What Red Hat Has Done is Worth So Much More Than a Billion

Red Hat is widely expected to crack a billion dollars in revenue in today’s earning call. This achievement will finally put to bed the argument that “nobody can make money with open source.” I want to congratulate Red Hat for this incredible achievement. However, I would also like to use this occasion to show that there is significantly more at play here. It isn’t just the billion dollars Red Hat is making with open source; there are many more reasons why Linux and open source are fundamental building blocks of the future:

* Red Hat will today pass a billion dollars in revenue.

* The collective investment in Linux is $10billion – freely available to you.

* Billions of users a day use Linux systems in everything from their TV, to their ATM machine to the cell phone to the servers powering the cloud. B

* Billions of dollars are transacted on Linux systems running every major financial exchange EVERY day.

* The fastest Linux computer does 10 quadrillion operations a second (that is a thousand billion or a billiard in long scale countries).

* Facebook used Linux to build a company forecast to be worth one hundred billion dollars.

Credit where credit is due: Red Hat has worked extremely hard and extremely smart to leverage open source to make a billion dollars. Here at the Linux Foundation, we work with them everyday and I am continually impressed by their focus, their management and their consistent commitment to working upstream.

But even more significant to Red Hat’s future prospects is the virtuous cycle that they now participate in. Platform economics have always been dominated by network effects. More users beget more applications, which beget more users and so on. This has resulted in great scale for particular companies who lock people into their network effect but has arguably not resulted in great innovation. Red Hat however, benefits from a different kind of network effect. A network effect centered around innovation.

Since Linux has grown, so have the benefits Red Hat receives (and gives to others). When Facebook contributes code to make their data centers more efficient, Red Hat benefits; when Red Hat contributes code to improve file systems, mobile device makers benefit; when mobile device makers contribute code to improve power consumption, super computer cooling costs go down; when super computer users contribute code to make Linux faster, Wall St. benefits with faster trading systems — and so on and so forth. So you can see that the positive feedback loop that is represented in the billions of figures above shows no signs of slowing down. Congratulations to Red Hat but also to all Linux users and ecosystem members who participate in this virtuous circle.