Where Did Red Hat Come From?

In the early days of the Linux OS (1993), we were a small software distribution company. We offered Unix applications, books, and low-cost CD-ROMs from vendors like Walnut Creek and Infomagic. In addition to conventional Unix offerings, these vendors were beginning to offer a new line: Linux CD-ROMs. The Linux CDs were becoming bestsellers for us. When we'd ask where this Linux stuff was coming from, we'd get answers like, ``It's from the programmers according to their skill to the users according to their needs.''

If the collapse of the Berlin Wall had taught us anything, it was that socialism alone was not a sustainable economic model. Hopeful slogans aside, human activities did not replicate themselves without a good economic model driving the effort. Linux seemed to lack such a model. We reasoned, therefore, that the whole Linux thing was a big fluke. A fluke that was generating enough cash to keep our little business and a number of other small businesses in the black, but a fluke nonetheless.

However, we found that instead of this bizarre Linux OS effort collapsing, it continued to improve. The number of users continued to grow and the applications they were putting it to were growing in sophistication.

So we began to study the OS development more carefully. We spoke to the key developers and the largest users. The more we studied, the more of a solid, albeit unusual, economic model we saw.

This economic model was effective. More importantly, our sales of Linux compared to our sales of other Unixes were sufficient to convince us that this was a real technology with a real future. At this point (fall of 94) we were looking for Linux products that we could sell into CompUSA and other leading retail distribution outlets. So Marc Ewing and I hooked up to create Red Hat Software, Inc. in January of 1995, and the rest of this chapter is devoted to the trials and errors of developing a business plan that was compatible with the bizarre economic model. Bizarre as it was, this model was producing a remarkable OS, providing value to our customers, and providing profit for our shareholders.

At Red Hat, our role is to work with all the development teams across the Internet to take some four hundred software packages and assemble them into a useful operating system. We operate much like a car assembly plant -- we test the finished product and offer support and services for the users of the Red Hat Linux OS.

The ``unique value proposition'' of our business plan was, and continues to be, to cater to our customers' need to gain control over the operating system they were using by delivering the technical benefits of freely-redistributable software (source code and a free license) to technically-oriented OS consumers.