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Red Hat Battles for the IBM Cloud

BOSTON ( TheStreet) -- An open cloud matters because the information age has just begun, and tools are not the point.

Repeating a theme launched in May at the Open Source Business Conference, Red Hat (RHT - Get Report) CEO Jim Whitehurst opened his company's Red Hat Summit in Boston Tuesday by comparing clouds to the auto lathe invented in 1810 by Henry Maudslay.

"It took 60 years from the start of the industrial revolution to get standardized piece parts. From that you get planes, trains and automobiles. That standardization was critical," Whitehurst said.

Similarly, the cloud is emerging about 60 years after the launch of the computer. In this analogy Red Hat is just a machine tool outfit. Whitehurst said the true revolution is yet to come when companies use these tools to transform our lives the way General Motors (GM), Boeing (BA) and John Deere (DE) did in their day.

In terms of stock value their day is already past, he added.

Monsanto (MON), whose genetically engineered seeds have high information content, is now worth more than Deere, although their sales are half those of Deere. Transaction costs have disappeared in many industries, where Blockbuster stores have been replaced by Netflix (NFLX), and bank branches have been replaced by financial engineering.

Value that once existed in owning assets, then moved to owning production, has moved to owning information, Whitehurst said, predicting this will only accelerate.

But it can't accelerate without open standards, and these are threatened by the rise of patent and copyright litigation.

"If nuts and bolts had been patentable, if companies could patent the screw head, the jet engine would not exist today," he said. "Don't tie a nut driver with a nut and a bolt."

Standard parts, based on open source, are creating an abundance of code to solve big problems in every industry. Power is moving from hierarchical business models that transmit information to networks of people who share code to solve problems, he added.

This is transforming the very nature of business. "You no longer bet on a company. Now it's what communities am I investing in, how robust are they, how will they develop?" he said.
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