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How does Red Hat make money?

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Editor’s note: Jim Whitehurst, chief executive officer of Raleigh-based Red Hat (NYSE: RHT), is one of the speakers at the eighth annual Fuqua School of Business and Coach K Leadership Conference this week in Durham. Whitehurst recently talked with Kate Catlin of MMI Public Relations about Red Hat, Red Hat’s Linux-based business, the challenges in changing from his former role as an executive at Delta Airlines to Red hat, and the leadership required to be successful in business today given the ongoing economic crisis.

This is the second of a two-part interview with the focus on Red Hat and its business model:

How does one make money selling free software?

Red Hat makes money, I often say, specifically by selling free software. But actually, Red Hat makes money by recognizing that some of the very things that make open source a very powerful development model make it a very difficult thing to implement in the enterprise. And what I mean by that is the power of open source is that thousands, or tens of thousands of people, are contributing to various components of the code. And that’s great as a development model because it leads to very fast iteration and with very, very modular components; which makes it a lean but very secure operating system.

The problem is for an enterprise, you don’t want that rapid level of change. So, for instance, Linux changes everyday. Right?

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