Kudos, Red Hat: You beat financial estimates for your current quarter. Wall Street was impressed. And customers are falling all over each other to sign long-term business deals with you. Still, The VAR Guy was disappointed will one key data point you shared this week.
Specifically, only 52 percent of your most recent quarterly revenue came from channel partners. Does that mean the glass is half-full — or half-empty — with Red Hat’s channel program?
Sure, Red Hat had a strong quarter, and the company has made progress with its partner program in recent years. The addition of JBoss helps VARs make $10 in consulting fees for every dollar worth of Red Hat middleware they sell. And Red Hat hopes to derive 60 percent of its revenue through partners in the not-too-distant future.
The current state of Red Hat — where 52 percent of sales involve the channel — is such a curious figure. It’s sort of like saying you’re half-pregnant. In stark contrast, the most successful software and IT companies push for far deeper channel penetration. (Wow, somebody email those last two sentences over to Freud.)
Emulate the Best
The point is, Red Hat has got to drive channel revenues to 60 percent of overall company sales — and beyond — in order to scale its business.
Remember: Cisco Systems started out with a direct-sales model. But it wasn’t until around 1997 that Cisco went indirect and became a corporate powerhouse. Today, even Cisco’s global 2000 accounts are mostly managed by channel partners. Ditto for Microsoft.
So celebrate the current quarter, Red Hat. The VAR Guy knows you’re the leading financial indicator for open source companies. But he’s still thinks you need to crank up the channel program.
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Tags: Channel Programs | JBoss Middleware | Open Source | Partner Programs | Red Hat Financials | Red Hat Quarterly Results
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I don’t get it; what’s your point?
RedHat is a different kind of company, what’s wrong with having other sources of revenue?
@Felipe: Here’s the point… f Red Hat wants global dominance, it will need local feet on the street in all the major markets. You can’t scale a business with a pure direct sales force. At some point, you need to rapidly expand your channel network of resellers, integrators and solutions providers.
The 50 percent direct/50 percent indirect model will always prompt concerns from VARs that Red Hat plans to take certain sales directs. That doesn’t inspire loyalty among partners.
Don’t misunderstand The VAR Guy. He’s generally bullish on Red Hat. They’ve done a great job building a brand and commercializing open source. But you can’t succeed alone when you go global. You need partners in every city…
You miss that things are different for Red Hat than others you mention because of the likes of CentOS. My reasoning being that the channels exist in smaller ways with happy little consultants and IT guys in bigger companies saying, yes you could have Red Hat enterprise and pay but you have me for the support and exact equivalent of the software for nothing.