Open Source Software is the Best Innovation MethodBy Jan Hogewoning | Fri, 10/30/2020 - 09:33
Q: What differentiates Red Hat from other companies that provide software-based solutions?
A: Red Hat has a very different business model compared to proprietary software companies. We dedicate ourselves to open source software development, meaning the design, programming and development is done through open collaboration among global communities instead of a group of in-house developers. Open-source solutions generated through these global collaborations are not registered as intellectual property. In normal companies, there is a group of internal developers that create a solution, which is then patented and sold through resellers. In Red Hat’s case, we take the open-source solution and help to translate it to business solutions for clients while providing full-time support. Just like other companies, we offer these services through a subscription model. The benefit of open source is that it creates a space for millions of minds to come together to create innovative solutions. This is why the industry is moving in this direction.
Q: Can you provide an example of how open source has generated a disruptive benefit?
A: One of our lines of business is to ensure clients have the ability to move information between different cloud providers. Our solutions provide greater flexibility and lower the dependency on one environment. Another line of business is microservices, which offer agile software solutions for particular services. The world is moving in the direction of microservices in cloud environments. For example, the digital platforms of BBVA, Banamex and Actinver all benefit from our technology solutions in this area to strengthen their services. There are three main advantages they enjoy: the time to market is faster, they have the capacity to adapt to an environment in a few weeks and there is more security in the application.
Q: Some say that open-source software may face obstacles in its operation. What is your response to that?
A: I think it is quite the opposite. When a company with proprietary technology has a problem, the diagnosis and development of a solution depends on its team. In the case of Red Hat, the solution depends on the continuous trial and error of the work of global communities, numbering between 30 to 60 million people. These communities continuously deliver new versions of the software. Because companies transform slowly, they cannot always adopt new software versions immediately. Meanwhile, we make them available right away and proactively help clients improve their tech. The result of continuous improvement is that the errors in the software are much fewer than with proprietary tech. Instead of investing US$3 million in a new update as legacy companies do, we have thousands of people improving software continuously. They make improvements, we create a solution and feed it back to communities. When a company truly wants to enter an exponential thought process, generating innovation in quantic jumps, I think open source is the answer.
Q: In which sectors are you the strongest in Mexico?
A: Nearly 60 percent of our revenue comes from two industries: TELCO and financial services. Another significant part is in the Public Sector. Right now, TELCOS are going through a process of virtualizing networks into open generic systems. Before, systems used to be closed and run primarily by Ericsson and Huawei. Red Hat migrates them to clouds. Almost every single telecom in this country runs with our tech.
In the financial services sector, our OpenShift container platform is used for the management of cloud containers and middleware solutions. We are particularly present in open banking and open payment solutions. JBoss was a company that produced middleware for the financial sector. We acquired the company and returned the solutions to the communities. Since then, those solutions have become standards in the financial sector. In the public sector, the government is pushing the use of open-source applications. By choosing proprietary solutions, you lose innovation. With open source, you can download a solution quickly and use it. Red Hat is working on a concept called Sustainable Open Source. With the ongoing austerity measures, the government wants to promote open source as a more cost-effective method. Lastly, it is worth mentioning that we have big clients in the retail sector, including the largest supermarket group and the largest fashion group in the country. They use Red Hat tech to manage inventory.
Q: What does Red Hat tech offer to the health sector, especially during the pandemic?
A: Our solutions are facilitating a digital transformation through cloud technology, microservices and API management. We are working with federal and state health institutions to support the rapid creation of apps that manage things like medical equipment inventory, as well as COVID-19 information. Institutions like IMSS and ISSTE are employing our tech to operate these microservices.
One thing Red Hat does is innovation labs. We sit down with a client to discuss how to transform not just their tech but also their organizational culture. We held open innovation labs with IMMS because it had challenges while confronting the pandemic, such as managing medication distribution. You cannot just throw tech at these challenges, you need other processes too. We also have two Open Innovation labs with banking institutions to help move their mindset to tech and processes. One specifically has to do with payment systems.
Q: In July 2019, IBM completed the acquisition of Red Hat. How has this impacted your business operations?
A: Tech companies have a value based on market cap and share prices, backed by their proprietary tech and sales performance. In the case of Red Hat, we do not have stock nor do we have intellectual property. So, why did IBM pay US$34 billion to acquire Red Hat? This comes down to the value of the open-source business model and the culture based on collaboration that comes with it. At Red Hat, there are 13,000 people and at IBM 400,000 collaborators. Integrating Red Hat into IBM would risk losing that distinct culture. This is why IBM chose to keep Red Hat as a separate company. We do have synergies; there is a group in between, called Synergy Team. They look for commercial synergies to better support clients. This applies primarily to the downstream area, where we interact with clients. In the upstream area, where we generate innovation, both companies have independent decision-making processes.
Q: What contributions does Red Hat provide to mitigating identity theft in the financial sector?
A: Every time you go to a banking branch in Mexico and you complete a procedure where you have to provide your fingerprint in an electronic scan, that fingerprint is checked against an INE’s (Instituto Nacional Electoral) database and processed in less than half a second. That is Red Hat tech. We are working on a fingerprint recognition project, as well as an iris recognition project. In terms of information security, we offer many solutions. We have an operating system called RHEL that secures information with backup. RHEL is also the most widely used operating system in these kinds of devices.
Q: What are your primary sales channels in Mexico?
A: Almost 90 percent of our sales are through commercial partners. This allows further sector specialization and greater national coverage. We have various commercial partners with whom we develop client relations. In addition, we have consultancy services that assure solutions are used in a good way.
Our go-to market is divided into two big areas: one is strategic enterprise and the other is midmarket/small and medium businesses (SMBs). They have different partners, different objectives, different processes and different target markets. While big transformation is more for the upper segment of the pyramid, many smaller companies acquire middleware solutions run with a Linux operating system for which we offer special microservices. One of our products is called Red Hat Quarcus. This is a lighter version of Java that does not come with the thousands of restrictions Java has, which makes it easier to operate.
Q: What are your expectations for the coming year and what are your main objectives?
A: In Mexico, we expect year-on-year growth of double digits. We are outperforming our expectations, partly because now is the moment for digital transformation and many companies associate us with that. We expect this to continue. For 2021, there are two important factors to consider. The TELCO industry is reinventing itself, strengthening its network capacities. People are interacting through the internet. Increasingly, they are using Wi-Fi networks instead of mobile data. This means the industry has to reconfigure itself. Red Hat is investing aggressively to assist in this process. We have also launched a specific campaign for Mexico called Reactivate. The idea is to reactivate the Mexican economy through companies that become more efficient and effective by using our technology solutions. Red Hat has lined up a large budget for Mexico for 2021 because we believe TELCO, banking and SMEs can really benefit from our approach.
Red Hat is a multinational software company that provides open source software products to enterprises. In Mexico, the company is primarily active in the financial, telecom, public and retail sectors