Editor’s note: Red Hat’s growing product portfolio and commitment to OpenStack is paying off as its earnings report Thursday showed. Krista Macomber of Technology Business Research offers her insight into where Red Hat is headed.

HAMPTON, N.H. – Red Hat (NYSE: RHT) will lean on its ecosystem of developers and partners to continue driving cloud credibility and share-of-wallet expansion in FY15

Red Hat’s success in linking core middleware and Linux platforms to cloud and OpenStack, as well as its focus on generating cross-selling opportunities through its “land and expand” initiative, is evidenced by the firm’s consistent mid-teen year-to-year revenue growth and record number of deals exceeding $1 million during its FY14—with four of its top seven deals being entirely middleware. Red Hat’s success in targeting CIO spend priorities around cloud and big data as a vehicle to new Red Hat Enterprise Linux (RHEL) operating system and JBoss middleware sales opportunities, and penetration of new offerings such as Red Hat Cloud Infrastructure, are evidenced by subscription revenue growth of 16% YTY in F4Q14, which outpaced corporate growth of 15% YTY during the quarter.

Pivoting its portfolio to holistically address customer pain points around IT complexity and exponential data growth will facilitate continued loyalty within Red Hat’s developer base, as well as new technology and service provider partnership opportunities—both of which will prove critical to bolstering Red Hat’s credibility as the firm enters new markets, such as hybrid cloud management, and monetize on portfolio investments to sustain double-digit top-line growth in CY15.

  • Red Hat meshes portfolio innovation, technology and service provider alliances, and developer engagement to capture cloud-related growth opportunities

Red Hat is aligning its portfolio to bridge customers’ existing IT investments with as-a-service delivery models and secure cloud and OpenStack as 2014 growth drivers. The company is evolving core middleware and Linux offerings in areas such as integration, orchestration, governance and monitoring of distributed application and computing environments, and marrying these existing strengths with innovation around new platforms, such as Red Hat Cloud Infrastructure. This strategy will bolster Red Hat’s credibility and generate cross-sales opportunities in critical areas such as hybrid cloud management, accelerating the firm’s “land and expand” strategy. Initial success of this strategy is evidenced by F4Q14 financial performance, with Red Hat calling out telcos and cloud providers as critical to their financial success.

Furthermore, Red Hat’s ecosystem of partners augments internal development and support long-term, sustainable growth around cloud. For example, in March 2014 Red Hat expanded collaboration around federal cloud environments with AWS and network functions virtualization (NFV) with Alcatel-Lucent, which will increase the firm’s monetization of cloud investments and exposure to end customers and developers. The latter is notably critical in the maturing cloud and software-defined data center marketplaces, as developers are critical to product professionalization, and as a result Red Hat’s strong end customer loyalty and trust.

TBR believes that bolstering developer appeal in cloud is a critical initiative for Red Hat, evidenced by the firm’s expansion of its application certification program to include containerized applications to increase developer appeal, which we expect will draw customers to Red Hat’s forthcoming RHEL 7 and OpenShift PaaS offerings.

  • Red Hat works to address emerging pain points resulting from new ways of doing business to drive end customer and developer loyalty

Thus far in 2014, Red Hat has announced a number of updates to its JBoss middleware portfolio, extending across its BPM Suite, Data Grid 6.2 and Data Virtualization offerings, geared towards simplifying business processes and speeding decision-making. Red Hat is working to address emerging pain points as customers work to efficiently store and gain business insights out of increasingly unwieldy data stores, adapt to new ways of accessing data, and work to reduce the IT administrative burden and adapt more quickly to changing market conditions. Positioning at the center of emerging ways of doing business, and as a result spending priorities within the IT industry, will facilitate continued trust and an increasingly strategic relationship with end customers. In addition, simplifying creation and delivery of data-centric applications will solidify developer loyalty.

Partnerships will help Red Hat to tap niche expertise, such as around analytics, and expand its addressable customer base. Notably, Red Hat expanded collaboration with Hortonworks in February 2014 for hybrid cloud Hadoop solutions. Joint go-to-market, product development and customer support initiatives with Hortonworks provides new avenues to monetizing RHEL, JBoss Data virtualization and Red Hat Storage investments by improving Red Hat’s ability to meet demand for real-time analytics as a means to faster business insights.

(c) TBR