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Bob Young's Bazaar Keynote
Intro by Mad Dog Hall
Bob Young has set the course in Red Hat by their philosophy, the
fact that they GPL their own internally-developed software,
and by providing good sites to support free download
of their software.
[The crowd is smaller than for yesterday's keynote by
Richard Stallman, but everyone seems pretty friendly.]
Bob started the talk by mentioning that it was his usual
high tech multimedia talk, meaning no media at all.
He stopped by Stetson's on 5th avenue to look at
hats. "We're in the hat business, not the software business, since
we give away our software."
He tries on a couple of hats, beret and soft felt. People seem
to like the beret better, so he put that on.
When asked if he was going to talk about the IPO, he led off
Going public gives you the resources to grow and look
after your customers. One of our key contributions is that we give away
all of the software we right under open source licenses. That's
our biggest contribution to this revolution and it continues to
get larger as we hire more engineers to develop more software.
Speaking to that, let me tell you
a story from my early days in New York.
For my business, Vernon Computer Rentals, I started going
to Unix users
groups and started writing a newsletter for them. I Asked them
what type of article they wanted to hear that they didn't already
get from Infoworld, etc. The answer was all about free software.
"From engineers according to their skill to engineers according
to their need." I was skeptical of the model, the "berlin wall falling".
I could see that it gave a unique benefit to the user, but
I was missing the economic model
to make it work for business.
When I dug into it, I found
three communities of developers of free software. The engineers that built it and two
bigger pieces: the engineers that build tools that they need
for their companies and the commercial companies that were
already contributing. The X Windows system is 110 MB and it
comes from the X consortium, Sun, DEC, HP, etc., who need a
common interface from their systems, couldn't trust each other,
so they published under an open source license. A barter
system based on open source.
Launched a catalog called PC Unix/Linux catalog. Bob, if the
software is free, how are you going to make money at this?
Trust me, our customers love it and we'll work this out.
Early on, we found we were not in the software business.
Hooked up with Mark Ewing where we take parts from a worldwide
set of engineers and give anything we develop back to them.
Totally different from the model of binary control of the
software. What business are we in? We looked around, are
we in the legal business? If a lawyer wins a case in court,
another lawyer can use his words as soon as they are out of
We're making a commodity. How do you make a name in the commodities
in the market? You build a brand name. Here is the Tomato Ketchup
story: Why does Heinz have the largest share of the market?
Some people say it tastes better. However, test it in the
third world and you'll find out, no one really likes ketchup
and they like all ketchups differently. We've defined the concept
of ketchup so well according to the parameters of what Heinz is,
to the point that ketchup that doesn't come out of the bottle is
better than ketchup that does.
The open source model would give us the best technology, unique
benefits to users. If we built a strong brand around the product,
we had a saleable commodity. The bulk of the work only starts
when you install, moves on from there. IBM is famous for their
products, but they effectively give away their products and
make their money on services and support, making those products
useful for their customers.
We give away the software in a shrink-wrapped box that contains
free software and some services.
Turn it over to Q&A
- Are you doing a Red Hat Linux for Netwinder?
That deal ended a while ago, based on them selling a large
number of units, which never happened. We don't have a
commercial agreement with Corel.
- Concerning patents and free software. Looking at a tracking
system on free software and patents. Is this true?
Just to be very clear on my response, on a personal basis.
Red Hat is not ideological, they exist for their customers
and their shareholders, Individuals within a company have
ideology, are there services that we can provide to our
customers based on these ideologies. I'm fascinated by
the problems created by the US patent office by granting
patents for everything including the kitchen sink. Patents
on code, in my personal belief, are a bad thing. If you
can't patent a Shakespear sonnet, how can you patent code?
We need a whole conference to talk about this.
- Don't think the patent issue is ideological, it is also
Agreed, but the creation of a database to help us defend
against free software infringement on patents is not
commercial. We haven't done anything in that area, I
- You used to say "free software" instead of "open source",
now including more commercial software. How do you support
the free software community.
I take pride in being ambidextrous, I can say both free
and open source and tend to use them interchangeably,
understanding that there is an ideological difference
between the two.
Our whole success, our opportunity to build a successful
business, hinges on the value proposition of giving our
customers the control over the technology they are using.
That is what gives us power over our competitors. We aren't
going to dictate to the market. We will make our customers
more successful. We will assist Oracle so that our customers
can run Oracle on Linux rather than Oracle on a proprietary
platform. We see it as a necessary step, to do that for their
business and believe that the model is so powerful, that
someday when people draw up a list of features they need,
one of them will be, "is it free software". First, we have
to prove to the customers that this is a good thing.
Red Hat does not ship proprietary software that we
develop as part of our products.
- I have trouble believing that the model for a software company
that is out there today is really going to vanish, that people
should focus on being marketers and organizers instead of
I gave a talk in Netherlands last year at a Unix conference,
50 year old Unix programmers with IQs two or three times
mine. My talk was going to be, "How Linux solves the fatal
flaw of Linux". That was a little arrogant. I was writing
my resume, I've been working in this industry for 26 years.
I've been here for 50 percent of the life of the industry.
What we are doing is not that radical. Looking at what is
being done as the way things should be done when it only
started in 1965. Before that, the software was shipped for
free with a product so that their customers could help them
support their code. They changed the model when they got
large enough to make more money by making their customers
more dependent on them. It is only 30 years old and it has
a fatal flaw.
I'm called at Red Hat the "Red Hat spokesmodel". It is, in
fact, my full time job to take credit for the work that
everyone else does. In this particular case, when you look
at the proprietary software model, intellectuals come up
and ask us how the lessons learned in the open source industry
to other arenas? In my mind, the lessons are already applied.
If you build a bridge, everyone can see it. The engineering
plans become part of our common heritage and we build bridges
based on the ones that stood up, not the ones that fell down.
In the CS industry, we're not allowed to build on what has
been done before. It deprives customers of the ability to
control their technology they have purchased. They sign
away their rights on software that their very lives may
This really looks like an inevitability, we are bringing the
software industry into the 21st century, the model under which
most systems work.
Five years ago, I couldn't equate the hype about the Internet
with reality. Today, I don't write letters on paper, I do my
shopping on the Internet, etc.
It isn't defined by any of us, but a new model is being
developed and I'm confident the days are numbered for the
- Questions about what should people do?
I know I'm going to get a thrashing about this no matter what
I say. Taking my Red Hat off. With my Red Hat on, if you
work for Compaq, get to me afterward and I'll go buy a beer
and tell you the real answer.
With my Red Hat off, do what's best for your customers.
VALinux' approach is different from Dell or Compaq. I know
i'm not clever enough to figure out which approach is right
but I know the market will figure it out.
I'm going to duck the question because I know the answers
that are in the best interests of Red Hat, but my friends
at VALInux and elsewhere are in the audience, so I'm not
going to go there.
- Comparisons between Linux and the highend servers like
Solaris. How long before Linux runs on the high-end servers?
The story goes back to Unix Expo 1995, here in the JJ center,
when the Unix engineers had heard of free software and were
interested in it, but the MIS directors ran the other way.
They didn't understand from it and ran from it like the plague.
We had launched our 2.0 product and we were hoping to sell a
lot of products at the show. I'm a sales guy, the doors open,
a guy with pinstripes slows down to approach our booth,
planning on passing it by. Grabbed him, talking to him.
He's from Merrill Lynch, "being a federally chartered bank,
we have adopted a policy of knowing where every line of
code has come." That's one of the best excuses I've heard
for not adopting a better technology. Over the course of
conference, two or three people from Merrill Lynch buy copies,
they have dozens of systems running Linux. I tell them
my first conversation, they say, "Oh damn, you were talking
to an MIS director. If you tell him what we said, we'll
come back and kill you."
IDC numbers, 15% of new operating systems last year were
Linux based in 1998. This wasn't so new, but the users
became brave enough to admit that they are using it.
The biggest challenge is that MIS directors are highly
conservative because their mission is not to screw it up.
They are running million dollar systems for billion dollar
companies. Saving a few million is very little compared
to the damage they could do if they guess wrong. Prefer
choices that have big names behind them.
The big opening today with Red Hat and VA today is deploying
solutions on those scales today is to get them to deploy
- What about scalability of Linux systems?
It is still true that, while we're dramatically bigger, we
still inherit our software from the larger Linux community.
I'm thrilled with the progress we're seeing because teams
from SAP and Intel are starting to contribute. Network
management tools are becoming available, better than not
- Marketing strategy that Red Hat is doing now. Offering the
platinum support package, $45,000 for an entire network,
more expensive than Sun's comparable price. Increasing
cost of Red Hat boxes.
We sell services. The basic system is the $30 system,
the more expensive version is the professional version and
it comes with more services.
Supplying high quality support is expensive. Sun can
discount their software support by offsetting it with the
cost of their proprietary hardware. Combine VA's hardware
with Red Hat's support, it will be a less expensive
solution compared to a proprietary solution.
- One of the things, is Red Hat ready to commit to sending a
person by plane to get something up and running. If I'm
running the stock market on Linux.
We intend to be able to do that directly and through our
partners. Could we sign that contract today to support
you in New York? I'd have to defer that, but we wouldn't
sign the contract unless we have the resources to do it.
If you don't get a yes today, you'll get it tomorrow.
We understand that is critical here in New York.
- The purpose of a company is to create value for their
stockholders. Some distributions add proprietary software
to add value?
I think it is a self-defeating approach. The better technology
seldom wins. The technology that is marketed better wins.
What open source does for us is give us a unique value proposition.
The minute we hook them on proprietary tools, we lose that
unique value proposition and become just another little software
company. Our company's value didn't come out from being first.
There are others that were there first and were much better
financed. Our success has come *from* our commitment to the
philosophy. The competitors that take the semi-proprietary
approach lose that value. I see it as a self-correcting system.
A great deal of education of the media is necessary.
PC Week is a great example, took a lot of quotes of mine out
of a talk I did at Comdex to say that we're taking on Microsoft.
Then they wrote a model to say we were arrogant. We give away
everything we do, yet we have to change our spots to keep from
becoming another MS. Help us educate the journalists, that
this is not just another operating system. It isn't just better
or cheaper, It has a value proposition that customers can't
find anywhere else, from the control that customers get over