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April 13, 2009
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Open Source: Channel Opportunity in a New World

13 April, 2009
By Mark Rieger, Managing Director, ProAmericas


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It is too late to say times are changing. They have already changed. The real question is - are you changing with them, and for the better? The economy has many channel partners wondering where their next growth opportunity will come from.

"When times were good, companies could continue down the well-beaten path with commercial software and proprietary operating systems," said Tom Zorn, executive vice president of value-added distributor Alternative Technology, a group of Arrow Enterprise Computing Solutions. "When the economy became an issue and information technology budgets became more heavily scrutinized, senior executives started asking, 'Can we deploy IT solutions that better maximize our budget?' Fortunately, open-source alternatives have matured to the point where they deliver the value and return on investment that customers are demanding. Channel partners who have not investigated and embraced open-source solutions need to."

Unix was once an established standard for enterprise and midmarket computing, but Unix standards are now ten years old. The open-source alternative is the Linux operating system, which now enjoys a firm foothold in the enterprise space and is gaining significant traction in the midmarket segment. Linux has proven to be as reliable as traditional code and proprietary systems - and at a lower price point. A February 2009 IDC survey of IT managers reported that the Linux server business is growing at a compound annual growth rate of 35.7 percent between 2006 and 2011, and that 49 percent of managers expect Linux to be their primary server platform within five years. IDC concluded, "Hard times are accelerating the adoption of Linux and the open source (sic) operating system will emerge from the recession in a stronger data center position than before. Given a chance to migrate away from Unix, respondents often said they would choose Linux as the replacement based on its low support costs." In "The State of the Open Source 2008", Gartner projects 90 percent of enterprises will use open source by 2012.

"One of the reasons why open-source solutions are attractive is how they are developed," said Zorn. "In contrast to proprietary software, open-source software is engineered by an independent community of developers, all contributing code to various software projects. Anyone can see the code, change it and learn from it. It multiplies one company's development capacity many times over. As a result, the open-source model often builds in higher quality, more security, and more easily integrated software. More importantly to customers, it does so at a vastly accelerated pace and at a lower cost than proprietary commercial software."

Open source also has embraced the commercial world, with Red Hat now having certified 3,400 independent software vendor (ISV) applications and 4,200 hardware systems to run on its Enterprise Linux Operating System. Red Hat maintains those interfaces for the life of each release, allowing ISVs to certify once and run anywhere.

Channel Partners can achieve significant service revenue with Linux

"In the current environment, we see that organizations are looking for value-based solutions that increase their operating efficiency, flexibility and ability to innovate with IT to solve problems," said Roger Egan, vice president, North American channels, for Red Hat. "Channel partners are a large part of that equation because they have been working closely with organizations that need those value-based solutions. Our goal with channel partners is to provide the knowledge and tools that enable them to have value-based discussions with their customers, and offer a low-risk/high-reward path to open-source technology adoption. The promise of open source is higher value, more flexibility with hardware, better security, higher reliability and higher performance. But it starts with transparency. The development process is open. The technology is open. There are no secrets, no surprises, and no predatory vendor lock-in."

Egan continued, "One of our biggest enablers to adoption is our subscription model versus a commercial software license fee. It allows customers to get on board incrementally, and allows channel partners to enjoy a growing annuity revenue stream. This is not a one-time sale that goes to the lowest bid, but a value-based opportunity to grow the customer relationship. Channel partners can provide customer value while building a repeatable revenue stream of subscriptions and services. If that relationship leads to a customer opportunity for system consolidation and transformation in a new, highly optimized, virtualized, cost-effective open-source computing solution, it could pull through a significant amount of associated server, storage and consulting revenue."

"We look at someone who is migrating to Red Hat as an opportunity to achieve more cost-effective operations," said Bill Nemesi, vice president of Mainline, a Red Hat Advanced Business Partner. "Can they gain from consolidation and virtualization? Can they move a bunch of System x boxes, where they are paying for administration, into a single System p that can run Red Hat Enterprise Linux with better performance? Mainline's team has the capability to help the customer through those assessments and help the customer make an informed decision. It is about transforming the enterprise, eliminating inefficiencies, unlocking value and giving customers a competitive advantage in the marketplace."

Resources are available to Channel Partners

Red Hat has aligned its field sales force with the channel, establishing partner metrics and clear rules of engagement. "We've already seen the impact from our investments in partners, resulting in increased revenue and an active channel partner opportunity pipeline," said Egan. Red Hat's channel partner network has grown 84 percent since January 2008. Red Hat training and certification is available in 45 cities in North America, and Red Hat global support and consulting is available 24 hours a day, seven days a week. Red Hat's Deal Registration Program for Advanced Business Partners and its License Renewals Program enable channel partners to register deals and to track license renewals in order to effectively develop and maintain successful customer relationships.

Red Hat works with value-added distributors like Alternative Technology, and Advanced Business Partners like Mainline, because they provide critical support for the open-source adoption process. "We brought Alternative Technology on board because many of our largest channel partners have established relationships with them," said Egan. "The way Alternative Technology goes to market, their business practices, their technical bench strength, and the way they develop and support their channel partners is very complementary. Engaging with a distribution partner brings significant value to Red Hat, not only in marketing and recruiting channel partners, but also providing expert support resources to supplement the resellers' bench, including pre- and post-sales, engineering services and support as channel partners build their own practice."

"Alternative Technology pays attention to us, gives us quick turnaround, provides accurate quotes, and is responsive to requests for special pricing. It has been a very pleasant experience working with Alternative Technology," said Nemesi.

Next Steps

"We strongly encourage our channel partners to increase their open-source knowledge so they can have value-based conversations with their customers and be in the position to execute on opportunities when they come up," said Zorn. "Channel partners can start by investigating which of Red Hat's 3,400 certified ISV applications and 4,200 certified hardware systems fall within their business practices, and which ones are used by their customers. Then they can attend one of Alternative Technology's educational webinars, sign up for sales and technical classes, and ultimately get certified. Alternative Technology account managers can help channel partners step through each of these activities."

For more information, contact an Alternative Technology account manager at 800-544-7674 or email@alttech.com. Resellers can also register for an educational webinar, hosted by Alternative Technology and Red Hat, by going to Red Hat Webinar Registration.

Mark Rieger is Managing Director of ProAmericas, Centennial, Colorado, a full service provider of market strategy, advertising, media research and publicity services for ISVs and VARs and a consultant to Alternative Technology. He can be reached at markr@proamericas.com or www.proamericas.com.














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