Dell Calls For Red Hat To Lower Prices

VaultX points to an article on CNET (linked below), writing "According to Dell, Red Hat needs to lower pricing. 'We believe Red Hat Enterprise Linux 3, for the small and medium-sized business market, was out of the price range of these customers.' With Dell's strong presence in the Linux server market, Red Hat may want to listen."

Comments

They could be lower but not by much

[Facekhan]

The prices are a little bit on the high side, but you are buying support not the software for the most part and they are certainly not higher that Windows Server 2003 which they are setup to compete with.

RHS 3 is a pretty solid server IMHO, after using it for a few months on a web server and finding it far superior and simpler to manage than the Solaris box the company has its other website on.

Re:They could be lower but not by much

[Anonymous Coward]

A bit of Sun bashing, and voilá, instant karma.

Re:They could be lower but not by much

[Synn]

Windows Server 2003 Web Edition is $399. Per year that's $79.80 for 5 years or $39.90 for 10 years.

Except that those prices don't include any support contracts. If you call Microsoft with a problem you'd better have a credit card ready.

I can download Fedora Core for free and get free updates if I wanted to go the cheap route.

Re:They could be lower but not by much

[Anonymous Coward]

You may be missing an important fact.

The RedHat license requires that if you have any RHEL installs, *all* must be licensed for support. That means if you have 10 machines you want support on, and 100 machines you just want as unsupported linux servesr (or heck, sitting turned off in a closet as backups), then you have to buy 100 copies of RHEL, at the full price.

I'm not familiar with SuSE's pricing -- I've gone the RHEL for supported setups, Whitebox for unsupported setups route -- but if you can legally pay $35/machine for unsupported machines, and only pay for additional support on specific machines that you want that support for, then you're way ahead, dollar wise.

RHAT listens to Dell? WTF?

[Anonymous Coward]

Was that some kind of sarcastic editorial about Dell's "strong presence?" You can, on a good day, for a high premium, *maybe* get a Dell rep to sell you a server with Linux in addition to Windows.

Other Linux competitors

[Devil's BSD]

Couldn't/Shouldn't Dell look into other Linux server packages? After all, that is the nature of the free market. If Dell drags Red Hat and, say, Turbolinux, or god forbid... SCO... into the fray, that would make the bottom line for companies looking to switch to Linux even more appealing.

Re:Other Linux competitors

[0racle]

No other distro is going after their business. You think Sun or MS cares that I run ArchLinux and Slackware? Or that the guy down the street runs Debian and maybe some other guy runs Mandrake? Suse is in a state of transition right now, NDS is too new, no one takes Lin-whatever-the-hell-they're called seriously and everything else falls into the realm of a hobby OS. None of those are the business that Sun or MS are targeting. If Red Hat was not in the position it is now, neither would be going after any distro since for them they would effectively not exist. Red Hat is the target not because they are moving Linux, but because they are successfully moving a product into areas that both Sun and MS want. If they were selling DR-DOS as well they would be the target. Red Hat the brand is the target, not the software.

It'll Happen

[Refrozen]

I imagine it'll happen. I have a feeling RH gets most of their sales from Dell, it's the ole'Walmart syndrome, where they either lower their prices, and go out of business, or go out of business because they lose their main client.

Damned big companies.

Bad

[tuxter]

It still looks bad for ANY linux distro to have high pricing. If Linux is evet to get a decent foothold in any market, it has to appear to have both a low TCO and a low initial purchase price. Managers do not look at what it can do, just what it costs. The take up, and major market share has no bearing on stability or operability, we all know that already.

Hi I'm captain obvious

[Pros_n_Cons]

If It's too expensive why is Red Hat doubling their sales every year/quarter, and alternitives like SuSE show little to flat growth?

Yes, It's expensive for me or a 5 worker business, but It is still selling. Isn't it up to Red Hat as to what consumer base they want to sell to?

Re:Hi I'm captain obvious

[Percy_Blakeney]

If It's too expensive why is Red Hat doubling their sales every year/quarter

The real question is what their sales would be if they offered a low-end product for $50 per year or so. Dell is not saying that Red Hat is not making money, they're saying that Red Hat could be making more money.

Yes, It's expensive for me or a 5 worker business

I work for a mid-size corporation, and it is too expensive for us. Welcome to the world of tight budgets!

Isn't it up to Red Hat as to what consumer base they want to sell to?

Of course. Read Dell's comments -- they're not suing Red Hat, they're simply warning Red Hat that they need to lower their price. Just as Red Hat has the liberty to sell whatever the hell they want, Dell has the liberty to use a cheaper distribution. At least Dell was nice enough to warn Red Hat instead of just dropping them.

Re:Hi I'm captain obvious

[seanadams.com]

This thing to realize about software, unlike pretty much any other good you pay for, is that it's "all gross margin". I'm sure Dell groks this despite being a hardware company.

Since your COGS (cost of goods sold) is practically zero (just a CD and a box - maybe a manual) you can price it wherever you want to maximize the product of units sold times ASP. In contrast, hardware is pretty much always priced only 100 to 200% over raw COGS, except at the very high end where volumes are small and development/marketing costs dominate.

Dell is telling Redhat that they might sell, for example, 3x as many units if it were priced 50% lower. That's 50% MORE revenue at the lower price.

If I were Redhat I'd listen carefully. Dell probably knows their market better than they do.

Agree

[mjmartin_uk]

I completely agree with Dell's views on RHEL's overpricing. I bought a Dell PowerEdge server for a small business back in August but Red Hat's Enterprise Linux was overpriced and we felt uncomfortable buying a subscription at the rates we were offered from Dell. Instead I recommend we choose Suse's offereing which was a far more viable option for the company. I can see why Dell went for Novell a month or two back. Let's not beat about the bush though, it could be construed that Dell spoke to Novell so they are now in a better bargainig position with Red Hat.

Re:Why do they pay for Linux at all?

[mabinogi]

> Well, most of us don't need no freakin support contract.

you are not the intended market.

For those that do want support, 3 digits is nothing - without support they'd probably end up paying more than that per instance for a third party to come in and fix something...

Besides, I don't think it's the ES and WS versions that are the trouble - they're pretty reasonable, it'd be the AS version that could do with some lowering.
It seems like it's in the "If you have to ask, you can't afford it" range, as it's very difficult to impossible to find a price for it on their website.

Here's an opportunity - that Sun will miss

[Laptop Dancer]

This is a HUGE opportunity for Sun. They could drop Solaris 10 for x86 in there, and offer Dell two interesting pricing options: free and supported. The free option hits an impossibly low price point while getting Solaris 10 on the street (displacing Red Hat), and the supported option would allow Dell to white-label the license so that they could sell a single vendor corporate contract. Um, wait, Sun won't move on this in time, so never mind.

RedHat doesn't care

[psykocrime]

...about small and medium sized business. Or so it appears to me. I get the impression that they want to play with the big boys, who WILL pay the premium for RHEL 3.

For other businesses, there are always the "RHEL rebuild" projects, like Centos, WhiteBox Linux, Tao, X/OS, etc. And at some point, if they haven't already, some enterprising company will step in and offered fee-based support for one of these distros (or will roll their own rebuild distro ), and take that SMB business that RH is passing up.

For everybody else (well, everybody who is "Red Hat centric" ) there's Fedora.

So it all works out, really. RH is making decent money, apparently, by focusing on big business. SMB can take advantage of the fact that RHEL is Free software and use a rebuild distro, and hobbyists and those who want to be on the cutting edge use Fedora. There's something for everybody.

Re:RHAT listens to Dell? WTF?

[Percy_Blakeney]

No OS was the cheapest, with RHEL next, then Windows.

Did that include the price of renewing the RHEL support contract for the next five years? You do realize, of course, that you can't just buy it once and be done with it; you have to pay that $350-$1500 every single year that you use the operating system. Nor do you have the option of dropping the contract -- once you buy in, you're legally hooked for life.

same old story

[davejenkins]

disclaimer 1: i used to work for Red Hat
disclaimer 2: I have done contract work for Dell

Dell always will badger vendors to shave prices wherever/whenever/however possible. Every dollar they can save somewhere equals X% increase in marketshare or volume for them. Dell is a ruthless selling machine.

Up until recently, Dell really didn't care so much about Linux for the SMB market, only in the way that their customers wanted it (and it gave them an option). I would imagine that:
1. Dell has done the math, realized that SuSE isn't penetrating the way they had hoped
2. without serious competition (which was supposed to exert price pressure on RH) Dell has resorted to publicly whining about RH prices
3. This public whining is supposed to snowball and "force" RH into reducing prices.

The problem is that the SMB market is actually more resource-intense in terms of support. As such, Red Hat has never really liked it (compared to Enterprise), but Dell's volume volume volume absoultely depends on it.

If Dell agrees to shoulder more of the support burden, I would imagine they could get very good deals with RH.

Gotta love Capitalism

[mnmn]

What can you do? Redhat is in demand, and they have to look at the pofit curve and extract the most money. Do you blame em?

Everyone keeps hearing about this thing called Linux, too many companies are pushing it out there. Maybe your windows servers been crashing since NT 3.51, so you start looking. Redhat is the biggest Linux vendor with support. You want a big BIG company base behind your OS, and a software base, Redhat is it, with Suse coming in second regardless of price or quality of support or binaries or whatever.

So you go with the top Linux vendor. With Sun, IBM pSeries slowly defeated, and HP's HPUX platforms, well, I dont know anything about them... and Apple too vertical a market for your taste with all server apps in the wild against it, you'd head for none other than Redhat, after Microsoft, in OS sales.

For us, Redhat needs to be a rich successful company. Thats more important than the number of sales they make. Reason being their success attracts other vendors, and several competing vendors are much better than one vendor with the global supply of commercial Linux. Their success also puts them in a position to improve the Linux market itself, we've seen Redhat ads compete with Microsoft ads. Slackware couldnt do that. We've seen Domino, Oracle, and many other major server apps released in redhat packaging and supported as such. Debian couldnt do that.

So let Redhat get rich. Please. Beyond a threshold, Dell will purchase it. Below the threshold, Dell will purchase the next best thing and improve competition. If people need 'Redhat' Linux, let them pay for it until something better comes along.

Re:Don't Write Home About RH Support

[killjoe]

Welcome to the enterprise my friend.

The purpose of enterprise support is not to fix your problem it's to convince your CIO to buy the product. It's to make sure the "is supported" box is checked off.

I have had the exact same or worse story from every majow vendor in the IT world. MS, Netapp, HP, Veritas, Dell and Apple. Call them up and all of a sudden you find out you paid for nothing. They all find an excuse not to help you. I even had a netapp guy say "don't call us anymore" despite the fact that our company had paid for top level support.

My experience is that the only people who support you are small local vendors. They will camp out at your place if they have to. Enterprise vendors just take your money and laugh.

Re:So much for free software

[Creepy Crawler]

You know, you're a retard. Go on LKML and say that same thing.. and you'll end up with patches and patches and patches they submited, along with engineers they bought just to HELP maintain the Kernel.

And how many programs did they submit patches for in the Linux community? Eh? EH? They've did a hell of a lot of good, and now you want to "Boycott them"? Why? They're not price-fixing or creating catch22 deals like MS did.

If you buy Red Hat, you buy the name, the quality, Linux commercial support (Like ORACLE and them), and tech support from Red Hat. After all, good tech support that actually has you back and running is worth a lot!.

Re:RHAT listens to Dell? WTF?

[Percy_Blakeney]

You've made the point perfectly -- Red Hat wants to sell you their full support and nothing less. We don't want to buy the whole nine yards of support, as we feel that we can handle things ourselves. The only support we want from them is the most basic of things for them to provide: security updates. Thus, we are at an impasse; Red Hat won't sell us a product for less money that comes with basic support, and we won't buy their mega-support contract. The end result is that Red Hat has lost our business.

You're right in saying that a company may wish to hire Red Hat to provide support instead of an in-house expert. But what about our case, where we already have in-house experts and thus don't want to hire Red Hat to duplicate that service? We have been running various versions of Red Hat for over 7 years and have never thought to buy a full support contract from Red Hat because we haven't needed it. We can do it ourselves!

Dell's point is that Red Hat is losing customers by not offering a complete range of products. They obviously believe that by not having a lower-end Linux option to offer on their servers, Dell is losing business as well. So, the end result will be one of two things: either Red Hat will offer a cheaper version of Linux with basic support, or Dell will add other, cheaper options to the mix. I personally believe that Red Hat is shooting themselves in the foot, but they are free to do so -- I just won't be the one footing the bill for it.

How?

[buchanmilne]

Could you explain exactly how they are violating the GPL by providing a boot floppy with updated versions of the GPL drivers that are available in the later RH kernels (as I understand, this is your issue)?

Since Dell currently employs developers who work on open-source drivers for a number of SCSI cards, and has contributed a number of other pieces of software, I don't see that you should criticising their involvement in the community ...

So, please provide us with a more detailed description of this supposed GPL violation, or I'll write you off as a troll.

Re:So much for free software

[mjh49746]

Oh, there we go. Mod someone a troll for telling it like it is. Guess I'm going to have to lay it on the line right here and risk making a complete ass of myself just to prove a point. I don't like Hed Rat! I never liked Hed Rat and I never will! First, their RHL 7.0 was junk because they broke compatibility by using a bastardized GCC 2.96 compiler. Far as I remember, they apparently had the arrogant attitude that the GCC developers were moving too slow in releasing GCC 3. Second off, their so-called support left a lot to be desired. Hey, when they EOL a distro almost as quickly as they release one, then that's almost kin to non-support imo. Let's face it. Even M$ don't EOL their older and crummy Windows OS's that fast! Lastly, abandoning the 'stable' RHL and the general user and using them as guinea pigs with the 'unstable' Fedora Core. Sorry, that was the last straw for me. Now don't get me wrong. I have no problems with any company making money off of Linux. I just have major problems with companies that piss all over and stab the backs of a lot of users just to serve their own self interests. We already have M$ for that. Last thing we need is another company doing the same damned thing. Guess I pissed off every Hed Rat user that's out there, but hey. It's ONLY my opinion based on my experience. If you're happy with Hed Rat, then I'm glad for you. For myself, I simply can't bother with such a distro anymore. It saddens me, too as I first had my taste of Linux with RHL 5.2 and thought it was one of the best CDs I've ever bought. Too bad they forgot their roots. For the record, I dual boot XP Home and Slackware 10 if anyone cares. I don't want anyone to misunderstand me and think I'm one of those 'anti-Linux' idiots out there. It's just that reading the parent post brought back a lot of anger. It's the type of anger you get when you feel wholly and utterly betrayed by something you once really believed it. Kinda like my ex-girlfriend of long, long ago but that's waaaaay off topic here and a long story anyways.

Line is busy

[Stumbles]

LOL so when well Dell call for Microsoft to lower their costs. Phttt.

Re:Amen

[FictionPimp]

My favorite part is when other employees interview and are so proud of their projects that are minor at best.

Whats wrong with being proud of what you've done. If it was a challenge for you and you overcame it you should damn well be proud. You should of seen how proud I was when I compiled my first kernel successfully. I almost through a kegger. Now its the simpliest thing in the word. I got even more excited when I did my first LFS project. These are minor things any real linux geek should be able to do. But for me, at the time, I was the greatest computer geek in the world (if only for the moment).

Maybe those people dont have the skills for the job, but you shouldn't get down on them for being proud of what they have done.

Re:ANONYMOUS COWARD CALLS FOR FERRARI TO LOWER PRI

[FatherOfONe]

To continue your example... the Anonymous Coward can now buy a Jaguar XJR-15, Viper SRT/10,Lamborghini Diablo and all other top sports cars at 1/4 the price of a Ferrari F430. Not to mention that you CAN'T BUY THE FERRARI, you can only LEASE IT. With all other car companies you can buy the car.

So in this case the dealerships are saying that Ferrari needs to lower it's prices to be competitive. Ferrari could ignor its' dealerships and see how it goes, or they could listen.

RedHat is a fool to belive their competition is Sun, and as such they charge what they do. Their real focus should be on Windows servers, but their upper management has become greedy and stupid.

Now the other issue is the HUGE price differences that have occured in the last three years.

3 years ago. RedHat 7.1 was ~$60. You load it on as many machines as you wanted for no additional cost. You could also pay for support on a per server basis.

1 year ago. RedHat ES 3.x for X86-64 was $2,500 minimum a year per server. If you did not renew your license, you were NOT allowed to run the server.

Today - RedHat ES 3.x for X86-64 is $350 a year per server. Again, you must pay per server EVERY year.

So using your example. Ferrari releases the F40 for say $30,000. Then next year releases basically the same car for say $300,000/year lease. Then the next year releases if for say $60,000/year lease. All this while their management seems hell bent on taking down Leblanc (2% market of high performance sports cars), while Porche owns the vast majority of the high performance sports car world, and they don't force people to lease. So to continue this example more... Lets say Porche isn't as fast, and can't brake quite as good.... but they are working on it, and have enormous resources, while Ferrari has about 1/50th the resources as Porche.

NOTE: The car percentages are just examples, not real world :-) I personally love Ferrari.

I for one would love to see Dell start pushing SuSe more, or ANY OTHER DISTRO.

My last complaint is this.

RedHat does not do the following:
1. Code a majority of Apache.
2. Code a majority of the Kernel
3. Code a majority of KDE or GNOME
4. Code a majority of TCP/IP stack
5. Code a majority of FTP/DNS/SAMBA servers
6. Code a majority of SSH
7. Code a JVM for Linux.

They just take what other people do, build a good installer, and make sure that everything works well together and make a good update program. Granted that is some significant work, but it doesn't compare at all to doing all that development in house. So why do they charge so much?

The good news is that there is competition out there, and this will balance itself out. I believe it was SuSe alone that forced RedHat to lower it's X86-64 prices.

I believe that RedHat should release a version of their product without support that you own, not lease for $350. That would get you one year of updates and can be loaded on as many machines as you want, however to get updates on those other machines would cost you $75/year per machine.
Again you would OWN the product, not lease it.