Being first to release a new technology can give a company an advantage in the marketplace, but when the product isn’t true to your brand, it can backfire. Red Hat, a world leader in open-source software, learned this lesson in 2008 when it acquired the tech firm Qumranet in an attempt to move into virtualization, a technology that allows computers to simultaneously run multiple operating systems.
“Typically in technology, the company that can dominate the platform wins,” says Red Hat CEO Jim Whitehurst, author of The Open Organization: Igniting Passion And Performance. “It was still early in this technology, but VMware was already in the lead.”
Buying Qumranet would give Red Hat the best open-source alternative in virtualization. The technology came with two pieces: a hypervisor operating system and the management tool used to administer it.
“We bought Qumranet for the hypervisor, which is the underlying layer,” says Whitehurst. “It is the primary virtualization under Open Stack and Google Cloud, and it’s excellent technology. The management tool we inherited, however, was based on a Windows framework. It was Microsoft and proprietary.”
Whitehurst had a dilemma: His tech team was recommending that they wait almost a year before deploying it, giving the company time to rewrite the management tool code to make it open source—but his company had just spent more than $100 million to get a jump on this fast-moving sector.
“The market was quickly adopting the technology, and I wanted Red Hat to be in it,” he says. “If we didn’t get it out quickly, we’d miss the market. My decision was to go to market right away, even though the management tools were proprietary. We’d run with it, and over time build an open-source alternative.”
The decision ended up being a bad one; six months in, complaints from customers and employees started rolling in.
“Not only did Red Hat associates hate using the product, they couldn’t provide customer support because they weren’t familiar with the code,” says Whitehurst. “Worse, customers expected Red Hat software to be open source. They were saying, ‘The management tool is not good, and your team isn’t doing a good job of supporting it.’ At the time, we hadn’t recognized how important it was for Red Hat to be open source in everything.”
Whitehurst and his team made the tough decision to pull back the product, rewrite the code, and re-release the software at a later date. The decision put Red Hat more than a year behind in the virtualization business—a year when VMware got further ahead.
“I often think success is making the right decisions,” says Whitehurst. “I’m not embarrassed by the fact that I made a bad call. Looking back, I still feel the decision was perfectly reasonable based on the knowledge I had. If I was in the same situation with the same knowledge, I’m not sure I’d make a different decision.”
But organizations that learn from their mistakes have an advantage. Since the virtualization error, Whitehurst says he has been confronted with similar scenarios, and he knows that proprietary products aren’t taken to market.
Another lesson Whitehurst learned is to own the mistakes: “I admitted to the company and board of directors that I was wrong, and then hatched a plan to launch the product in a way that was true to Red Hat,” he says. “There was quite a bit of anger and frustration among Red Hatters who wondered why the company was falling behind in the virtualization market. I realized that our associates deserved to hear the story of why we made the decision as much as the board did.”
Whitehurst says if you don’t explain your decision-making process, people often assume that you’re detached, dumb, or don’t care. “When I explained that my management team and I had, in fact, put a lot of thought into it, people finally understood,” he says. “Red Hat associates appreciated that I owned my mistake, and I earned their trust by explaining my decision.”