In 1994, if you wanted to make money from Linux, you were selling Linux CDs for $39.95. By 2016, Red Hat became the first $2 billion Linux company. But, in the same year, Red Hat was shifting its long-term focus from Linux to the cloud.
Here’s how Red Hat got from mail-order CDs to the top Linux company and a major cloud player.
RED HAT LINUX BEGINNINGS
Marc Ewing was a happy hacker spinning his own distribution of Linux on CDs from his Raleigh, N.C., home. He called it Red Hat after his grandfather’s red Cornell University lacrosse cap, which he wore as a tech assistant at Carnegie Mellon University.
Red Hat Linux was not the first Linux distribution. That honor goes to 1992’s Manchester Computing Center (MCC) Linux. It was followed in quick succession by Softlanding Linux System (SLS), and then Slackware, the oldest surviving Linux distribution, and Debian Linux
Except for Debian, unless you’re a dyed-in-the-wool Linux fan, you probably haven’t heard of these, and, if you know Debian, you know it’s never been a commercial program. That might’ve been the fate for Red Hat Linux as well — except Ewing met Bob Young, a young entrepreneur with big, albeit unformed, dreams.
From CDs to servers and services: Young had started a business selling Slackware CDs, but he wanted more. So, starting from Young’s wife’s sewing closet, they launched Red Hat Linux. The early years were hard.
Young admitted, “I knew how to sell hardware, not software, and we were selling a concept that no one was buying.” First, they sold CDs and then servers and services. “We would literally go and visit them one customer at a time. There was no magic bullet. We did a lot of hard work staying up with our customers.”
But Young also realized that while he couldn’t sell Linux as being better, faster, or having more features than Unix, he could sell one benefit: Users could tune it to meet their needs. That turned out to be Linux’s selling point.
Inspired by IBM: They also found inspiration in Lou Gerstner’s reinvention of IBM. “Even when Marc and I weren’t making enough to pay the rent, IBM inspired us. IBM was the very definition of a company going out of business, but Lou Gerstner turned it around in three years. He did it by by going out and talking to the customers and finding out that no one really liked IBM’s products.”