IBM-backed open-source enterprise software-maker Red Hat’s revenue grew 11 per cent year-on-year during the second quarter of 2023 in a market where other tech players are struggling with slowing demand. businessline spoke with Matt Hicks, President and CEO, Red Hat to understand how the global tech spends are shaping up, the headwinds and opportunities, and India’s potential for the Linux company.
It’s been just over a year since you took over the responsibility as a CEO. What’s been the journey like so far? How have you been navigating through the slowdown?
It’s been the fastest year of my life, so far, since I started at Red Hat almost 18 years ago. There has been a lot of chaos in the last year from economic to geopolitical challenges. But we see quite a pull for software innovation, be it cost cutting or higher realisation, or perhaps to drive innovation with the changing markets. This has created a pretty consistent opportunity for us, even within the churn and uncertainty.
What are you hearing from your clients when it comes to tech spending ? Do you think the worst is behind?
There is a bit of hesitancy to bet on the thing that’s unknown right now. If you go back the last few years, customers would take a bet on any tech that might give them that differentiator. The trend I’m seeing right now is that everyone is getting back to basics. They’re going to invest, but they’ll do it in known paths. They want to bet on whats going to be durable for a decade. This is where we have seen the pull and success with technologies like Linux.
Are there any specific sectors where you think tech adoption is happening faster, for example, would telecom be something which is exciting because a lot of their network is moving towards open source environment?
Telcos have been our poster child and now you have 5G, which just by the design of it will be more distributed. One good data point of the success down this path is that we recently announced our partnership with Nokia of taking over their core platform business on it. We know this space, well, we run a lot of the core networks and our edge networks for telcos. So that has been a great area that fits in that hybrid cloud world that we really like.
Automotive is another area where I would say there are sort of two trends that are shifting there. The first was the pressure of semiconductor shortages, which really made a lot of the major car producers rethink how they were building cars. Hand in hand with that, there was the push towards electric vehicles, and you now have a much more software-dominated vehicle. And those two factors combined have driven a pretty significant change in the automotive industry. There is also a tremendous amount of change that’s going on in manufacturing sector right now.
How is India doing for Red Hat ?
India is probably one of the hottest markets on the planet. It has good fundamentals, strong technology understanding and great growth. So, in market as a whole, India is a phenomenal opportunity. It also is a significant engineering hub for us. And so that’s something I would expect to continue and for us. We started when we started our investment in India, right about when I joined Red Hat, and it has only grown since then. So I’m excited about that. I keep telling Marshall (India country head) he has more to do more.