Last week, I met up with Jim Whitehurst, Red Hat’s CEO. He gave a very fluent presentation to a group of journalists that ran through Red Hat’s business model, and explained why – unsurprisingly – he was optimistic about his company’s future growth.
Somewhat unkindly, I reminded him of an interview he gave a couple of years ago, in which he said:
When I look at the quality of our existing technology, and the incredible brand that we have and the markets we play in, we should be a $5 billion company or more. If you just look at operating systems and middleware–that’s nearly a $100 billion business. We’re a $500 million business. We have barely scratched the surface.
Well, today Red Hat is a $750 million business according to Whitehurst. But when, I wanted to know, would Red Hat reach that $5 billion turnover – and why was it taking so long?
His answer was a good one. He said that he did think that Red Hat could get to $5 billion in due course, but that this entailed “replacing $50 billion of revenue” currently enjoyed by other computer companies. What he meant was that to attain that $5 billion of revenue Red Hat would have to displace software that currently costs $50 billion. Selling $50 billion-worth of software – even if it only costs $5 billion – is somewhat hard, which is why it will take a while to achieve.