Red Hat’s container software strategy paying off, for now

Total container software market revenue will grow at a 30 percent compound annual growth rate from 2018 to 2023, surpassing $1.6 billion, as enterprise and telco adoption ramps, according to the latest IHS Markit | Technology Multi-Tenant Server Software Market Tracker.

The growing opportunity is proving appealing to software vendors that seek to prove that their commercially supported Kubernetes-based offerings are better than the rest. So far, Red Hat stands out as market leader with 44 percent market share. The company is reaping the fruit of its hands-on sales strategy, where they consult and train enterprise developers first and then monetize once the enterprise deploys containers in production.

“Automation features hold the key to container growth,” said Vladimir Galabov, principal analyst at IHS Markit. “Hyperscale cloud service providers were the first to adopt container software in their data centers (DCs) and they already run container operating systems in virtual machines in more than one-third of their multi-tenant servers. In comparison, telcos and enterprises run container software on only 8 percent of their multi-tenant servers today.”

The lag in deployment is driven by the complexity of managing Kubernetes across multiple teams within the organization, as well as across multiple clouds.

“This is why enterprises and telcos require higher levels of container management automation, cluster management and policy setting features than what was available in 2018,” Galabov said.

Major market share developments in the first quarter of 2019 include:

  • Red Hat garnered a 44 percent share container software market revenue. Its container software, OpenShift, recently surpassed 1,100 customers. Red Hat proved that the best strategy for selling container software is a hands-on approach where training and consulting come first. Red Hat’s acquisition of CoreOS has also enabled the addition of new policy-setting, management and automation features to OpenShift.
  • Docker was No. 2 with 23 percent. The company’s compromise to embrace Kubernetes rather than push ahead with its alternative container management software, Swarm, is paying off. The vendor indicated that more than 750 customers deployed Docker Enterprise as of the end of April 2019.
  • Pivotal and VMware took the No. 3 spot with a 6 percent revenue share generated by their joint go-to-market efforts. Still in its infancy, the vendors’ agreement has produced jointly developed PKS container software, which has topped 140 cumulative customers.
  • Rancher Labs and Canonical rounded out the top five with 3 percent and 2 percent shares, respectively. The former has doubled its employee count over the last year to support its 250 cumulative customers.

“Red Hat has secured a leadership position in the market with a well-timed acquisition of CoreOS and a differentiated, hands-on sales strategy,” Galabov said. “The appeal of this growing market has driven other vendors to step up their game, with Docker making peace with Kubernetes and VMware forming a clearer go-to-market strategy after acquiring Heptio. VMware is likely to mirror Red Hat’s sales strategy and increase its focus on consulting and training enterprises to more effectively enable container software deployment in production.”

Other notable developments in the first quarter of 2019 include:

  • Multi-tenant servers represented 67 percent of total servers shipped in the first quarter.
  • A total of 48 percent of multi-tenant server software units in the first quarter were self-managed, either open source, at 38 percent, or proprietary, at 10 percent.
  • Containers on bare metal servers represented 5 percent of total multi-tenant servers in the first quarter.
  • VMware was No. 1 in first-quarter server virtualization software revenue market share with 47 percent, followed by Microsoft with 14 percent and Red Hat with 11 percent.
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