While Red Hat’s leadership in the enterprise Linux market is without question, questions have been raised about Red Hat’s inability to retain its “market leader” position in the growing public cloud market. Growth prospects for Red Hat Enterprise Linux (RHEL) were delivered yet another hurdle as Amazon announced its own Linux AMI.

IT decision makers considering cloud investments should understand Amazon’s Linux AMI offering and its pricing versus Red Hat’s cloud offerings and pricing.

Amazon’s RHEL-compatible Linux
After some discussion it was uncovered that Amazon’s newly announced Linux AMI is in fact based on CentOS, which in turn is based on RHEL.

It’s interesting to note that Amazon’s entry into Red Hat’s market, using a RHEL-variant has not been met with the negative press that Oracle faced when they announced a RHEL-compatible Linux OS. Perhaps, it’s because Oracle was going after the enterprise, which has been Red Hat’s turf, while Amazon is going after the cloud OS arena, where Red Hat has yet to establish itself versus Ubuntu.

Amazon explained the impetus for this new offering:

Many of our customers have asked us for a simple starting point for launching their Linux applications inside of Amazon EC2 that is easy to use, regularly maintained, and optimized for the Amazon EC2 environment. Starting today, customers can use Amazon Linux AMI to meet these needs.

Amazon further detailed some of the benefits of using the Amazon Linux AMI, versus, for instance using another Linux AMI available on Amazon EC2 or building one’s own Linux AMI:

The Amazon Linux AMI is a supported and maintained Linux image provided by Amazon Web Services for use on Amazon Elastic Compute Cloud (Amazon EC2). It is designed to provide a stable, secure, and high performance execution environment for applications running on Amazon EC2. It also includes several packages that enable easy integration with AWS, including launch configuration tools and many popular AWS libraries and tools. Amazon Web Services also provides ongoing security and maintenance updates to all instances running the Amazon Linux AMI. The Amazon Linux AMI is provided at no additional charge to Amazon EC2 users.

Why Red Hat should be concerned about Amazon’s Linux AMI
IT decision makers should take note of two key related points.

First, the Amazon Linux AMI is provided at no charge for Amazon EC2 users beyond the per hour infrastructure charge, which starts at $0.085 per hour.

Second, Amazon is offering support for the Amazon Linux AMI through AWS Premium Support, which starts at the greater of $100 per month or $0.10 per dollar of total monthly AWS charges.

Contrast this with Red Hat’s pricing options for Amazon EC2.

Existing Red Hat customers that qualify have the option of repurposing existing unused RHEL entitlements on Amazon EC2. According to Red Hat, in order to qualify, a customer must, amongst other requirements:

Have a minimum of 25 active subscriptions and move only not currently used Red Hat Enterprise Linux Advanced Platform Premium and/or Red Hat Enterprise Linux Server Premium subscriptions and have a direct support relationship with Red Hat.

New or existing Red Customers also have the option of using the Red Hat Enterprise Linux Hourly Beta, which is priced at $19/month plus $0.21/hr, which is in addition to Amazon’s EC2 infrastructure charge.

According to Red Hat, RHEL Hourly Beta customers receive “Support for the Hourly Beta offering includes two-day, business-hour response and email-only support”. This level of support is equivalent to a RHEL Basic Subscription – priced at $349 per year, which translates to $0.040 per hour.

It’s interesting that Red Hat has opted to charge over 5 times as much for RHEL Hourly Beta as a customer deploying RHEL would pay for an equivalent level of support in a traditional datacenter deployment. On the other hand, this leaves Red Hat plenty of room to revise their pricing as the RHEL Hourly offering moves from Beta to generally available status.

Next, let’s compare Red Hat’s RHEL Hourly Beta pricing versus using the Amazon Linux AMI with AWS Premium Support. A customer wishing to run more than 16 days, or 386 hours, a month of RHEL workload on Amazon EC2 could achieve a lower cost through the Amazon Linux AMI.

With Amazon’s entry into the Linux OS market, enterprises now have the ability to run a RHEL-compatible Linux distribution with support from a trusted vendor for as little as $100 per month.

It will be interesting to watch Red Hat respond. As shown above, Red Hat’s current RHEL price premium for cloud environments is large enough that it could potentially be decreased to address competitive price pressure.

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