Four key partner takeaways from Red Hat's results
We sifted through the open source giant's latest results to find the golden nuggets for the channel - so you don't have to
Open source big daddy Red Hat has just closed the books on its fiscal year to 28 February 2018. Here are the key partner takeaways:
64 quarters of growth for Red Hat
Despite celebrating its 25th birthday yesterday, the open source giant is still growing as if it were a start-up.
Revenues for Red Hat's fiscal fourth quarter hiked 23 per cent to $772m (£512m), which it partly attributed to customers buying a wider breadth of its technologies. That marked its 64th straight quarter of revenue growth, and the third in a row where growth exceeded 20 per cent.
Deals of over $1m hit 169 for the quarter, a 50 per cent spike. Of these, 26 were over $5m, 14 topped $10m and two exceeded $20m. One third of those 169 deals encompassed five or more technologies, which Red Hat said reflected a recent expansion of its product portfolio.
GAAP operating income rose 40 per cent to $132m. Although it sank to a GAAP net loss of $13m, the deficit was due entirely to a $123m charge stemming from new US tax laws.
Red Hat partners are starting to build OpenShift practices
On an earnings call, Red Hat CEO Jim Whitehurst boasted about the high growth rates of Red Hat's container application platform, OpenShift, and also revealed that some of Red Hat's partners are beginning to build business units around it.
OpenShift is designed to help developers quickly develop, host, scale and deliver applications in the cloud and Whitehurst said the offering is outpacing the growth of Dell-backed competitor Pivotal, which filed for an IPO on Friday. OpenShift added "several hundred" customers during its fiscal 2018, bringing the total to over 650, Whitehurst said. This compares with the 44 net customers Pivotal said it added year on year in its IPO filing, he added.
"I think we've done a really good job of building bottom-up grounds for momentum around OpenShift," Whitehurst said. "And what that's starting to reflect in now is SIs coming to us wanting to build practices, because they are seeing demand from their customers. And so you will see us working a lot with partners to work to build out services capability around OpenShift."
Red Hat believes containers are the future
On that note, Whitehurst used the Q4 call - a transcript of which can be found here - to evangelise the container space following Red Hat's bumper acquisition of CoreOS in January.
The $250m deal will bolster Red Hat's leadership in Kubernetes and containers, he claimed. CoreOS is the creator of CoreOS Tectonic, an enterprise-ready Kubernetes platform that provides automated operations, enables portability across private and public cloud providers, and is based on open source software.
"We continue to believe that the next era of technology will be driven by container-based applications that span multi and hybrid-cloud environments and that Kubernetes, containers and Linux will be the foundation of this transformation," said Whitehurst.
Red Hat is pushing more business through partners
Red Hat has in the past committed to pushing over 70 per cent of business through partners as it looks to exploit the scale an indirect model can bring.
In its Q4 2018, the channel generated 71 per cent of Red Hat's revenues. That's up from 69 per cent in Q4 2017. Going further back, the comparable figure stood at 71 per cent in 2016 and 68 per cent in 2015.
On the call, Red Hat CFO Eric Shander also indicated that partners could expect more juicy services work in the coming quarters.
Fuelled by demand for consulting projects around its Ansible and OpenShift offerings, Red Hat's services revenue pogoed 29 per cent to $89m in Q4. Shander said these growth rates will drop as Red Hat trains up the partner ecosystem.
"We have been working with our partner ecosystem to really get them up and scaling that out," he said.