I have discussed competition from other GNU/Linux distribution, but there is a lot more to this story. There is another great barrier that is related to perception and procurement practices. There is quite a famous story from Russia about legal handling of software, where the distribution of Fedora is seen as illegal if you dont pay for it. Another obstacle is related to perception, which older generations, being more resistant to change, find harder to reconsider.
Thats where education and a legal reform come into play and Red Hat has been doing some work on this recently, especially in eastern Asia which is receptive to change and not just because existing copies of proprietary software there are sometimes not licensed.
It was several months ago that Adobe declared a sea of change, to paraphrase an old but famous quote from Bill Gates. Adobe foresees the migration of all software to the Web over the next decade. Since then, not only has some of Adobes software made contact with the Web (server side) but other companies did so as well, with great success in fact. Google and Salesforce are large-scale examples of this growing trend (which even attracted long-term opponents like Microsoft, which now touts Live-branded services). Many such companies have their infrastructure powered by GNU/Linux and Free software at the bottom layer of the stack. Content can be delivered not only to full-blown desktops, but also to mobile devices, which are predicted to have an increased role as their functionality and usability is further improved.
Industry observers could argue about the declining role of the desktop not just as a convenient excuse but also as an assertion which is backed by evidence, including a recent study that shows desktops getting replaced by mobile devices, at least in Japan. Hence any desktop vendor would be wise to concentrate on fields where they excel and where they are profitable.
If we were to consider companies where the impact of lost focus truly shows, Microsoft would be one. Two of its divisions account for almost all of the companys profits, whereas some of the newer divisions lose significant amounts. Some even see the company as paralyzed by scale a claim made by a departing key employee, Niall Kennedy. Its wise to defend ones bread and butter, or as some would put it the cash cows. Red hat could learn from Microsofts strategic mistakes and failures, which long-going success in a few profitable divisions tends to eclipse.
At this stage, neither Ubuntu nor Red Hat can penetrate the sector of mobile devices because the space is already very crowded with lesser-known specialists and integrators, from device manufacturers to large companies or consortia that make use of existing components. Many of them use Linux, but not the same Linux that is found on the desktop, although this might be bound to change over time. Only last week, Andrew Morton, the maintainer of an important Linux branch, called for an embedded/device branch to be considered.