Red Hat CEO pins 21% growth on hybrid cloud market

James WhitehurstRed Hat demonstrated healthy growth in its quarterly earnings, with CEO James Whitehurst attributing the success to the growing hybrid cloud market.

The company reported Q4 revenues at $544 million and total revenues for the year at $2.05 billion, both an increase of 21% on the previous year (constant currency). It now claims to be the only open-source company to have breached the $2 billion milestone.

“Our results reflect the fact that enterprises are increasingly adopting hybrid cloud infrastructures and open source technologies, and they are turning to Red Hat as their strategic partner as they do so,” said Whitehurst. “First, the fourth quarter marked our 56th consecutive quarter of revenue growth which contributed to Red Hat’s first year of crossing the $2 billion in total revenue milestone.”

While public cloud has been dominating the headlines in recent weeks, the Red Hat team remain positive that the hybrid cloud market will ultimately deliver on expectations. “Public cloud has been a great resource for us to reach new customers, including small and medium-sized businesses,” said Whitehurst.

“During meetings Frank (Frank Calderoni, CFO) and I have hosted over the quarter, investors have asked whether the public cloud is a positive driver for Red Hat. We firmly believe that it will be a hybrid cloud world, where applications will run across four – all four footprints; physical, virtual, public cloud, and private cloud.

“Our revenue from private IaaS, PaaS and cloud management technologies is growing at nearly twice as fast as our public cloud revenue did when it was at the same size.”

Although it is unsurprising that Red Hat strongly backs the hybrid cloud model, security and data protection concerns in the industry add weight to the position. Despite progress made in the delivery and management of public cloud platforms, recent research has shown that enterprise decision makers are still concerned about the level of security offered in public cloud, but also where the data will reside geographically. Both concerns are seemingly driven hybrid cloud adoption, giving enterprise the full control on how and where company critical data is stored.

Over the last 12 months, Ret Hat has also confirmed a number of partnerships with major players in the public cloud space to increase its footprint. Last year, a partnership was announced with Microsoft where it became a Red Hat Certified Cloud and Service Provider, enabling customers to run their Red Hat Enterprise Linux applications and workloads on Microsoft Azure. In addition the Certified Cloud and Service Provider platform also has relationships with Google and Rackspace. Red Hat claims that these relationships have resulted in more than $100 million revenue, a 90% increase year-on-year.

“In Q4, we further expanded our technology offerings that can be consumed in the cloud. For instance, RHEL on-demand is activated on Azure in February,” said Whitehurst. “OpenShift, our PaaS solution, and our storage technology will be added to the Google cloud. And RHEL OpenStack platform is now available at RackSpace as a managed service.”

Despite increased competition in the market over recent years, Ret Hat has proved to be effective at holding onto customers. The largest 25 contracts that where up for renewal in the last quarter were all renewed and the new deals were 25% higher in the aggregate. The company also claims that 498 of the largest 500 deals over the last five years have also been removed.

“We never want to lose a deal, if we do, we never give up trying to win back the business,” said Calderoni. “This quarter, I am pleased to report that we closed a multi-million-dollar ‘win-back’ of one of those two former top deals.”

The company also estimates that revenues will grow to between $558 million and $566 million for Q1 and between $2.38 billion and $2.420 billion for the financial year.