E-BUSINESS SPECIAL REPORT
Red Hat's Switch Campaign

Like Apple Computer (Nasdaq: AAPL) , Linux vendor Red Hat Software (NYSE: RHT) is playing the role of challenger as it tries to convert longtime users of a competing brand to its own products.

But according to officials at North Carolina-based Red Hat, the similarity between the two companies' missions ends there. Red Hat product services director Marty Wesley told the E-Commerce Times that the Linux vendor's primary battlefield is the enterprise server market, not the desktop. And its principal foe is not Microsoft's (Nasdaq: MSFT) Windows, but rather the Unix operating systems used by a considerable number of enterprises. Those Unix systems include Sun's Solaris, HP's (NYSE: HPQ) HP-UX, IBM's (NYSE: IBM) AIX and SGI's Irix, among others.

Red Hat contends that its products allow companies to certify and use its software for years without engaging in constant updates or costly purchases and upgrades of proprietary software.

Migration Campaign on Track

The company said its switch campaign -- more accurately termed a migration campaign -- is steadily garnering backing from a number of big-name hardware and software providers, including IBM, Dell, Intel (Nasdaq: INTC) , AMD (NYSE: AMD) and Oracle (Nasdaq: ORCL) .

Red Hat also has landed new end customers at a steady rate. In fact, it now holds 52 percent of the market for Linux operating systems, according to research firm IDC.

"The campaign has actually proceeded better than we expected," Wesley said. "I think that's especially noteworthy given the condition of the market, the economy and the slowdown in IT spending."

Specifically, Wesley explained, Red Hat recently has scored significant gains in the retail industry and is actively courting customers in the financial services, federal government and telecom sectors.

Battle Advantages

Giga Information Group analyst Stacey Quandt said that Red Hat has an advantage that Apple does not possess -- other than that its main enemy is not Microsoft. In short, Red Hat's product is based on an open source foundation.

Another advantage of Red Hat is its ability to leverage multiple microprocessor architectures, such as the x86, IA-64, PowerPC and mainframes, she said.

In addition, Quandt noted that Linux and other open source technologies, such as Apache, Samba and Tomcat, are disrupting the status quo in companies and organizations where there are limited budgets for IT spending -- and almost all businesses face tight budgets in the current economic environment.

New Frontiers

While Linux commands less than 1 percent of the desktop market, compared with Windows' 95 percent, its push into other areas of the enterprise eventually could be reflected on the desktop.

"Red Hat's strength is clearly in the server market, but if its campaign is successful, it will influence the use of Red Hat Linux on workstations and desktops," Quandt noted.

Supporting that contention, IDC has projected that overall enterprise spending on Linux-based systems will rise from $80 million in 2001 to $280 million in 2006. And analysts have told the E-Commerce Times that although Linux currently holds a tiny percentage of the desktop market, its share could rise to as much as 10 percent over the next few years.