Managing Asia

Open source success drives Red Hat move into Asia

Reporting by Christine Tan | Written by Huileng Tan
How this CEO turned Red Hat's fortunes around

Concerns over China's economic slowdown as well have kept many global companies wary. Not Red Hat.

The open source software major is planning to spend tens of millions of dollars in China in the next five years as part of a broader effort to lift growth in Asia, which currently contributes a fifth to Red Hat's revenues, president and chief executive Jim Whitehurst told CNBC.

The North Carolina-based company is expected to cross $2 billion in revenues this year with a target to hit $5 billion in around five years. It is aiming to more than double the Asian ex-Japan share of its revenue to 20 to 25 percent in the same period—up from 10 percent now.

"China is like skipping that whole client server wave that is going from in mainframe servers to these new architectures which are all built on open source, so it's a little bit likethe analogy of laying the phone wires to going straight to mobile," Whitehurst told CNBC's Managing Asia.

The issue of how much access governments and law enforcement agencies can have to companies' proprietary technology has been hotly debated recently. Red Hat has a natural edge here.

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"Post-Snowden and some of the other things that have happened around the world, I think there's a concern about in many countries about intellectual property that's coming from another country that's locked. That's proprietary. And so we don't have that problem, because anyone can see our source code."

Open source software is the bane of technology companies selling proprietary products but its popularity is even turning into collaborations with information technology giants, as Red Hat proves.

"Open source is becoming the default choice (for) how developers are writing their applications. And it's without a doubt the default choice for what clouds run," Whitehurst said.

Jim Whitehurst, CEO of Red Hat

Even rivals are signing up.

Last year, Red Hat teamed up with Microsoft to allow Red Hat to run its software on Microsoft's cloud service, Azure, in what could be considered a milestone after former CEO Steve Ballmer in 2001 called Linux "a cancer that attaches itself in an intellectual property sense to everything it touches."

"I think (current Microsoft chief executive Satya Nadella) has realized that if Microsoft has to stay relevant in today's world, they have to embrace open source because that's where innovation's happening," Whitehurst said.

The two have yet to work out revenue arrangement, although they think "it could be actually quite large" with potential for more partnerships in the works.

Despite its fast growth and partnership with Microsoft, the gloves are still off.

"We believe in the open source model; that's what we deliver. Microsoft still delivers a whole proprietary stack so there are a lot of things we do together to serve our joint customers but we'll still compete every single day," said Whitehurst.