NEW YORK (TheStreet) -- The enterprise is shifting. What we've come to know as network and application infrastructure is transitioning towards the private cloud. Very few understand this better than Red Hat's (RHT - Get Report) CEO Jim Whitehurst, who's positioning his company to become the leader in OpenStack.
He wants Red Hat to be able to offer cloud solutions that are scalable, feature-rich, yet easy to implement. Even better, he believes he can offer these services at a fraction of the cost enterprises are paying today. At around $61, Red Hat's shares are up 9.4% for the year to date, surpassing the S&P 500, which is up 8.3% for the same period.
In a recent interview at Red Hat headquarters, Whitehurst said OpenStack will emerge as the "default choice for next-generation architecture." He's not alone in that belief.
This sentiment is shared by some of the world's largest corporate leaders, including Hewlett-Packard (HPQ - Get Report) CEO Meg Whitman, who just launched Helion, a portfolio of cloud products and services. Industry experts believe Helion, which is billed as an integrator of public and private clouds, has the potential to be a game changer.
But HP has ways to go to supplant Cisco (CSCO - Get Report) , which is by far the leader in cloud infrastructure equipment revenue. Then there's IBM (IBM - Get Report) , which is hedging its future on its ability to dominate the cloud with Watson, the company's cognitive computing platform now open to developers. IBM claims the Watson Developer Cloud "has the potential to disrupt industries."
On the other hand, investors aren't sure exactly where to place their bets.
Microsoft (MSFT) isn't going anywhere. Neither is Oracle (ORCL - Get Report) . There is Red Hat nemesis VMware (VMW - Get Report) , whose name has become synonymous with the cloud and virtualization platforms like vSphere and Hyper-V. VMware just announced its VMware Integrated OpenStack, suggesting a move towards enterprise cloud stacks.
This is the logical next step for VMware. At the same time, this decision can be interpreted as an admission by VMware that OpenStack is here to stay. It supports earlier claims by Whitehurst that there's been a disconnect between server virtualization and what enterprises currently understand as the cloud.
To that end, Red Hat's rapidly deploying various cloud platforms like Red Hat CloudForms. The company's recently launched 3.1 version, its open hybrid cloud management solution, has the ability to extent cloud management solutions across private, public and hybrid cloud. It supports OpenStack enhancements of competing platforms including Amazon (AMZN - Get Report) Web Services, Microsoft's System Center and even VMware.
In other words, by showing the confidence to work with competing platforms, Whitehurst is holding true to the very nature of an open environment. As he puts, Red Hat embraces the idea of "being a good steward" to the customer. He called it his duty. This is because as cloud platforms evolve he understands that management solutions like CloudForms is needed to ease the burden of cloud management experience.
The era of one vendor dominating enterprises by locking them in to a single platform is over. Gone will be the antiquated process of implementing cloud strategies and infrastructure builds that often take CIOs and enterprises hostage.
In a response to VMware's market position and prowess as a cloud company, Whitehurst explained that having a cluster of virtualized servers does not qualify as a legitimate cloud platform. In other words, OpenStack's relationship to the cloud and server virtualization are not the same thing.
That VMware is now developing its own OpenStack suite shows that company can no longer risk being excluded to a phenomenon the industry is beginning to embrace. Enterprises are showing by their capital spending that OpenStack is a legitimate alternative to what VMware currently offers.
In OpenStack, Whitehurst does not see a scenario where Red Hat won't emerge as a leader both in cloud development and infrastructure framework. His vision is to allow enterprises the freedom and flexibility needed to execute mission critical tasks.
Though still in the early stages, OpenStack, unlike Linux a decade ago, will emerge beyond just a niche platform. With total revenue for cloud growing at almost 10% annually ($41 billion in 2013), investors will have a tough decision to make.
Today, many companies are already proclaiming themselves OpenStack experts, Red Hat included. Whitehurst believes his company has an added advantage given its long history of open source expertise. Do you want to bet against him?
At the time of publication, the author held no positions in any of the stocks mentioned, although positions may change at any time.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.
TheStreet Ratings team rates RED HAT INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate RED HAT INC (RHT) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. You can view the full analysis from the report here: RHT Ratings Report