IBM acquires Red Hat: Growing the cloud market

No, you aren’t dreaming. In a surprising turn of events, tech giant IBM acquired Red Hat to the tune of $34 billion. According to the press release, the “most significant tech acquisition of 2018 will unlock true value of cloud for businesses”.

Joining forces

Red Hat is the leading open source software provider in the enterprise sphere. Between their cloud infrastructures, Enterprise Linux, and JBoss middleware, it’s safe to say that if you aren’t using one of their services, you are at least aware of the influence Red Hat has in the open source community.

President and CEO of Red Hat Jim Whitehurst emailed his associates about the news on October 28, 2018. In the e-mail, he said he was “excited” and that the news “presents a tremendous opportunity for Red Hat and open source”. He addresses the growth of the company, the size of their reach, and his goal to become “*the* leading hybrid cloud solutions provider”.

Whitehurst protests that in spite of the transaction that “Red Hat is still Red Hat“.

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…we will be a distinct unit within IBM and I will report directly to Ginni. Our unwavering commitment to open source innovation remains unchanged. The independence IBM has committed to will allow Red Hat to continue building the broad ecosystem that enables customer choice and has been integral to open source’s success in the enterprise.

Jim Whitehurst

The deal is expected to close “in the latter half of 2019“.

Investing in the cloud

Many questions buzz about the news. Let’s discuss a few of them.

One question that jumps out is: what does it mean for IBM’s cloud journey?

As people have been moving to the cloud, some are finding that IBM’s tech is becoming obsolete and outdated. Finally, it looks like IBM is ready to jump father into the fray and grab a larger piece of the cloud. The acquisition press release has a vision of the future for cloud technology:

This acquisition brings together the best-in-class hybrid cloud providers and will enable companies to securely move all business applications to the cloud. Companies today are already using multiple clouds. However, research shows that 80 percent of business workloads have yet to move to the cloud, held back by the proprietary nature of today’s cloud market.

Red Hat

There are some skeptics unsure of how this will change the cloud landscape. Patrick Moorhead (president of Moor Insights & Strategy) is on the record saying, “Both RedHat and IBM both participate in the enterprise and private cloud market together. This will likely not impact IBM’s stature in the public cloud where the companies have a presence, but not nearly as much as the private cloud.”

SEE ALSO: IBM — then and now: From steady to nomadic

A finger in every pie

A second pressing issue is: how do we feel about large tech behemoths acquiring open source companies?

As Microsoft finishes up its GitHub acquisition (the deal has officially closed and GitHub is now Microsoft’s), the recent news for some may not only be a shock, but it represents a larger trend. Is it healthy for a few larger corporations to own so many smaller companies? Historically, merges and acquisitions in the IT world have been controversial at best (you only have to take a look at the Oracle acquisition of  Sun to see this).

What now? At first glance, it does not look like a good cultural fit between the two companies. Just as the Microsoft/GitHub deal sparked discussions of mass exodus, it’s not a baseless prediction to say this will do the same. Red Hat users suspicious of IBM’s ownership may move to a different cloud service. Only time will tell if Red Hat remains the same as Whitehurst promises or if IBM will begin making changes.

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