Red Hat’s reputation is its business

Why is Red Hat Software picking on a bunch of low-rent CD salesmen
about their use of the term “Red Hat” on the disks they are peddling?
It is Red Hat’s collection of code, although UnixCD and CheapBytes may have every right to peddle it. However, Red Hat has a good reason for complaining. It’s the same
reason that the company has made a business of selling something you supposedly
can get for free. Here’s a hint: Red Hat’s success has almost nothing
to do with the software.

A few years ago, I said a lot of mean things about Red Hat. I suggested
that commercializing Open Source software was an inherently silly idea,
and its investors were very silly people. That may have been true
about nearly all the other vendors in the Linux environment, but it is
time to recognize that Red Hat has made a real business out of the
platform. The way the company has done it shows how good management can build a brand.

Let’s be frank. There’s nothing all that special about Red Hat’s
technology. It’s Linux, the same powerful, clunky, indestructible code base
you can find on the Web in a lot of places if you’re patient and willing
to look. While the company has done a tremendous amount of work
extending that code to such an unlikely system as an IBM mainframe, there are
plenty of other developers who have done the same thing. It isn’t Red Hat
software that makes the company and its product so valuable.

It is Red Hat’s brand that sets the company apart.

Branding is what the Red Hat business is all about. It may be
about the purest example of just how far a brand can take you. It is
certainly the best example of brand building in the Open Source community — if not in the entire software marketplace. Branding may be the one reason that Red Hat continues to keep its head
above water financially, even while the rest of the industry is drowning.

How much is a brand worth? Sony will tell you it is nearly the entire
worth of their company. So will Philips
Electronics, as will Coca
Cola (.pdf file).

But how do you build a brand and make into a key asset?

Building a brand isn’t easy to do, and most “formulas”
for creating a brand are nonsense. Buying a brand doesn’t work either.
Ask the
investors in Pets.com.

The only way you can build a brand is to earn it, and that’s what Red
Hat has done. The company’s process is simplicity itself. It’s also hard.

First rule of brand-building: Be true to your vision.

Nearly every would-be Open Source company announced that it was
going to make money by selling services associated with Open Source. As far
as I can tell, the only firm that has really executed this plan
has been Red Hat. It put together a services
and training program that isn’t embarrassing.

Red Hat has a systems
integration and consulting team that can talk to the CTO or the suits without
embarrassing themselves, and the company has built a credible contract engineering team.

And Red Hat still sells software.

Had you looked, you would have found something similar in the business
plan of every Linux corporate wannabe that rode a wave of
irrational exuberance in the late ’90s. However, what other company
stuck with their plan and waited for the market to mature?

Second rule: Do your job.

Most software companies do a pretty poor job of developing products.
Many match that poor product with levels of support that are downright
infuriating. While Red Hat gets mixed marks from the user community, it beats
poor support (Microsoft) or no support (the average Open Source
project). When the company first began to bully some small distributors, it
said, “We want users to understand what they are entitled to [when they deal
with Red Hat] — a difference of service and support levels.” That
doesn’t sound unfair.”

Third rule: Pick your friends well.

Of all the happy circumstances Red Hat has encountered, few are as
happy as Big Blue’s loud public embrace of Open Source. Not only has IBM
given credibility to the Linux platform, judicious positioning by Red
Hat made it seem as if Red Hat was IBM’s preferred vendor.

Fourth rule: Make your name synonymous with the product.

This can be a risky strategy as anyone familiar with the story of Thomas Crapper can
tell you. However, Red Hat has to be happy that so many software
developers have specified Red Hat Linux as opposed to “POSIX-compliant Linux”
as their preferred platform.

Fifth rule: Pick your enemies well.

Microsoft’s inability to refrain from the most infantile corporate
behavior imaginable has allowed Red Hat to position itself as the alternate
voice of reason. It’s a role that Sun’s Scott MacNealy can’t play. Larry
Ellison doesn’t look the part. But whenever Matt Szulik takes the
stand at a federal hearing, it re-enforces the perception that his
company is the primary alternative to the bullies of Redmond.

Sixth rule: Make yourself the alternate choice.

That has been the principal success of Red Hat as 2001 draws to a
close. Red Hat, more than Apple, or AOL — or any other vendor — has become the
alternate choice, a safe choice for corporate buyers and a recognized
name in the marketplace. And for a firm that I thought would disappear
a long time ago, that’s a pretty good place to be.