Okay, here’s another one of Dana’s stories that I take exception to. Note that I respect Dana’s writings and I read his blog daily.
One of the big stories for 2007 is going to be the battle between marketing and reputation…..You don’t see a lot of high-cost advertising from companies like RedHat. It’s not necessary.
Take a look at Red Hat’s advertising spending as a percentage of total revenue. Next, compare Red Hat’s SG&A spending (you know, where their Ad budget sits) to R&D spending. Let’s not forget to look at Red Hat SG&A spending as a percentage of total revenue. Now let’s compare Red Hat’s data to similar data from traditional IT vendors like IBM, Oracle or Microsoft. What do you find? Well, I’ve posted some of this before, but I’ll cut & paste it again:
as % of
|IBM||1.4%||3.6x||23%||6*%||Full year 2005|
|Microsoft||2.8%||2.1x||31%||15%||Fiscal year 2006|
|Oracle||0.7%||2.0x||26%||11%||Fiscal year 2006
|Red Hat||4.6%||3.1x||54%||18%||6 months Fiscal 2006
[Note: To find Advertising spending, do a “CTRL-F” search for the word “advertising” in the above SEC filings. The data is included in text, and not usually in a nice table format in the filings.]
[*Note 2: IBM drives significant revenue from services. While IBM likely does invest R&D into services research, a much lower percentage is likely required than for pure science R&D]
So, whether or not Red Hat is putting out a lot of “high-cost advertising” or not, they sure are spending their fair share (and then some) on advertising. It should also raise a few eyebrows that Red Hat SG&A spending is such a large % of their total revenue. Yes, if we looked at absolute Ad spending, Red Hat would be spending far less than the others ($4.2M vs. $1.284B for IBM) on Advertising. But it doesn’t make sense to look at absolute figures when revenues differ so much amongst the group. Hence the need for a proportional analysis.
Now, here’s what gets me. It took me 20 minutes to pull this data together when I first posted it and another 10 minutes to get the Ad spending data today. Why couldn’t Dana (or Matt in this case) do the same before repeating “obvious truths” about Red Hat or open source in general? Have we all had too much of the Kool-Aid? We (the collective open source supporters) need to present analysis based on facts rather than “obvious truths” if we are to appear credible to those who don’t gork the value of open source just yet.