Business model: more on Red Hat
Few days ago I wrote a commented a Billy Marshall’s suggestion telling I was convinced was taking advantage of commons-based peer-production, and the difference between Red Hat and Oracle expenditures on R&D had a simple explanation.
Today I read Savio Rodrigues post, comparing Red Hat’s SG&A spending to similar data from IBM, Oracle or Microsoft and I got a clear picture of the (often) unseen side of the moon.
I think he did a very good job searching around SEC files.
And I’m happy he is also half convinced that proprietary enterprise vendors spend 5-10x more on sales and marketing. As I wrote it’s true that COTS open source software is found by users, but it’s not trivial to turn them into customers.
Roberto Galoppini and 
Savio Rodrigues 7:03 am on December 20, 2006 Permalink
Hello Roberto,
Well, I’m less than half convinced about SG&A spending by traditional vendors being higher than open source vendors 🙂
There are clearly some traditional vendors who spend “too much” on SG&A, but I don’t believe that being an open source vendor means you don’t have to spend on SG&A. You don’t spend as much on SG&A when you’re in the early stages, but as you grow rapidly, you have to compete against the large software companies, and so you’re spending is going to track their spending.
I totally agree with your comment that COTS is found by users, but it’s not trivial to turn them into customers.
BTW, what do you think about my opinion of traditional vendors end up acquiring open source vendors?
Roberto Galoppini 8:39 pm on December 21, 2006 Permalink
Sorry to be late Savio, but we moved our beloved server and we got some troubles with DNS updates.
You pose an interesting question, here a brief answer to a point, but I’ll be writing soon a whole post about it.
Red Hat.
RH might play the gorilla game, making bigger and bigger its stack. But the large vertical integrated corporation is starving, above all in markets where the reduction of technological and legal barriers to trade make cooperation more efficient. And more, I believe VC are not fond of investing money in weak IP business, unless you can proof them you’re going to be the one (see also my post on Alfresco business model).
Roberto Galoppini 11:28 am on January 4, 2007 Permalink
As promised I eventually wrote a post about RH and the gorilla game.