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Red Hat Channel Business Hits All-time High

Jim Whitehurst

Jim Whitehurst

Channel partners now drive 81 percent of Red Hat Inc.’s (RHT) business. Plus, overall Red Hat revenues continue to surge as the Linux company diversifies into fast-growing sectors like OpenStack clouds and OpenShift for container management, according to CEO Jim Whitehurst and CFO Frank Calderoni.

Whitehurst and Calderoni described the company’s channel momentum and business milestones during an earnings call yesterday.

“The Q2 route-to-market mix was 81% from the channel and 19% from our direct sales force, and this compares to a 75/25 split in Q2 of last year,” said Calderoni. “This is the largest portion of channel business in a quarter and reflects channel strength across our major geographies.”

The channel momentum is global in nature — with particularly strong performance in EMEA (Europe, Middle East, Africa).

“In terms of the channel, some of our larger deals in particularly EMEA where the vast majority of our business goes through channels, when it’s stronger, you see the channel mix pick up there,” Whitehurst said. “One of the things you’re seeing there is some of the larger deals were fulfilled via distribution, which ticked it up. I wouldn’t expect it to stay at 81% over the next couple of quarters. Some of that was just some of the larger deals that just happened to fulfill that way.”

Red Hat OpenShift Containers

Either way, Red Hat and its channel partners are in growth mode. Indeed, Red Hat’s overall Q2 2017 revenues were $600 million, up 19 percent vs. Q2 2016, the company said yesterday. The company pointed to Linux-oriented containers as a major growth segment, stating:

“As organizations adopt agile application development technologies such as Linux containers, they are able to rely on Red Hat as their strategic partner to modernize their infrastructure and application development platforms.”

Red Hat’s software container strategy involves OpenShift. “We expanded our offerings around OpenShift, which is our container platform, so it is now available across a number of environments,” said Whitehurst. “We have OpenShift for developers that can be run on laptops. We have OpenShift for the lab that enables developers to move easily from dev to test. And as applications move into production, we have OpenShift Enterprise. We cover the life cycle of an application with our end-to-end platform, and because these three offerings are the same platform, customers will not have to retool their platform to build their container applications.”

Red Hat Diversification

Red Hat now has 1,200 customers buying one or more of the company’s emerging technologies — which are outside of the traditional Red Hat Enterprise Linux definition. “We had three OpenStack deals alone that were over $1 million,” said Whitehurst. “So I think we’re seeing really, really, really good traction there.”

Still, competition looms on multiple fronts. In the OpenStack sector, companies like Mirantis have serious momentum. And in the container market, a more formalized Docker channel partner program just launched.

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