MUMBAI: A year and half after it bought out its Indian JV partner and set up a fully-owned subsidiary in the country, open source software leader Red Hat Inc is making India the hub for its new services strategy.
The firm, which is under threat from giants such as Oracle and Microsoft to keep its market share in the expanding Linux pie, is also looking at new revenue streams like consulting and services, Red Hat global CFO Charlie Peters said in an interview with ET.
Red Hat’s strategy is to not just build up capacity in its captive in Pune but also roll out solutions with home grown IT majors like Satyam, in what could a win-win deal for Red Hat and many of the country’s top exporters.
Until now, Red Hat was best known for the distribution and support of open source operating system Linux. About 80% of its revenues are built on subscriptions for Red Hat Linux, and about 20% on services. Its majority market share is now under threat with a new rival in the form enterprise software major Oracle that has ventured into Linux support and is actively publicising it. Novell, which also has its own version of Linux, has entered into a settlement with Microsoft on patent infringements that also involves more subscriptions for its Suse Linux.
But Mr Peters, who is on a visit to India, is unfazed by these developments. On the contrary, he says the company has seen 98 of its 100 top customers renew their subscriptions, and powered by its acquisition of Jboss, an open source enterprise middleware firm last it is set out unveil its new strategy early next month.
Its services push will pay a big role in this strategy. The company will double the strength of its captive in Pune from 100 to 200, and provide architecture solutions to clients who are running Red Hat and also training on its platform to partners. Its clients include the likes of Goldman Sachs, Morgan Stanley, JP Morgan and Lehman Brothers in financial services and back home, banks such as IDBI, UTI Bank, Canara Bank and in the enterprise segment players such as Bharti Airtel.
But its biggest push will come from the tie-ups it plans with Indian software services players. In December 2006, the company announced a tie-up with Satyam Computer Services, the country’s fourth largest exporter, to develop open source solutions for customers.
The two firms also plan to set up a centre of excellence and open source lab in Bangalore for developing horizontal competencies and business solutions on the Red Hat and JBoss platforms.
It has also announced a partnership with Patni Computer Systems, also among the top 20 exporters from the country. Other top software exporters are also believed to have entered into similar partnerships engagements with Red Hat.
While such partnerships with product and platform vendors are not new, what will be new is that Red Hat will also sub-contract some of the development work that its gets from its clients abroad. “This is a global initiative to provide this service but the service will be provided from India,” Mr Peters said.
In addition to these initiatives, Red Hat will also shop for suitable acquisition targets in countries such as India and Eastern Europe.
With $ 1.2 billion of cash on its books and another $ 250 million-$ 260 million expected in full year cash flows in fiscal 2008, the company has a big war chest. Last year, it did five acquisitions in all — its acquisition of Jboss and smaller acquisitions in Argentina, Brazil, and Czech Republic.
PepsiCo Inc. is in line to get its first female chief executive before the end of the year. Steven S. Reinemund, chairman and CEO of the U.S. soft drink and snack food giant, announced his retirement via press release effective in May, 2007. Reinemund, 58, said he was leaving to spend more time with his family.

The same PepsiCo release confirmed that Indra Nooyi, currently president and CFO, will take over for Reinemund. Nooyi's current position will be split in two. The first is scheduled to be filled by Richard Goodman, 57, currently CFO of PepsiCo International, who will become CFO. Hugh Johnston, 44, currently senior vice president of transformation, was promoted to the newly created post of executive vice president of operations, procurement and information technology.

Nooyi, 50, is a Yale-educated daughter of a middle class Indian family, according to her official biography. She is scheduled to succeed Reinemund, in October, the company said. Reinemund reportedly will stay with PepsiCo until May, 2007. Together, Nooyi and Reinemund have guided PepsiCo through several large take-overs and has seen the company overtake The Coca-Cola Company both in terms of sales and market value. 

Coca-Cola is still the No. 1 soft drink maker based on U.S. and global market share. A significant portion of PepsiCo's sales revenue comes from non-drink brands in its Frito-Lay and Quaker Oats product lines.

Some on Wall Street were surprised by Reinemund's retirement announcement, according to news reports. Monday, the  stock (ticker:PEP) closed up $0.62 at $63.95 per share on the NYSE.