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Red Hat CEO Says Software Vendor Model Is Broken 223

alphadogg writes "The current model of selling commercial enterprise software is broken, charged the CEO for Red Hat. It is too expensive, doesn't address user needs and, worst of all, it leaves chief information officers holding all the risk of implementing new systems. 'The business models between customer and vendors are fundamentally broken,' said Jim Whitehurst, speaking Wednesday at the Interop conference in New York. 'Vendors have to guess at what [customers] want, and there is a mismatch of what customers want and what they get. Creating feature wars is not what the customer is looking for.' Whitehurst estimated that the total global IT market, not including telecommunications, is about $1.4 trillion a year. Factor in the rough estimates that half of all IT projects fail or are significantly downgraded, and that only half of all features in software packages are actually used, then it would follow that 'easily $500 billion of that $1.4 trillion is fundamentally wasted every year,' he said."
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Red Hat CEO Says Software Vendor Model Is Broken

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  • Broken how? (Score:0, Interesting)

    by odies ( 1869886 ) * on Wednesday October 20, 2010 @05:40PM (#33966866)

    How is it broken? There are different ways for companies to go by.

    You can already buy commercial products that are made for general usage, like Microsoft Office. They can be feature rich products too, since they're used by many and different people and companies need different features. Since the products are made for large amount of customers, price for a single user or company is relatively low.

    If you require something that the commercial products don't offer, you can either hire a development house to build it for you or do it in-house. That way you get exactly what you need, but the price is higher since it's made specially for you. If there is a mismatch between what you want and what commercial products offer, you go this route.

    Now, the CEO of Red Hat basically says that model is broken, but offers no alternative. He says open source magically fixes it my offering services and support. But what is there to offer if the companies still need to go the second route if such product doesn't exist? And if it exists, what is broken with the commercial model? They do also offer support.

  • by Mephistophocles ( 930357 ) on Wednesday October 20, 2010 @05:56PM (#33967002) Homepage
    Whitehurst touches on the emergence of cloud computing in the enterprise as well, and this is integral to an intelligent discussion of the imminent death of the traditional licensing system of enterprise software. From TFA:

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

    That ease in the cost of deployment, coupled with the flexible infrastructure the cloud supplies, will eventually mean the death of the traditional "per-proc" style of enterprise licensing. Happily, it likely means fantastic opportunities for open-source to take back a large share of the market. I've spent the last year migrating my medium-sized enterprise to the cloud AND a near-100% opensource infrastructure. In my particular sector (healthcare) that's becoming a trend - it's not a coincidence that the move within the medium to medium-large enterprise to the cloud often goes hand-in-hand with a serious investigation of open-source software within the mission-critical, production infrastructure.
  • Re:WHAT vendors? (Score:4, Interesting)

    by Archangel Michael ( 180766 ) on Wednesday October 20, 2010 @06:23PM (#33967302) Journal

    that all works until someone needs 4 to mean AM sometimes and PM all the other time.

    Defaulting the current year makes sense, until you have cards for December being entered in January (11 months difference), a common yearly adventure.

    Did you miss the part that she would rather manually sort through the records than type two characters?

  • by Surt ( 22457 ) on Wednesday October 20, 2010 @06:30PM (#33967412) Homepage Journal

    This seems like a pretty fundamental misunderstanding of enterprise licensing costs. Costs are calculated per cpu or per seat because that's a convenient proxy for the size of the system, not because of any actual deployment expenses associated with the number of cpus or seats. If you think your licensing price is going to magically head downward because of cloud computing, you are in for a nasty shock. Instead prices will head up because the cloud providers now have more lock-in. In any case, the licensing cost goes to development and profit. Which of development and profit do you think the enterprise software provider wants to give up when they move to a cloud model?

  • Re:WHAT vendors? (Score:3, Interesting)

    by MagikSlinger ( 259969 ) on Wednesday October 20, 2010 @06:47PM (#33967622) Homepage Journal

    Never seen them (vendor engineers). Seriously. Where did you work where they would talk to you?

    There are medium to smallish companies we buy software from, and they have sent their engineers to observe & talk to us. But none of the big boys have ever sent any engineer to us.

  • Re:WHAT vendors? (Score:4, Interesting)

    by AVee ( 557523 ) <> on Wednesday October 20, 2010 @06:54PM (#33967714) Homepage
    I actually worked at a software company in that league (a Top 10 software vendor). Those companies are big, weird and certainly not to be regarded as a single entity. Whether or not they are going to spend time on your needs really depends on loads of factors, the biggest ones being politics between the big shots in both companies and the amount of money you bring in. If your CTO is very good at the politics you may get above average attention. If the amounts you get invoiced are big enough to be noticed in the quarterly results you will get above average attention.

    But if your just 'Joe Sixpacks Beer Store' you are generally screwed. But in that case you probably also wouldn't want to pay for the costs of proper attention, if you would be willing to pay for all the hours spend to accomodate your needs you would be served (and go bankrupt). Building software isn't cheap, an you are going to pay the full price for anything that is build just for you one way or another.

    And the of course there are the governmental projects, but those are in a league of their own. Those are the projects where you send the people you wouldn't dare sending to any of your bigger customers. Government officials spending tax dollars will always pay, regardless of how badly things get screwed up. (The amount you get to spend seems to be a dick size issue, and it's all just tax money anyway...).
  • by Billly Gates ( 198444 ) on Thursday October 21, 2010 @12:29AM (#33969910) Journal

    In the early 80s 2 groups existed. One was to only use prepackaged software and the other is to use your programmers to create your own solution. His rant backs the former group but unfortunately it is viewed as an expense commodity that does not add value to a ROI. The battle to use prepackaged software has won. Until investment is viewed as a profit center and not a cost center no business will bother to hire programmers to create software to do what it is they need to do rather than buy a prepackaged bloatware that may or may not work.

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