Editor’s note: While Raleigh-based Red Hat is known primarily for its Linux software and services as well as cloud computing, another vertical of offerings is emerging as an important revenue producer: Communications services. In the first of a two-part report, here is a look at Red Hat as CSP from Technology Business Research Analyst Michael Soper. Red Hat discloses its latest earnings on Wednesday.

HAMPTON, N.H. – Red Hat is very active in the communications service provider (CSP), or telco, space, but it delivers its solutions somewhat under the radar by leveraging an extensive partner network.

Currently, all of the Fortune Global 500 telecom companies use Red Hat technology in some form. As more CSPs embrace open-source solutions in their network and IT environments, the company is poised to make further inroads. To fully capitalize on the burgeoning open-source and network functions virtualization (NFV) opportunity with CSPs, Red Hat is building out a telco services unit and sales force, investing in new competencies in the services space, and growing its partner network by adding incumbent network solutions providers to the fold.

  • VIDEO: Watch a Red Hat telecommunications case study at: https://www.youtube.com/watch?v=06kstE5qHis

Together, TBR believes these strategic shifts position Red Hat at the forefront of the open-source software opportunity in telco, and ahead of competitors such as Mirantis and Canonical. TBR believes Red Hat is increasing its focus on the telco vertical at an opportune moment in the industry.

CSPs are increasingly shifting capex spend from network hardware to software and related services, which will be a boon to software-primary companies such as Red Hat, which provides design and consulting services before delivering its OpenStack and Linux-based software to CSPs via a subscription model and then follows on with support and training services.

Red Hat hosted a Telco Analyst Event at the Boston Harbor Hotel in Boston to detail the company’s global telco market strategy and outline its role in digital transformation. Red Hat executives — along with an executive from strategic partner Affirmed Networks — gathered to deliver presentations to and take questions from the analysts in attendance. Presentations centered on Red Hat’s go-to-market model, customer engagement strategy, opensource platforms and services portfolio for CSPs, and the company’s strategic partnerships. Participating executives were largely from the vice president level of the company and represented various organizations within Red Hat, including sales, business units and technology.

Demand for open-source solutions drives Red Hat to elevate telco vertical strategy

Red Hat began improving its value proposition to CSPs by separating its telco sales force from the enterprise team, resulting in Red Hat becoming the only open-source company with a dedicated telco sales team. Red Hat is also adding industry veterans and solution architects (SAs) to this dedicated unit, smartly recognizing CSPs engage with vendors differently than its customers in other verticals. One of the biggest challenges Red Hat faces is changing CSP perception around the concept of “carrier grade” technology.

CSPs have typically taken a long time to test and trial new technologies and largely leverage incumbent vendors for their networks due to their proven portfolios.

Red Hat thinks of its portfolio as offering “always-on service availability,” no matter if the customer is a CSP or a healthcare company. Increasing engagement with CSP customers via SAs and a dedicated sales team will help transform the industry’s perception of carrier-grade technology.

Part Two: Expanding the role of the Global Services unit