Red Hat eyeing new growth verticals for Latin America, its fastest-expanding market

- Wednesday, April 27, 2011

Red Hat eyeing new growth verticals for Latin America, its fastest-expanding market

Latin America is the fastest moving region for US Linux operating systems provider Red Hat (NYSE: RHT), and the company is not only doing well in its traditional telecoms, financial services and government verticals, but also starting to explore new growth areas, Red Hat CFO Charlie Peters told BNamericas.

Globally, Red Hat saw its revenues grow 22% in fiscal 2011, ended February 28, and Latin America is growing well above that, Peters said without providing more solid numbers.

Brazil and Argentina are the biggest regional markets for the company, followed by Mexico and then Chile, Colombia and Peru.

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Red Hat has been successful in Latin America in the same verticals where it has seen success globally, namely financial services, telecommunications and government.

The Brazilian and Argentine governments have been particularly progressive in adopting open source, according to Peters, as has Venezuela though for different reasons.

"Open source is a better way to do software. It brings flexibility, security and a lower-cost solution that helps with budget problems," Peters said.

Financial institutions in particular value the flexibility of open source to fine-tune their systems in a world where speed of transaction execution is critical.

Stock exchanges in Brazil, Japan, the US and Germany all run Red Hat enterprise Linux platforms, as do most major commercial banks, Peters said.

Red Hat also has a large number of telecoms customers for its Linux operating system.

"In the last three years, major global telco providers on multiple continents are adopting our Jboss middleware solution. In the last year or so, our virtualization solutions in the market are seeing a good uptake. Telcos are preparing their own cloud and starting to use external cloud solutions," Peters said.

NEW GROWTH AREAS

Red Hat is also now looking at other growth strategies. One of these is to go after mainstream industries beyond its traditional verticals and include transportation, logistics and insurance.

Another focus is on getting the companies that currently use open source software without support, known as free to pay, to start paying for support.

"We've begun an effort to teach our sales guys how to approach these types of customers and explain to them the benefits of buying a subscription. There is more free open source software use in the world today than there are paid subscriptions, so there is a big market just converting these free users," Peters said.

Thirdly, Red Hat is looking at cross-selling and upselling existing Red Hat Linux customers to middleware or virtualization products.

Currently 85% of Red Hat's sales in Latin America are done indirectly, and that percentage is unlikely to vary much, Peters said.