It appears that the Red Hat/JBoss team are aggressively expanding their presence in the SOA marketplace. They continue to extend their stack to enhance their offering. The latest addition to their stack is their ESB which they have stated they want to become the De Facto open source standard ESB, replacing other offerings like Apace ServiceMix. At the same time, they are expanding their professional services organization to enable them to compete in the larger services market, which up until now JBoss had been largely unable to compete in. I had written about JBoss missing this larger market earlier in the year.
It is amazing what cash and an enterprise presence can do for a company. While many thought that Red Hat paid too much for JBoss, I am convinced that we are about to see just how well this is going to unfold. I believe that the RH/JBoss team will take full advantage of the JBoss installed base and push hard into the services space dominated by the likes of IBM, BEA, and Oracle. They have the presence, expertise, and the technology to do it. Not only that, the market is ripe for them and their model. They will offer the support and functionality to make their solutions very competitive. They will lead with infrastructure, and I expect will fairly quickly move beyond that to consulting, architectural design, and application development. Red Hat has a history for delivering professional services to the enterprise market credibly, so this will be very natural for them.
My predictions are:
1. RH/JBoss will be successful in taking share from all three market leaders.
2. I expect that they will enter and deliver their services profitability.
3. It wouldn’t surprise me to see them achieve upwards of $200M in services sales within two years.
4. They could make it to be one of the top 3 market leaders for services sales within 2 years.
So then the question of consolidation comes up. When I worked for GE, Jack Welsh always said that if you weren’t in the top one or two in your market you should probably get out as there would not be enough revenue to generate profits beyond that. I would argue that being number three in a pure service business is fine, but number four will really struggle.
Regardless, that nuance will not be lost on our current market leaders. RH/JBoss will be disrupting the service portion of the market, taking share, and driving profits out of it. They will take notice quickly. Collectively, they have nothing in their product mix to stop RH/JBoss with the exception of IBM’s WAS CE, which is quite a ways away from becoming a competitive solution.
I wouldn’t be real surprised to see Oracle making a play for Red Hat within that timeframe. And if Ellison thinks that $380M was high, wait till he sees what the Red Hat price tag will be in two years.