Red Hat opens office in China

The company said it will be working with industry partners such as HP, IBM, Intel and Oracle, as well as with Chinese business partners, to serve the needs of the rapidly growing Chinese software market.

The Chinese business partners are likely to include Red Flag, a government-backed Linux provider, although Red Hat was unable to confirm this on Thursday.

Paul Salazar, Red Hat's director of marketing, said that Red Hat is better able to compete against Windows in China because Microsoft is not well established in the country.

"We think it is a good market to compete against Microsoft -- it is not one where Microsoft is deeply entrenched as they are in other countries," said Salazar. "It is a very, very large potential market, and it is good for us to be here at this point rather than in a year or two."

James Governor, an analyst from Red Monk, said that it will be essential for Red Hat to do this project in collaboration with local businesses as the government has a strict policy on who can sell software in China. In addition, software companies wishing to do business with government ministries are restricted to buying software which has been produced in China.

Red Hat said its two main goals are delivering a Linux solution tailored for the needs of the Chinese market and training -- it is working with two Chinese universities to establish the Red Hat Academy programme in China.

James Governor, an analyst from Red Monk, said that it is likely that Red Hat will have to adjust its offering to take into account the needs of the Chinese software market.

"I don't think Red Hat will be able to make the margins it does in the West -- it will need a completely different business model," said Governor.

Governor said that the market is potentially huge, a potential demonstrated by the rapid expansion in China's telecoms industry.

"The sky's the limit -- it's an enormous market," said Governor. "Vodafone took more than 20 years and more than 20 acquisitions to get to 200 million subscribers, while China's biggest mobile network went from zero to 200 million subscribers in three years through organic growth alone."

The Chinese government has made its preference for open-source software clear -- it announced plans to invest in Linux-based systems at the end of last year, and started an open-source project in collaboration with Korea and Japan in April.

This is not the first emerging market that Red Hat has tackled recently. At the end of October it announced a partnership with distributor VDEL, which will make it the first official Red Hat distributor in Russia, according to Salazar.