Businessmodel of Red Hat

Customer Segments

Red Hat’s products are geared towards enterprise users that favour the flexibility and customisation options afforded by open source Red Hat software. The Company provides software products to big businesses across multiple sectors and jurisdictions, including those operating in, among others, the financial services, education, technology, electronics, aviation, entertainment and telecommunications industries.

According to the Company’s website, 100% of all airlines, commercial banks, healthcare providers and telecoms companies in the Fortune 500 rely on Red Hat products.

Its high-profile corporate clients include IT giant Cisco, electronics company Casio, tech firm CA Technologies, software company Adobe and movie studio DreamWorks Animation.

Value Propositions

Red Hat is an established and experienced tech company. It has provided reliable and effective software, training and support solutions for a number of years, and is well-respected within the tech industry and open standards community.

The open source nature of its software allows its user base to collaborate in developing, maintaining and enhancing its software, as the human-readable source code for its software is made publicly available and its licences permit modifications to be made.

The Company also provides reliable and ongoing technical support for all its products.

Channels

The majority of Red Hat’s products are available for download via its mobiles and desktop website at www.redhat.com. Once downloaded the Company’s software can be accessed through the computer or workstation on which it is installed.

For other services, such as Red Hat’s consulting and training offerings, customers are able to contact the Red Hat sales team directly, either via a contact form on the Company’s website or over the phone.

Customer Relationships

Much of Red Hat’s software is provided on a self-service basis, available to download directly from the Company’s website. These sales do not require any interaction with Red Hat representatives.

The Company’s consulting, support and training services require a degree of discussion with the Red Hat sales team, in order to fully cover the individual needs of each customer. The open source nature of Red Hat products allows for community driven customisations to be made available.

Every Red Hat customer receives a certain amount of technical support as standard, with premium customers receiving round-the-clock assistance.

Red Hat additionally provides webinars, tutorials and troubleshooting guides through its customer portal, as well as community support and discussion groups through its community sub-section.

The Company also provides a variety of methods by which customers can interact directly with Red Hat representatives, including numerous social media accounts, a blog and a feedback page.

Key Activities

Red Hat is a multinational software company which provides a variety of open source infrastructure software products, primarily targeted at the enterprise market.

Its principal software offerings are Linux-based operating systems for desktops, workstations, servers and data centre networks.

The Company’s software products are sold under open source licences that permit access to the software’s human-readable source code, allowing users to copy, modify and redistribute the software.

Red Hat also provides technical support services and technology consultancy services to big businesses. Its consulting services help customers to enable infrastructure, application integration, storage and cloud solutions, and include additional services such as assessments, upgrade planning, and application development.

The Company’s support services provide customers with technical support with regard to effectively implementing its technologies.

Key Partners

Red Hat collaborates with a number of different companies to both assist with the development and maintenance of its products and to increase its marketing and sales reach, as part of its Red Hat Connect program.

The Company lists a number of different types of partner on its website, including corporate resellers, distributors, independent software vendors, cloud services and solutions providers, systems integrators and training partners.

Red Hat partners receive access to new Red Hat technologies, flexible pricing models and certification services. The Company has major strategic alliances with a number of high-profile tech companies – including Microsoft, Dell, Cisco and SAP – with which it collaborates on a daily basis, as well as smaller partnerships with developers and resellers worldwide, such as Axiz in South Africa, Datacom Systems in New Zealand, IDC Frontier in Japan and Spectrami in the UAE.

Key Resources

Red Hat’s key resources are its technologies, personnel and IT infrastructure, as well as its strategic partnerships with resellers and developers worldwide.

Red Hat has a number of patent applications filed with US Patent and Trademark Office, including applications titled ‘Storage cluster data shifting’, ‘System and method for content storage’ and ‘System and method for reading file blocks’.

Cost Structure

Red Hat’s costs relate primarily to the research and development of its software, its certification and training services, its IT and physical infrastructure and its personnel.

The Company’s workforce numbers more than 7,900, including large sales and support teams, which must be paid salaries and benefits.

Red Hat also accrues costs through its physical infrastructure, including its server and data centre networks and its large network of regional offices across the US, Latin America, Europe, Asia Pacific, Africa and the Middle East.

Revenue Streams

Red Hat generates revenue through multiple streams. The Company sells a range of infrastructure products and services directly through its website, including annual subscriptions to its flagship Linux-based enterprise operating system.

These subscriptions are priced at $49 for standard users and $179 for more advanced users. Customers requiring ongoing technical assistance can pay $299 to receive additional support services.

Red Hat also provides Red Hat Enterprise Linux for servers and virtual data centres, which are available at various price points between $349 and $8600 per year, depending on the number of nodes and sockets in the data network. According to recent reports, Red Hat’s infrastructure products account for more than 70% of its total annual revenue.

Red Hat also generates a significant proportion of its revenue through support contracts, providing technical assistance to companies and fixing bugs and issues within their data networks. It also provides training and skills assessment services, cloud and infrastructure consulting services, and testing and certification services.

In its annual report for the year ending 29th February 2016 Red Hat recorded revenue of $2.05 billion.