Friday, December 21, 2007

Whitehurst as New Red Hat CEO - A Great Choice

Today, my version of the lyrics from the Beatles song "A Day in the Life " would go a little like this:

"Woke up, got out of bed, jaw hit the floor." Given that the announcement of Szulik stepping down came as a surprise even to many company execs, I guess there's no reason why I should have seen it coming. But, still, WOW! Total shocker.

Reading the reaction from Red Hat watchers has been fascinating, too. Here's a quick rundown.

  • Phil Manchester of El Reg's developer bureau provides a real nice write-up that puts this move in a broader market context. He notes that Whitehurst's appointment can be seen as a big step for open source towards the mainstream, reflecting the shifting "suits to sandals" ratio in open source. I couldn't agree more.
  • CNET's Matt Asay: Asay's first reaction was to throw a conniption, saying, among other weird things, that he'd lost all faith in Red Hat. Then I guess he poured himself a strong one and, an hour and a half later wrote that "he probably overreacted." And in his latest entry on the subject, Asay admits that, because Open Source is an "operations business" (are there any that aren't??), "perhaps - perhaps" Whitehurst is a good choice.
  • ZDNet's Dan Farber with Larry Dignan and David Berlind: These guys note, quite rightly I'd say, that Lou Gerstner, the guy that turned IBM around, was a complete newbie to technology, having previously run RJR, been an exec at Amex, and before that been a partner at McKinsey. One problem with this comparison, though, is that, by most accounts, including the one provided by Red Hat Investor Relations, Red Hat don't need no turning 'round, thank you very much. But, still, IBM's great success as a services business with Gerstner at the helm proves at least that a computer industry outsider can successfully run a computer company. (Note: It is curious that one of the things Whitehurst is praised for is his big role turning around Delta - maybe some people at Red Hat think they *DO* need a turnaround guy...)
To summarize, El Reg gives us a lot of very useful context, Asay kinda loses it then sort of pulls himself together, and ZDNet tells all us open source fanboys to just simmer down - after all, such a move is not unprecedented.

But the title of this entry includes the words "Great Choice," which goes beyond where ZDnet leaves things. Why? Because I think a former old-guard airline COO who had to watch his lunch be eaten by low cost, low price carriers, has precisely the right background to run the leading open source company. He knows what is going to happen to Oracle, Microsoft, SAP, BMC, BEA, etc., etc., because it is exactly what happened to Delta.

So, if you agree with the above, then it answers why Whitehurst, among available airline industry execs, makes sense. But what is it about the airline industry that makes it a particularly good hunting ground for the next Red Hat CEO? The economics of the airline industry are very similar to software and are especially similar to the SaaS model that is coming to dominate the industry. Both are marked by low and declining unitary costs and by high fixed costs. And network effects are prevalent in both. Lastly, Red Hat's customers - not its community of users, contributors and partners, but its paying customers - buy services, not software. Said differently, Red Hat is in the service business. Guess what the biggest service industry in America is? Hospitality, of which Travel represents $703 Billion.

No, Whitehurst is a very good choice for next Red Hat CEO. Hats off.

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