Red Hat Looking to Expand Into Indonesia and Cloud-Computing

Red HatRed Hat Inc. has spent the past decade becoming one of the dominant commercial providers of the Linux operating system, but it is now looking to expand by exploiting opportunities in Indonesia, and in the field of cloud-computing systems. Red Hat Inc., which generated approximately 1.5 billion dollars in revenue last year, is expecting double digit revenue growth over the next year. This would follow 48 consecutive financial quarters in which Red Hat has shown revenue growth, but it is nonetheless a very optimistic expectation on the part of David Yap, Red Hat’s country manager for Malaysia and Brunei. This optimism, however, is strongly supported by indicators from the Asian Pacific market.

Last year the Asia Pacific region contributed 13 to 15 percent of Red Hat’s total revenue, and this number is expected to increase significantly in the near future. This expected increase is due to the fact that total IT spending in the region has been predicted to increase by 4.2 percent, to a total of 758 billion dollars. Total IT spending in Malaysia is expected to grow even more, with Gartner, an IT research and advisory firm, predicting that Malaysian spending on IT will grow by 10.2 percent, to almost 21.24 billion dollars, by the end of 2014.

These high expectations for growth in the Asia Pacific market have caused Red Hat to expand its operations in the region, with Damien Wong, a senior director with Red Hat, recently announcing that Red Hat will open an office in Jakarta. Mr.Wong has said that the decision was heavily impacted by a report published by the International Data Corporation this past January, in which it is alleged that attitudes in Indonesia are changing to become more and more techno-centric. Furthermore, Indonesia has long had a campaign, titled “Indonesia, Go Open Source”, which has encouraged the proliferation of open source systems, such as Linux, in the area. However, this expansion by Red Hat into Indonesia is not the only thing they are looking to do in order to increase their annual revenue stream, as they are also looking to expand into the cloud-computing industry.

Red Hat has recently embraced OpenStack, a kind of open-source software which could prove essential in the operation of data centres. The software effectively removes the need for companies to turn computing operations over to external services, such as the public clouds run by Microsoft Corp. and Google Inc. Red Hat, in order to stimulate sales of OpenStack, has decided not to provide technical support to purchasers of its commercial Linux software if said customers use rival versions of the OpenStack software. This technical support offered by Red Hat is considered by many experts to be the main reason to use Red Hat’s Linux as opposed to the free versions. Because of this, Red Hat’s threat to void technical support to non-OpenStack users has created a worry among Red Hat’s rivals that the software giant will be able to leverage its market power from the open-source software industry into the cloud-computing Industry.

However, regardless of their rival’s concerns, Red Hat seems set on expanding into the cloud-computing industry, as it has been estimated by the IDC that software such as OpenStack will generate 5.8 billion dollars in revenue this coming year, with that figure expected to grow significantly from in the foreseeable future. Therefore, Red Hat Inc.’s decision to expand into Indonesia and into the cloud-computing industry is looking as though it will have a very beneficial impact on the company’s growth over the next few years.

By Nicholas Grabe
Follow @NicholasGrabe

The Wall Street Journal
The Jakarta Post
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