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CORPORATE PROFILES

What it Takes to Survive a Walk on the Vendor Side

December 17, 2001
By Doug Barney


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Let's face it, this was a tough year for everyone. IT budgets were sliced to ribbons, venture funding dried up faster than sweat in the desert, carriers suddenly stopped investing in build-outs, and dot-commers traded in their Porsches for Hyundais.


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No group was hit harder than networking vendors, who depend on enterprise and xSP spending. But the folks running networking companies are tough -- they rise to the challenge. We wanted the skinny on how today's hottest players plan to make it in 2002. To find out, we went straight to the top. No low-level marketing VPs here. We interviewed CEOs, chairmen, presidents and founders of companies representing OSes, data services, Internet software and hardware, and security.

We unearthed a variety of strategies -- some companies are sitting on cash to outlast the downturn, some are designing new technologies and networks, while others are cleverly recrafting sales and financing arrangements.

In an era when you are betting your company business success on technology, you have to make sure the supplier is viable, and that means asking tough questions. Decide for yourself just who will make it through 2002.

Red Hat Sticks to Knitting

Surviving bad times is challenging enough when you have an established product line and huge brand-name recognition -- just ask Nortel and Cisco Systems. It's even tougher when you're establishing a category. That's the situation Red Hat Software is facing as it tries to convince the world that Linux is safe for the enterprise. This means not just taking on old IT thought patterns, but facing Microsoft's mammoth marketing muscle.

Red Hat says it plans to survive these challenges by educating the market about open source, driving server sales and going after untapped markets, such as embedded OSes. While it battles Microsoft in the server space, Red Hat plans to steer clear of markets where it has little strength. Instead, the Research Triangle Park, N.C., company has a two-pronged approach. On the low end, it is pushing embedded Linux, a solution for small-form-factor devices, such as PDAs and thin clients, as well as networking appliances, such as SSL accelerators, firewalls and load-balancers. On the high end, it has more at stake: replacing mainframe OSes on large Unix servers with its latest creation, Red Hat Linux 7.2.

Matt Szulick, CEO,
Red Hat

On the flip side, some are begging for a serious approach to Linux on the desktop. But even with Windows XP getting a bad rap and the recent judgment against Microsoft opening the OEM channel to rivals, Red Hat CEO Matt Szulick says the company won't spend millions trying to dislodge Windows from its desktop perch. "There is a lot of integrated activity with Microsoft's family of products that does not make replacement easy for many enterprise customers," Szulick explains. (Click here for more on Linux in the enterprise.)

Instead of replacing today's fat-client desktops with a Linux fat client, Red Hat is pushing embedded Linux, which can run on mobile devices, thin clients and set-top boxes. The play? Support smaller footprint systems, perform well on multiple chip architectures, and get in there cheaper than anyone else, Szulick says. The idea is not just to replace current systems, but to offer more value by supporting richer media types, like streaming video.

As this vision grows, Microsoft's lock on the desktop could be broken. "The replacement opportunity will be interacting with multimedia types through a more productive and enhanced client," Szulick says.

Szulick says he's spending as much time talking about Red Hat financials as he does the product. He must convince open-source zealots that vendors deserve to make money. "We are continuing to educate to make sure that customers come to understand that Red Hat is not a wellness center; it is a profitable business," he says.