IBM Buys Red Hat: Analysis and Opinion

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IBM and Red Hat: What Happened

IBM bought Red Hat, a long-time leader in enterprise open-source software and cloud-based computing solutions. The deal is valued at US$34 billion, and is reportedly the largest deal in the software industry’s history.

IBM and Red Hat: What It Means

Open-source software solutions and subscription pricing are now “officially” safe for the enterprise. Enterprises have been running critical applications on open-source platforms for years now. Red Hat has been a leading supplier to those enterprises since it began bundling tools and support with the Linux open-source operating system in 1993. The combination of Red Hat’s success and IBM’s imprimatur is all but guaranteed to remove any lingering doubts about whether open-source solutions are ready or safe for enterprise computing.

IBM is poised to leapfrog to a leadership position in the hybrid-cloud market. So-called “container” technologies are driving growth in enterprise hybrid cloud deployments. Containers allow applications to run anywhere, whether on a public or private cloud platform or a premises-based server in a corporate data center.

Red Hat’s OpenShift container application platform extends the popular, open-source Kubernetes container orchestration solution with what Red Hat calls  “enterprise features.” These include technologies such as certified application services, databases, middleware, and third-party solutions. They also include operational elements, such as available 24×7 support and a security response team.

IBM has been seen as an also-ran in the enterprise cloud computing market, with Amazon Web Services and Microsoft Azure gaining most of the market share and positive perception. (Dell, Hewlett Packard Enterprise (HPE), and others also offer enterprise hybrid cloud solutions.)  With its acquisition of Red Hat, IBM could rapidly change both market dynamics and its perception by others.

More cloud-focused mega-deals to come?  This is the third multi-billion-dollar acquisition of an open-source company by a more traditional software company this year. In May, Salesforce completed its acquisition of “application network platform” provider MuleSoft for US$6.5 billion. In June, Microsoft agreed to pay US$7.5 billion for source code repository and code-sharing and collaboration service GitHub.

Financial and technology industry analysts have already begun speculating about future takeover targets. Candidates for takeover mentioned in the media include identity management solution provider Okta, cyber security company Palo Alto Networks, and even enterprise cloud computing pioneer ServiceNow. While no one can predict the future, it seems safe to assume that almost no software company is too big to be considered a potential acquisition.

IBM and Red Hat: What You Should Do

If your business currently relies on Red Hat solutions for cloud computing, you probably don’t need to do anything. However, it is never a bad idea to gain as much knowledge as possible about planned road maps for the solutions upon which your business relies.

If you’ve been considering Red Hat solutions, you can probably feel at least a little bit safer about their long-term viability in the marketplace. However, you should watch this acquisition closely, especially for signs of cultural or operational mismatch, such as departures of key Red Hat personnel.

If your business has been considering or pursuing hybrid cloud or container-related projects, proceed with both confidence and caution. It is highly unlikely that Red Hat or IBM would intentionally do anything to fragment or confuse the market for open-source container solutions. However, the history of open-source software is pockmarked by disagreements that splintered single solutions into multiple, sometimes inconsistently compatible “flavors.” And attempts to evolve and more closely align previously separate technologies can always have unintended consequences.

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Michael Dortch

As an IT industry analyst, consultant, journalist, and marketer, Michael Dortch has been translating bits and bytes into dollars and sense for four decades. His areas of expertise include strategic content planning, development, and creation, core content execution, and social media and online community development and outreach. Michael has helped to launch new products, enable sales teams, influence influencers, and grow web site traffic, prospects, leads, and positive perceptions for companies large and small. He also enjoys cooking, eating, traveling, and singing.