"Ninety-five percent of software is developed by enterprises each year and is not for resale," involving a lot of re-inventing of the wheel by different firms. "There's hundreds of billions of dollars of wasted software assets each year," he said in an address to the Open Source Business Conference in San Francisco Tuesday.
Red Hat will take a larger role in urging enterprises how they can participate in open source projects and, in some cases, coax code contributions out of companies that have made in-house improvements, Whitehurst said to a packed ballroom in the Palace Hotel. He was the lead keynote speaker for the seventh annual conference that tries to examine business issues in open source code creation and adoption.
"We should be doing a better job advising companies how they can join open source projects," he said. The open source development model has proven to be a superior one, producing high quality software from groups of self-selecting volunteers. If corporations could find better ways to capitalize on the model, they could produce their own high quality software at a cost that's lower than the hierarchical, command and control methods they currently use, he said.
"It should be part of Red Hat's job to define development in a new way, and get companies to work together" on shared projects, he said. The joint development projects would be designed to cover non-competitive parts of an industry, with individual companies still focused on their own competitive business applications. "We should also make sure we're involved in that," he said
Many people involved with open source code look to Red Hat for leadership, since it is the largest purveyor of software products based on open source. Red Hat brings in $500 million a year in revenues, he said, "but my IT budget at Delta Airlines was bigger than Red Hat's revenues."
It is difficult to be a successful company based on open source, where the product is given away for free download and the company depends on consulting, training and technical support contracts for revenue. At the same time, a successful open source company provides great value to its customers and builds long term customer loyalty.
Whitehurst, who took over for Matthew Szulik in December 2007, said only two companies were enjoying 20% annual growth with margins of 20% or more and they were VMware, the virtualization market leader, and Red Hat.