Software vendor model is broken: Red Hat CEO

Head of open source firm vents at conference

The current model of selling commercial enterprise software is broken, says Red Hat CEO Jim Whitehurst.

Speaking at the recent Interop conference in New York, Whitehurst said: "Vendors have to guess at what [customers] want, while there is a mismatch of what customers want and what they get. Creating feature wars is not what the customer is looking for."

Of course, being an executive of an open-source software company, Whitehurst would naturally be critical of the standard model of software sales. In his presentation at Interop, however, he also discussed how cloud computing could offer a break from this routine.

"People say [they are interested in the] cloud, but what they are really espousing are frustrations with existing IT business models," Whitehurst said after the presentation.

He kicked off his talk by asking a seemingly simple question: "Why are costs of IT going up when the underlying costs to deliver those services halves every 18 months?" The cost of computing should come down, he reasoned, thanks to improving processing speeds and storage capacities. New, more powerful development tools and frameworks should also ease the cost of deployment. Yet IT expenditures continue to go up by about 3 percent to 5 percent a year.

The answer to his question is that "it's the vendors and how we are delivering [IT] for our customers," he said.

Whitehurst took aim at the "typical software sales model" for this state of affairs. To develop software, a vendor may spend years interviewing customers, estimate what they need and build a set of features to meet these demands. For the customer, this work translates into yearly maintenance fees and the necessity of buying an upgraded version of the product every few years. Also, because of the great amount of work involved in changing to another software package, the vendor can price its offerings at an artificially high rate. He noted that Red Hat still runs Oracle's financial systems "because it would be a nightmare to move" to another platform.

"With software, you are renting the ability to use features, and then every few years you have to buy the same thing again. The cost to provide and the pricing that has been changed has nothing to do with one another."

And despite the vendor's iterative process of improving software, "there has been no change in product quality demonstrated in the past 30 years."

Naturally, during his talk, Whitehurst touted the open-source model as an alternative. "Open source represents a fundamental change to the model," he said, arguing that open source, thanks to customer participation in the maintenance of the code, has a lower bug density, as well as more useful feature functionality. "With open source, you are not buying functionality. You are buying services and support."

While the vendors are selling functionality, IT departments take on the risk of turning that functionality into something beneficial for their organisations. The software and hardware are already paid for before the service they are running is actually offered.

This is why cloud computing is so appealing to CIOs, Whitehurst said. CIOs are not so much interested in the ability to move workloads off to external datacentres as they are in not paying system costs until those show some business value.

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Tags managementInteropRed HatJim Whitehurst

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