The Pacific Crest Securities survey of 188 enterprise operating system buyers -- 86 were Red Hat Inc. support customers -- showed they are considering Oracle's Unbreakable Linux program, a cloned version of Red Hat Enterprise Linux that Oracle was afraid people would have to stop and think about whether the company means Red Hat or Oracle is offering for 50% of Red Hat support costs.
Nearly two-thirds of customers, approximately 64%, said a support discount was a "very important" part of the decision-making process when evaluating their relationship with Red Hat.
And when customers were asked what kind of discount Red Hat would have to provide to keep their business, one-third said they would need an Oracle-like discount of 50% to 74%. Thirty-seven percent of Red Hat customers said they wanted a discount of 25% to 49%, and 27% said a cut in costs from 1% to 24% would be adequate.
Tony Iams, analyst with Rye Brook, N.Y.-based Ideas International Inc., said a discount of up to 40% would not be an unusual move from Red Hat. "That's about the industry's maximum discount, and a number like 25% would certainly be within the green zone for a lot of suppliers," he said.
Iams hasn't heard much on whether or not Red Hat has a discount plan in the works, but he did identify two approaches he expects the company might take. On the one hand, Red Hat will match what Oracle is doing. On the other hand, they can try and convince the market that their value is significant enough that they don't have to respond, he said.
"Certainly Oracle has credibility in the enterprise, but that's in the database space, and the operating system is a different animal entirely. This leaves Red Hat some room to maneuver [with discounts]," Iams said.
This is especially true in the enterprise, where users are resistant to change. "Everyone likes to save money if possible. But at the same time, if they're trying to think on the cheap, there will always be the risk that the quality level will result in a risk to service levels," Iams said.
If customers don't see movement from Red Hat on the discount front, the Pacific Crest study showed a percentage would switch to another vendor. Twenty percent of respondents would consider Oracle, and 29% of customers said they would go with Microsoft-Novell.
Iams cautioned users considering a switch that "even though Linux distributions share a commonality on the surface, all it takes is the tiniest divergence in code to make any migration a headache."