 Live from San Francisco, it's theCUBE. Covering Red Hat Summit 2018. Brought to you by Red Hat. Hey, welcome back everyone. This is theCUBE's exclusive coverage of Red Hat Summit 2018, live in San Francisco, the Moscone West. I'm John Furrier, the co-host of theCUBE. Here this week as a co-host analyst, John Troyer, co-founder of Tech Reckoning, a advisory and community development firm. Our next guest is Jim Whitehurst, the president and CEO of Red Hat. We have the man at the helm, the chief of Red Hat. It's great to see you. Thanks for coming on, taking the time. Great to be here. Thank you for hosting with us here. So you're fresh off the keynote, you got a spring in your step, you're pumped up. Red Hat is really getting accolades across the board. So congratulations on the big bets you've made. You guys are looking like geniuses. We know you're super smart, there's a company. So congratulations. Either that or luck. Keep it, we'll take it either way. You're in a well position. Analysts love your opportunity. We're reading in the financial analysts out on the web that saying the expanded market opportunity for Red Hat is looking really good. You got infrastructure, applications and management all kind of coming together. OpenShift is the centerpiece of all this. And the cloud scale world is moving right to your doorstep. This is really the big tailwind for you guys. By design or like, I mean, how is all coming together? Is it a master plan? Well, yeah, I think it's two things. So one is because we don't bet five years out on technology and write a technology stack to get there. You know, that's not our model. Our model is to engage in communities and when those communities get popular enough that we think that there's value in a supported version then we offer the supported version. Now, if you flip that around and think about what that means, it means we're never wrong with a technology bet because we're not providing a product until it's something that's already highly successful. So we didn't offer open stack until it was successful. We weren't offering a Kubernetes offering until it was popular. And so I think that's one benefit. We truly work bottom up in communities. And then secondly, I do think we benefited from the fact that we've lived in the old traditional enterprise world for 20 years, helping them migrate from Unix to Linux. And so I think we understand the old world and the one kind of spin we put on the technologies is we have a sense of, okay, for a traditional enterprise it's great there's all this cool stuff that Facebook and Twitter and others are doing. How does that apply to this set of problems? I think we uniquely have a foot in both worlds. So we work and develop with, you know, the Google's, Facebook's, Twitter's, but we really think hard about how those technologies apply to a traditional enterprise in the context and legacy migration and all the other issues that they face. And you had years of experience dealing to the practical nature of getting support to customers, but you got to bring that new shiny new toy, but make it right for the customers. Yeah, exactly. And I think one of the reasons OpenShift, you mentioned that, you know, it's our Kubernetes platform is getting so much attention is we have instrumented and architected it to be able to run traditional stateful enterprise applications. And so, yeah, you can do cloud native, you know, 12 factor, blah, blah, blah, blah on it, but importantly, you can run your traditional application suite on it. And so one of the reasons I think you see so much momentum and so much interest in it is we're trying to span both worlds and really thinking from an enterprise IT mindset in terms of their problems and saying, how do you apply these technologies to make it work? So we're not sitting here saying, you need to go do this, you need to adopt Google's practices. What we're saying is, here's great technology. We think you can leverage to kind of help you as you migrate to this new world. You guys got some clear visibility and I think it's interesting container trend and Kubernetes really good timing for Red Hat with what's going on. And so two things we were commenting on our Open today was we got the interoperability of multiple cloud options going on with Kubernetes and containers with respect to legacy applications. And then you got the cloud native scale for all the new stuff. So the old model in tech was kill the old to bring in the new, now you have a new model where you can actually keep the old legacy containerize it while building new functionality all within software that you guys are enabling. So this is kind of a breath of fresh air for a lot of people in the industry and the enterprise side saying, oh, okay, I can still use my stuff but yet build new scale with cloud and on-prem and have choice. Exactly. And it's not just use my old stuff. It is also leverage my existing people and their skills. Recognize the app dev world. Most people aren't developing in a stateless cloud native way. And if you look at the traditional enterprise developer they on average have four hours a month to do continuing education and new skill development. So the idea that you're going to flick a switch and say all my new applications are going to be in this new model is crazy. Plus so much the work you're doing is around your existing estate. Really providing a platform that says you can develop net new with the skills if once you have those, you can take your existing people and take them on a journey versus like this big chasm that you have to get over as you think about both your applications and skill sets and build over time. I think that resonates really well with enterprise. Jim, I really like the keynote this morning. It was a very customer focused, not technology focused. And a lot of these keynotes lately have been fear based. You know, change or die, right? Your company's going to go out of business. You had a more positive vision and the stories there were very good. A lot about time to market, time to value. Some nice stories I was joking. I think, you know, flying cars would be great but I know I'm in the future if T-Mobile can help car makers update the apps in the car within a couple months using OpenShift, right? That's the future as far as I'm concerned. But you had this really nice framework of, you know, instead of pre-planning everything and as IT has wanted to do, you talked about configure, enable, engage. Can you talk a little bit about that framework and kind of your prescription for up leveling the organization and its resiliency basically as it hits the ground running? Yeah, sure. And so I think you put a really good light on this idea of so many technology companies are out there kind of almost fear-mongering around digital transformation. And what's happening is organizations around the world, fundamentally how they create value is changing. And it's all gotten listed under this moniker of digital transformation. But what it's basically saying is the future is very unknowable because the world's changing very, very fast and it's ambiguous. You're likely to have the uberized, I mean that's a word now, orthogonal competitors coming in different ways. So your normal way of let me do a five-year plan, let me prescribe a set of initiatives and organizations and job descriptions to go attack that. And then execution becomes about compliance against that plan. That model no longer works when you don't know the future well enough to be able to do that. And so rather than just pick on that and say, ooh, you should be scared, you should be scared. What we try to do is say, hey, Red Hat's lived in that world forever. Like we had no idea that Kubernetes is just going to be accessible. It isn't, we don't necessarily know where it's going to be five years from now. But we know if we build the right context, it will develop the capabilities required for us to meet our customers' needs. And so applying that same model that we've seen in open source and frankly we see in a lot of Web 2.0 companies, we get asked over and over again, hey, you provide me great technology that helped me contextualize this broader problem. Because the problem that everybody has is I need to be able to move more quickly. I need to be able to react to change more quickly. I need to innovate more effectively. That is not a skew. If that were a skew, we would be a $100 billion company, right? That's not a product you can buy. It's a capability to build. And so the model we talked about was planning gets replaced by configuring, right? So you don't know what the future's going to be, but you know it's going to change. And so configure yourself for change. Prescription or this idea you lay out all the steps that need to happen for people. In an unknowable world, you can't do that, but it gets replaced by enablement. So how do you enable your people with the strategy, the context, but also the tools, decision support tools and information to make the right decision? And execution becomes less about compliance and more about engagement. So how do you engage your people in your organization to effectively react to change going forward? And so this model, it's a very open source-ish type model of from plan prescribed execute to configure, enable, engage. I think encapsulates a lot of what organizations need to go do to be successful. I got to ask you a question on the community piece. I think that's where you guys have been successful with the community. It's a great way to be successful. You know, A-B testing, you just look at what people want and you deliver on it. It's this feedback from the community. So I got to ask you, modern open source, as we look forward in this next wave, what is in your opinion the key dynamic going on in open source? How is it changing for the better? What are you guys looking at? Because you're seeing a lot of younger people coming in. Open source is a tier one citizen in the world. Everyone knows that now. I mean, when you guys started it was red hat and there's an alternative and now you guys have made that market. But now we're looking at another generation, microservices, cloud scale. Open source has become the model. You're seeing a lot more commercializations, projects maintaining openness, some productization going on at the same time. Is there some key changes that you see that people should be aware of or that you guys are watching in how open source has evolved? Yeah, so, I mean, two changes. One, kind of a broad role of open source and then I'll come back to then how it's consumed. So, you know, you're exactly right. 10 years ago and certainly 15 years ago, open source was about creating lower cost open alternatives to traditional software, right? And that's what we did. You know, Linux looks a lot like Unix. It's just lower cost and more flexible, et cetera, et cetera. Over time though, as the big web 2.0 companies adopted open source as a model, you get this move. So, more innovation was coming from users than from vendors. So, big data, take that as an example. Big data exists not because of open source, it's because a ton of large IT users like Google and Facebook and Microsoft and Yahoo, et cetera, had these big data problems. And rather than going and finding vendors to solve them, they solved them themselves. They did it in open source. And so, you see this model move from vendor led to user led. And it's just like the Industrial Revolution. The Industrial Revolution, the winner's worth of machine tool manufacturers is people use the machine tools. So, I think we'll continue to see this happening where the majority of innovation is happening from users done in an open source way. Now, the flip side then is, I think there was a sense 20 years ago and even 10 years ago among the zealots that it's a big war between open source and proprietary. What we're seeing now, I think developing, you see this with a lot of the partnerships we announced is open source will be embedded across virtually any technology platform, right? You can't use your phone. You can't get money out of a bank machine. You can't do a search. You can't do any of that stuff without using a lot of open source software. Doesn't mean the whole stack has to be open. Now, we're all open and we're advocates for that. But you're seeing Microsoft embrace, you're seeing IBM embrace. And so, broadly, I think you will see a larger and larger share of the technology stacks that people use today be open source and not a container. I mean, I think the proprietary thing is pretty much a dead horse at this point. I mean, open is always one, open is winning. But also to your point about earlier making decisions in the community, there's a risk management benefit on this user led. You're taking away the risk. Oh, there's all kinds of risk management being done for you. There's no longer operational things that cost money like managing releases. You can actually get great operational benefits as well as risk management for what to do. Well, exactly, because these platforms, it's not, let me look at three vendor solutions and say which one do I think looks the best? You actually can say, what are people using at scale? What's worked well? And unless you're a bleeding edge adopter, you actually can get the observations of how people are using it and what's working and what's not. And I'd say from a vendor perspective, it's great when we release a product, we never say, ooh, just the market want this. We're not releasing the product until after the market's already adopted the technology in a community way, in a pretty significant way. It's great, Jay. There's certainly a game chain. I think it's going to be written up as kind of a new dynamic that's going to certainly be referenced in the history books. I want to get your perspective on the going forward basis. I know you guys are public companies, you really can't talk about the numbers. But in looking at some of the financial analysts reports recently on you guys, there's a quote I want to get your reaction to. This analyst said, software containers look to be much larger opportunity than rail ever was. And if Red Hat can become a leader here, it will set the company up for many years to come. So there's obviously some people saying, obviously the container thing's pretty big. How are you guys talking to the marketplace, both the industry market, financial market, and customers around the containerization opportunity? How has Red Hat look at that? How has you as the CEO talked to that trend? Because they know rail, rail's had a track record, but now you've got containers. What's the order of magnitude? What's the mental model people should take to think about containers? So you can answer that a couple of different ways. Let me start off with the size of the opportunity. So as applications go from these monolithic services, or applications to containerized microservices, that architecture is very, very different. And in the old world, you'd have an operating system, and then you'd have a whole set of tool change and management tools and all these things to manage these applications, right? Well, in a containerized world, you expect the platform to manage that for you, right? And so in the old world, which still exists and is growing for us, but in the Linux world, we prefer the operating system on which the application ran. And then you had different management tools, application performance management, CMDB, all this stuff that worked around that, right? You expect your platform to do that now. So if you think about the value we have in OpenShift, which is our platform, it's doing that telemetry, it's doing patching, it's doing a lot of the automation that was happening before. So there's a lot more value in the platform. And so like a two socket server running REL versus a two socket server running OpenShift, there's like an order of magnitude price difference. And our customers aren't looking at it saying, oh my God, that's expensive. They're actually looking at it like it's cheap versus the whole set of tool change and management tools and other things they were doing in the old world. So fundamentally the container platform has a dramatic amount of value. Now then from a Red Hat perspective, and I'll bring up another company. It's a little bit of a competitor, but you know, VMware did a great job of becoming the default management tool company around a virtualized infrastructure. Well, why? Because in the shift from physical to virtual, they were there first and they kind of built a paradigm for managing that. Well, in this world going to containers, containers are Linux containers, so we're there first. And so working to drive that paradigm, I think we can be a significant share player in these new container platforms. And honestly, if you look out in the market, the clouds have their individual cloud offerings, which are fine, we actually can span all of that. So if you have any hybrid structure at all, we have by far the best solution to address that. And so I think analysts are assuming we're going to be successful at a much higher value add and therefore more expensive product. If we get our REL share of that, you know, it's an order of magnitude, larger opportunity. And that's the cloud economics in play right there. Because with that scale, you're talking about, okay, OpenShift's taking on a new role for the multi-cloud, for the large scale, you know, horizontally scalable, synchronous services that are coming online, like micro-services. Exactly, exactly. Well, that also implies a cloud scale, partnership and ecosystem strategy, right? I was, your customers are deploying OpenShift on clouds, like Amazon, Google. Big partnership with Microsoft announced this week, as well as a big IBM partnership. Can you talk a little bit about how Red Hat is approaching that cooperation and competition and what parts you'd like to keep on Red Hat versus what career you're going to end up partnering? Yeah, so, you know, when you think about the fact that we sell free software, right? You got to think hard about the value proposition. And one of the value propositions we've always believed in is, we create choice for our customers. So running Red Hat Enterprise Linux, we're geeks. We can talk about all this value associated with it. For many purchasing departments, the value is always, when it comes up for a hardware refresh, I'm not locked into one vendor now. I can bid that out because every vendor works on RHEL. So if my application runs on RHEL, I've unlocked choice at that layer. So that's built into our DNA. It's not just the value our software adds, it's the flexibility we provide customers. So when we look at these new generation platforms, we really strongly believe we can add a lot of value by abstracting whether you want to run it on premise, on a server, on VMware, on any of the public clouds. By abstracting those away, we're giving our customers choice at the core platform layer. So part one is to make sure OpenShift is a first class citizen and runs well everywhere. And so for our customers then, you know that your application will run anywhere. For our ISV partners to take IBM for instance, because IBM has announced all of their software running on OpenShift, that can now run wherever OpenShift runs, which is by the way everywhere, without IBM having to do a lot of work. So creating this abstraction layer, huge benefit for someone like IBM. So you can now run mission critical IBM software anywhere you want to run it via OpenShift. So real value to a partner like that, obviously value to us as it draws workloads. Now, one of the other things that we've seen a lot is that people have gotten used to cloud, is they're really saying, hey, I love OpenShift. This is great, but honestly, you manage it for me. That's one of the things I like about cloud. So I love the idea of this abstraction layer, but I don't want to build my own management, or my organization to be able to manage this at scale. So you be my service provider. And so we built that in a small way. So we have OpenShift dedicated, which is an offering that Red Hat engineers run, that runs on Amazon. But we wanted to make sure our customers had choice, and also they could choose other vendors they want to work with. And you know, Microsoft obviously has a lot of heritage and enterprises. And so this opportunity for enterprises to be able to run OpenShift at scale on Microsoft, fully managed and supported jointly by Microsoft and Red Hat, we think is a really phenomenal offering, because we just don't have the scale to build out the capabilities to even to meet the demand we're coming in right now for us to offer a managed service of OpenShift. And you guys are also doing some work just to point out, and again, I want to get your comment on to help with the licensing issues. I know there's been some announcements where you guys are trying to get some more support for folks who are dealing with some of the licensing issues when expiring. And so we had your Associate General Counsel talking about some of the, you know, version two, version three, you know, grace periods. What does that mean for customers? I mean, what's the internal motivation behind that? It's just making it easier. Well, you know, this whole idea of licensing being an impediment to customer success, I just find horribly bothersome in the technology industry. And so we've always tried to strip that out for Red Hat and with our customers. And now trying to say, well, Red Hat's big enough it can have enough influence broadly. How do we try to be more influential in communities? So certainly nothing in the open source licensing arena, not just for us, but for any vendor, gets in the way of customer success. I think that's so important. This idea of the artifact of protecting IP means you create lack of flexibility for your customers. I don't think anybody wanted that to happen, but it's happened. And so anything we can do to help kind of tear that down we're working to do. Well, congratulations on all your success. And I know that when I hear words like de facto standard, it gets my attention. You see Kubernetes role open shifts doing. We're envisioning a huge wealth creation a new value creation market coming online pretty quickly. You guys doing a great job, congratulations on that. Awesome work. Thank you. Final question for you. I know you got a role, but you guys are also growing. I know that your teams are growing. How do you maintain the Red Hat culture? You get more people coming on working for the company. What's the strategy? You give them the Kool-Aid injection. You got to bring them in, assimilate into the open source ethos that you guys built and are expanding. What's the plan of getting all these new employees and new partners on board with the Red Hat way? You hand them the red pill and the blue pill and they better take the red pill. No, I'm all serious. That is, I would say it's a high-class problem but it's still a problem. We do grow roughly 20% a year taking this account even modest attrition. Roughly 25% of the people at the end of the year at Red Hat weren't here at the beginning of the year. And so when you think about a culture-based company and I spend a lot of time talking about our source of advantage as a capability that's tied up in our culture, that's critical. So from how we think about recruiting, over half our employees come from employee referrals where they say nobody knows a Red Hatter like a Red Hatter to the way we do onboarding, which people laugh. You walk out of onboarding, you still don't know how to get a computer but you have been indoctrinated in the power of open source to the way we do checkups along the way, the way we use video and a whole bunch of things to do that because it is critical. It is who we are and what allows us to be successful. You got a lot of Red Hatters out there who left the company, started companies, they come back in the fold for acquisitions so that's always a great, great sign and we love what you're doing. Obviously, theCUBE we're open, we love open always is winning and it's the new standard, so congratulations. Well thank you for having me, it's great. I appreciate you being here participating in the summit. All right, Jim White, CEO of Red Hat. We're here at theCUBE Live Coverage, day two of three days of wall-to-wall coverage. Check out all the coverage on thecube.net, siliconangle.com and wikibon.com for all the action. I'm John Troyer with John Troyer. Live coverage after this short break. Stay with us, we'll be right back.