Red Hat adds to open-source stack

With its acquisition of JBoss, Red Hat hopes its third try scaling up the open-source software stack proves to be the charm.

The commercial Linux vendor bought JBoss this week for at least US$350 million, a price tag that could rise to US$420 million if the open-source application server vendor meets certain financial targets.

Users and analysts applauded the marriage of two of the biggest stars in the commercial open-source arena.

"Of all the potential firms who could have acquired JBoss, we feel that Red Hat - being an open source proponent - is a good match for us," said Barry Strasnick, CIO of CitiStreet, a benefits provider. Formerly a big user of the WebLogic application server from BEA Systems, CitiStreet started moving to JBoss in 2004. It now runs all of its mission-critical applications using JBoss on top of Red Hat Linux.

Badri Nittoor, CEO of JBoss systems integrator Tripod Technologies, said users now have an open-source alternative to get J2EE support for enterprise class applications -- as well as a way to move toward a service-oriented architecture (SOA).

Red Hat, which leads the Linux server market over Novell's SUSE Linux, has tried to build its own open-source application stack -- which Novell already boasts. But Red Hat has had limited success so far.

For instance, Red Hat unveiled its Directory Server software, bought from America Online Inc.'s Netscape division, at its first annual user conference last June. The global market for directory service software was worth US$669 million in 2005, and is expected to almost double to US$1.3 billion by 2009, according to Sara Radicati, principal analyst at Radicati Group.

The market remains dominated by Microsoft's ActiveDirectory, followed by Novell's eDirectory software. As for Red Hat's market share, "It's very small, let's put it that way," Radicati said. She pointed to the reluctance of companies to make big switches such as swapping directory servers.

Before buying JBoss, Red Hat had its own Java-based application server, based on the open-source Jonas application server developed by the European ObjectWeb consortium. It competes mostly with IBM's free WebSphere Application Server Community Edition, formerly known as Gluecode, as well as the open-source Apache Group's Geronimo application server, said analysts.

Although Red Hat CEO Matthew Szulik said the company plans to continue its "significant" investment in Jonas analysts did not share that optimism.

With JBoss, Red Hat gets to start with a product that is already popular. Rachel Chalmers, an analyst with The 451 Group, estimated that the J2EE cross-platform application server helped propel JBoss to $50 million in revenue last year, mostly in service and support fees.

JBoss' low cost of ownership compared to competitors such as IBM's WebSphere and BEA's WebLogic has helped it win customers on multiple platforms, according to Steve Walli, vice-president of strategy at Boston open-source consulting firm, Optaros.

Indeed, JBoss acknowledged in September while signing an alliance with Microsoft -- which has its own Windows-only application server -- that about half of its customers were using JBoss to work with Windows Server in a .Net environment.

Walli said that factor could complicate Red Hat's marketing strategy. But a user said it could motivate him to switch to Red Hat.

"I have wanted to switch from Windows to Red Hat for some time, but I am not familiar with Linux," said Jason Long, CEO and chief software engineer at Supernova Software and founder of the Houston JBoss Users Group. "This should lower that barrier and make it a more attractive option."

(Computerworld's Heather Havenstein and James Niccolai and China Martens, of the IDG News Service, contributed to this report.)

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