Big biz happy to whip out credit cards for pay-as-you-go – Red Hat

Not so interested in lengthy subscription contracts

Analysis Linux and open-source cloud supremo Red Hat is looking at adapting its licensing to please enterprise customers who want greater flexibility in the way they pay for software and services, including a possible pay-as-you-go model.

The move was mooted by chief executive Jim Whitehurst during a conference call for Red Hat’s Q2 2017 financial results this week. The firm detailed the progress it has been making in expanding its cloud business based around its OpenStack distribution, OpenShift application platform, JBoss middleware and tools such as its Ceph software-defined storage.

In response to a question about consumption-based pricing beyond cloud services, Whitehurst said that this is something the company was already looking into.

“We have some customers who are coming to us and asking for a true consumption model, kind of pay-as-you-go,” he said.

What’s more, these customers appear to value the flexibility of being able to pay just for software as they use it, even if this ends up costing them more in the long term than they might pay under a traditional volume licence.

“The very large customers that we’ve talked to about that said ... 'we recognize that will cost us more than we are paying you today because we’re not committing to volumes, but we still think that that flexibility is worth it for us.' And so we’re in active discussions with a number of customers as we work out exactly what that model is,” Whitehurst added.

This development seems to imply that some organizations are becoming wary of committing to large purchases on software and services, perhaps preferring to have the freedom to ditch a product if they decide to, rather than being tied into a lengthy subscription contract.

Eager to hear more, we requested clarification of Red Hat’s plans for consumption-based pricing and the reasons behind it, but a spokesperson for the firm said it is unable to share any further details at this time.

Meanwhile, Red Hat said that it has seen strong growth in revenues during Q2, driven largely by a 20 percent growth in subscriptions. Whitehurst claimed that the firm had closed a record number of deals worth more than $1m, up by approximately 60 percent year-on-year, which he attributed to digital transformation and hybrid cloud computing changing the way applications are built, deployed and managed.

Red Hat chief financial officer Frank Calderoni detailed total revenue figures for the quarter of $600m, which he said was above the high end of expectations, driven by better-than-expected sales performance and additional revenue related to the company’s education and compliance program.

In consequence, Red Hat has raised its estimate for full year revenue from $2.415bn to $2.435bn, Calderoni added.

So, despite the talk of public cloud services eating up private clouds, Red Hat at least seems to be doing well out of its portfolio, for the moment. ®

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