Red Hat pulls out of consumer channel

Red Hat pulls out of consumer channel

Linux vendor Red Hat has confirmed that it will no longer offer consumer (pocketbooks) and professional (retail boxes) editions of its software once current stocks of its Red Hat version 9.0 have been depleted.

The vendor claims that the community-based development cycle for these versions of its software has negated the need for selling the products through the retail channel.

“The development cycle was just too fast – it was too hard to try and pigeon-hole it as a boxed product every six months,” vice-president for Red Hat Asia Pacific, Gus Robertson, said. “There was no sense in putting it in a box when it would change again within a matter of weeks.”

Robertson said it would now be left up to Red Hat’s development community to determine release schedules for the personal and professional versions of its software.

It will be distributed via Linux user groups, books and magazines and web-based downloads rather than as boxed products.

However, it is not a complete exodus from the retail channel for Red Hat.

The company’s enterprise product, that has a 12-18 month development cycle, will continue to be sold to the reseller channel through distributors ACA Pacific and Everything Linux.

The move makes sense according to industry analysts, who have long speculated that the Linux publisher made most of its profits from support contracts for enterprise level software rather than through sales of boxed products.

Robertson said he would not be drawn to comment on whether the axed product lines were profitable, but said that they were nonetheless very popular.

“I am not sure if Red Hat is looking to profit from it,” he said. “It was more like an introductory product to attract people to the enterprise product.” Robertson said the move would require Red Hat to re-assess its relationship with Network Services, a magazine distributor fully-owned by Australian Consolidated Press (ACP) that pushed Red Hat’s consumer editions as “Pocketbooks” into newsagents.

The news has angered one of Red Hat’s Australian distributors, Everything Linux.

Managing Director, Anthony Rumble, said the decision had been driven by North America and showed no consideration for market dynamics in the rest of the world.

“I don’t think it was making a lot of money but that is not the point,” he said. “It's more like marketing: it's branding, it's cheap advertising. From a strategy perspective, this is a huge mistake.”

Rumble said that the software did not sell well as a boxed product in North America. To add to the heartache for Red Hat, the vendor would receive countless support calls from customers that had purchased a third party distribution of the Red Hat software without the necessary documentation that came with the official Red Hat version.

“Even here in Australia you could get a 3-CDR set which was released by anybody – let’s say they called themselves ‘youknowwho-Linux’, or ‘whatshisname-Linux’, for thirty bucks,” Rumble explained. “These third parties are able to modify the software – but occasionally left Red Hat trademarks on it, so Red Hat would get stuck with support calls for products they didn’t sell.”

Locally, the channel came up with a solution to this problem.

Rumble claims Everything Linux convinced Red Hat Asia Pacific to modify the product to suit the market – by packaging an ‘official’ Pocketbook Red Hat distribution complete with seven CDs, a manual and installation guide. The Pocketbook would sell through retailers at only marginally above the cost of an unauthorised distribution.

“We realised you didn’t need a big box full of air,” Rumble said. “We simply tackled the problem with a better product and it sold very well.”

Rumble said Pocketbook and professional versions of Red Hat Software accounted for at least 20 per cent of Everything Linux’s business.

“There are a lot of retailers that will feel like they are being cut out of the deal when they hear about this,” he said. “Many of our customers are box builders who would bundle that software just like an OEM builder would with Microsoft - they would throw a pocketbook in with the build of a new machine. Now that the boxed versions are gone – it’s more than likely they’ll start loading ‘whatshisname-Linux’ CDR’s instead.”

Rumble expects that users of Red Hat’s professional edition, who would pay slightly more than the consumer edition in order to receive some local installation phone support and some manuals, will more than likely now become customers of competing vendor SuSE’s professional edition. “I’m sure SuSE is smiling about this,” he said.

Robertson said the channel should rest assured that Red Hat’s plans for its Enterprise product set will more than make up for the loss of the boxed consumer and professional editions.

“If anything we are putting more focus into the retail channel,” he said. “My focus here is to push more product through the channel in Australia and you will hear a lot more about it in the next six to eight weeks.”

Rumble said Red Hat’s Enterprise product was growing in Australia, but he “wouldn’t be betting the business on it.”

“It was the [consumer versions] that were driving people to it,” he said. “Red Hat was landing huge deals because someone from a large company would buy a pocketbook, they would start using it at work, then the risk assessment manager comes around and has a heart attack because they have no license or support contract for that software. Next thing you know Red Hat has scored a license for their advanced server and a huge support contract.”

Rumble hopes that Red Hat will give its Asia Pacific division enough autonomy to allow it to reverse the strategy locally.

“They’ll be back,” he said. “They will have to work it out – the only question is how long it will take them to work it out.”

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