Red Hat may have to eat its own (red) hat!

Implications: •  Microsoft recognizes that it can no longer ignore the Linux threat and has found a way to derive revenue from it.

•  Microsoft has opened the door for Novell to coexist with it in Windows environments.

•  As this is an exclusive arrangement for the next three years, it will allow Novell to prove itself while competition like Red Hat is at a major disadvantage.



Analysis: After years of badmouthing Linux or trying to ignore it altogether, Microsoft has entered the game by striking a partnership with Novell.  Microsoft recognizes that many small-to-medium (SMB) sized businesses are looking at other platforms in addition to Windows and rather than watch its influence on these organizations diminish by being shared with Linux vendors.

By partnering with Novell and entering into an exclusive three-year agreement, Microsoft has established Novell and its Suse Linux Enterprise distribution as the preferred Linux distribution in mixed Windows/Linux environments.  While Microsoft would certainly like to see the world viewed exclusively through Windows, it has given its blessing (and legal indemnification) to Suse in mixed platform environments.

While Red Hat's market share greatly exceeds Novell Suse's, Red Hat is now at a distinct disadvantage when selling into the Windows world. Having Microsoft as a serious partner provides Novell with a major advantage in Windows environments and should provide it with the opportunity for significant growth as Linux deployments become more prominent in SMB organizations. 

Additionally, Oracle's decision to compete with Red Hat by offering support for Red Hat Linux will cut into Red Hat's revenue stream, especially in organizations that run the Oracle database on Linux platforms. 

Red Hat now finds itself waging a war on two fronts:  against Oracle for support revenue, and against Novell in Windows shops.  Its claim that it will be the only commercial Linux vendor left standing one year from now is mere bravado; by that time Red Hat may be in a position of having to eat its own (red) hat.