Red Hat Seeking Ways To Avoid Channel Conflict With Service Partners

Red Hat is also shooting to increase its percentage of sales that go through the channel to 70 percent from about 60 percent today, although it will likely take a couple of years to get there.

Those were among the comments offered by Mark Enzweiler, Red Hat vice president of global channel sales, in an interview this week at the Red Hat Summit and JBoss World conference in Boston.

Red Hat acquired Amentra, a supplier of system integration, business process management and system development services, in March 2008 in a move the company said complements its JBoss middleware. But that created the potential for conflict with Red Hat’s JBoss channel partners, especially in the services-intensive middleware market.

Amentra, which Red Hat operates as an independent company, has some 200 services employees.

Enzweiler met with the 23 members of Red Hat’s partner advisory council on the issue this week. While he said they made progress delineating the roles of the vendor’s services operation versus its channel partners, the channel chief said he was not satisfied that the company has achieved “absolute clarity on our services strategy.”

The issue is important given that spending for services in the middleware market is $10 to $14 for every $1 spent on software purchases, Enzweiler said. Those services include consulting, assessment and implementation for middleware, Linux, cloud and virtualization software.

Enzweiler said the partner advisory council meeting generated “some really creative ideas” to avoid channel conflict, including the possibility of Red Hat offering partners referral fees for servicing specific technologies.

But he said that ultimately it comes down to developing rules of engagement, making sure that partners have the right skills to provide middleware services, and properly profiling partners so Red Hat can bring channel partners into service opportunities that match their skills.

Red Hat has some 5,200 channel partners globally -- about 1,600 of whom are in North America -- including resellers, OEMs, distributors and hosting partners. They account for 56 to 62 percent of the vendor’s sales, fluctuating slightly from quarter to quarter. “We would certainly expect to improve that this year,” Enzweiler said, citing 64 to 65 percent as a likely number for the current fiscal year that ends February 2011.

He expects the company’s channel sales to eventually reach 70 percent of sales. He noted that partners already bring in 70 percent of Red Hat’s new customers and generate 80 percent of virtualization technology sales.

And Red Hat is counting on solution providers to carry the company’s software into cloud computing sales opportunities, said Scott Crenshaw, vice president and general manager of the recently formed cloud computing business unit.

“The goal is to give them everything they need to sell and build clouds and help customers manage them,” he said in an interview, adding that a cloud computing strategy briefing to channel partners earlier this week was “well-received.”

This week Red Hat unveiled Cloud Foundations, a package of tools and services for designing, building and managing private and public cloud computing IT systems. The message from company executives at this week’s conference is that Red Hat’s open source technology is well-suited for cloud computing given its flexible, modular architecture.