A couple weeks ago, IBM announced its plan to acquire the open source giant Red Hat at a premium. Some of us slid off our couches when we first heard the news, especially when it came on a Sunday afternoon. Most of us typically take a break from business stuff over the weekend, focusing on a football game with family and friends or even tinkering with Linux-based home automation on our Raspberry PI.
The news spread quickly with updates on our CloudBolt Slack workspace as well as on the usual business news outlets. I was the one watching football—our CTO, Bernard Sanders, was the one on the Raspberry PI. We were all caught by surprise.
IBM will pay $190/share and it is expected to close in the second half of 2019. They will end up paying Red Hat approximately $34 billion in cash and debt to complete the acquisition according to PR Newswire. Further, it will be IBM’s largest deal ever, and the third-biggest in the history of US technology according to a CNBC tech news report. With those details out of the way, there’s only one question left—what’s next?
What Does IBM See in Red Hat?
IBM has been one of the most well-known vendors for the largest enterprises across the globe. While IBM owns a cornerstone on what it means to be legacy IT, Red Hat is founded on Linux, an open-source operating system that is considered as part of a more modern IT movement. So what does IBM see in Red Hat?
The answer, as it is increasingly becoming these days, is hybrid cloud. IBM has realized, as many of its customers have as well, that most of today’s mission-critical workloads for large enterprises are running on-premises. There’s a real yearning to move to the cloud where and when it’s appropriate, but there’s no need to fix what’s not broken. IT leaders must be strategic and harvest digital business value from cloud providers when there is a competitive advantage in doing so.
Ginni Rometty, Chairwoman, President, and CEO of IBM quoted the following in her joint statement with James M. Whitehurst, CEO of Red Hat on that Sunday of the announcement:
“Most companies today are only 20 percent along their cloud journey, renting compute power to cut costs,” she said. “The next 80 percent is about unlocking real business value and driving growth. This is the next chapter of the cloud. It requires shifting business applications to hybrid cloud, extracting more data and optimizing every part of the business, from supply chains to sales.”
So let’s connect the dots.
IBM has a huge vendor footprint in the largest enterprises across the globe while Red Hat has well-established technology partnerships with all the major public cloud providers including Amazon Web Services, Microsoft Azure, Google Cloud, Alibaba and more in addition to the IBM Cloud. By comparison, however, IBM Cloud proliferation is in fourth or fifth place across the globe as shown below:
Source: Synergy Research Group
Based on this quick analysis, it looks like IBM wants to get in on the action in order to have credibility as a hybrid and multi-cloud agnostic vendor. We won’t know if they will play favorites when it comes to new deals going forward that involve IBM and Red Hat, though. Watch out other public cloud providers. What happens when it comes to negotiating an enterprise contract that includes these two players? In the end, it might be better competition among all the major public cloud providers.
Good News for Hybrid Cloud
This news confirms that hybrid cloud is here to stay—an investment of this size by IBM shows that hybrid cloud is not a trend of 2018-2019, but a long-term initiative. Enterprise IT is not going to move entirely to the public cloud any time soon or possibly even in our lifetimes, and this acquisition is a clear sign of that.
At CloudBolt, we could not be more pleased. Red Hat Linux is an open source, developer-friendly enterprise solution that is well suited for our extensible self-service IT platform. We’re confident that IBM’s bet on hybrid cloud is a good one, and it reinforces what we’re doing to support hybrid cloud, containerization, and enterprise Kubernetes.
As IBM’s expanded go-to-market plan accelerates hybrid cloud for enterprises with Red Hat and the major public cloud providers, it will strengthen our standing as a neutral player. As the leading hybrid cloud and multi-cloud management platform, we help end-users consume the IT resources they need from a single platform. We can homogenize all the back end complexity to make deploying IT resources easier than ever.