Dell and Red Hat Form Alliance

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Dell and Red Hat Form Alliance
R. Krause - July 7, 2000

Event Summary

Dell and Red Hat Inc. announced the One Source Alliance to accelerate commercial adoption of the Linux operating system and to support businesses building Internet infrastructures. Linux is now one of three strategic operating systems Dell factory installs and supports globally, along with Microsoft Corp.'s Windows and Novell Inc.'s NetWare.

Red Hat and Dell offer customers a "pure play" for Linux development and deployment as demand for the open source operating system increases. Unlike many manufacturers, Dell does not have a proprietary, in-house UNIX offering that competes for resources. This agreement allows Dell to align its efforts with Red Hat to deliver best-in-class Linux solutions to its customers and outlines a tightly integrated package of joint development programs, global services and marketing initiatives.

Dell and Red Hat will expand their direct engineering relationship to address the immediate high-volume business opportunity in the Internet infrastructure buildout. Red Hat and Dell also will focus on future core operating system developments in the areas of reliability and availability, including clustering, to support the maturation of Linux. A key aspect of their development activities is next-generation open source systems based on Intel's IA-64 platform.

An example of early development efforts between the two companies is the Red Hat Linux stack in Dell's new PowerApp.web appliance servers, announced in April of this year. Engineers from Red Hat and Dell worked together to create an optimized version of Red Hat Linux for the new appliance web servers. Toyota Motor Sales USA, Inc. is one of the first companies to deploy PowerApp.web appliance servers, at approximately 1,400 dealerships in the United States.

Both Dell and Red Hat have also committed to running each other's systems internally, thereby benefiting from the One Source Alliance in a work environment on a daily basis. Red Hat will use Dell PowerEdge servers and Dell Precision workstations as its primary development and certification platforms and Dell uses Red Hat Linux in certain areas of its IT manufacturing operations. New features for Red Hat Linux will be tested on Dell equipment and then submitted back to the open source community for further validation and testing. The co-development and testing is expected to provide Dell a time-to-market advantage in offering the latest versions of Red Hat Linux to customers.

Dell and Red Hat will create special Linux service and support offerings to meet the extensive needs of commercial customers. Red Hat will be Dell's preferred Linux services provider worldwide.

Market Impact

This is another boost for Linux in general and Red Hat in particular. Having "most favored nation" status with Dell, combined with the likely market volumes for Dell's PowerApp server appliances, should help Red Hat extend its dominance of the Linux market. However, the special "tuning" that Red Hat will do for the Dell hardware is not necessarily good for the Linux movement - the market's OS fragmentation concern gains credence when the market leader creates a "special" distribution. Even with this concern, we expect this announcement will help Linux continue to increase its server volume market share (est. 25% in 1999). With Linux pre-loaded on the fastest growing segment of the server market - server appliances - by the #2 vendor in the Intel server market, we expect the growth rate to be greater than would otherwise happen.

Dell benefits from the increased visibility of its Linux offerings. IBM is catching up to Dell in its overall Linux offerings, owing to its breadth of platforms on which it will support Linux. However, we believe Dell is maintaining a slight edge in mindshare, due to the early lead it built up from direct ordering and factory pre-loading of Linux on its various systems.

User Recommendations

Hardcore Windows users will find no value in this announcement, but we do not see any real downside for the rest of the world willing to consider Linux. The Linux market leader combined with one of the strongest Intel server manufacturers to deliver packaged solutions is a strong message, and we see only modest risk. Risk, in this case, takes the form of the potential dearth of applications and drivers for Linux. However, the Linux community has been trying hard to catch up, and soon this negative-sell will be obviated.

The services/support agreement will also serve to lessen uncertainty for customers planning to add Linux to their in-house operating systems.

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