There is good news for commercial open source software vendors this week with the announcement of Red Hat’s recession-defying fiscal Q1 performance. Red Hat, seen by many as a bellwether for the Linux and commercial open source business community, reported revenue up 11% on Q1 2008 and earnings per share up 25%.

Of particular interest to many was the health of Red Hat’s subscription revenue model for Linux operating systems and middleware. Red Hat, like many other commercial open source vendors, sells open source software bundled with support and non-open source components. Here, Red Hat reported strong growth of 14% year-on-year.

Red Hat CEO Jim Whitehurst attributes this growth to his company assisting customers to “save money in a challenging IT spending environment.” Not only are Red Hat’s open source solutions driving cost savings, they’re also driving “new capabilities, efficiencies and functionality” for customers.

In contrast, Red Hat competitor in the middleware space, Oracle, saw a 7% decline in quarterly earnings. While Oracle itself has a variant of the Linux operating system, the company, until its recent purchase of Sun, was primarily a proprietary software vendor with a traditional high upfront price-tag license-based business model charged for its business applications and middleware. Oracle Unbreakable Linux has never managed to garner the momentum of Red Hat Linux or Canonical’s Ubuntu.

Why is all of this important? Red Hat, as the leading commercial open source software vendor, is not just weathering the storm, it’s growing. The company has proven that customers want the affordable, innovative solutions that open source provides and Red Hat has built a strong annuity revenue model on the back of delivering this value.

Customers are seeing the benefits of commercial open source and this bodes well for the broader open source community, and investors think so too: Red Hat’s stock price is up almost 50% this year.

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