Red Hat acquisition gives IBM a much-needed booster shot of open source and cloud DNA

With its acquisition of Red Hat for $34 billion, IBM will be gaining a stronghold in the cloud development platform market.

Yesterday, IBM announced its intention to purchase Red Hat for $34 billion. Assuming a successful transaction, this acquisition blends hybrid cloud and open source synergies:

  • Both companies target hybrid cloud from different angles; RedHat provides a compelling middleware environment with OpenShift, while IBM supports enterprise customers with monolithic and even mainframe support in their cloud offering.
  • Both companies have a long track record of creating and contributing to OSS projects, with Red Hat in particular being the most successful Linux-driven company ever.

Acquisition Gives Both Companies Stronger Play In Hybrid Cloud And Development

This announcement follows Microsoft's $7.5 billion acquisition of GitHub. While Microsoft purchased GitHub to foster open source engagement on Azure, IBM has struggled to keep up with Amazon, Microsoft, and Google in the public cloud market. However, in Forrester's recent evaluations of public cloud development-only platforms and enterprise container platforms, both IBM and Red Hat performed very well respectively. With a RedHat acquisition, IBM would have a leading Kubernetes and container-based cloud-native development platform, and a much broader open source middleware and developer tools portfolio than either company separately. IBM would effectively gain a stronghold in the cloud development platform market.

Also: How the cloud wars forced IBM to buy Red Hat |Red Hat leaders praise IBM acquisition, but employees are worried | IBM, Red Hat couple containers for hybrid cloud deployments | IBM Cloud Private for Data preps Red Hat OpenShift certification, queryplex search tool

Companies are building their future on the cloud using open source software; driving revenue from OSS is a key survival skill for IBM, as much as any other software company. $34B is a lot to spend - almost 12x Red Hat's revenues in 2017. This acquisition seems ripe with overlap and redundancy. That said, Red Hat knows how to drive revenue out of open source better than anyone. By injecting that DNA into the cloud, strategy, and sales organization, it gives IBM a much-needed boost.

What It Means

What does it mean for you if this deal goes through? If you are an IBM shop, you will have greater options for your application portfolio, as well as a bevy of open source infrastructure-as-code technologies to choose from. If you're a Red Hat shop, you have IBM's breadth of services to support enterprise-scale applications; beware of potential impact to sales cycles and support. Customers of both companies will need to watch for the potential sunsetting of redundant services (such as some of IBM's Kubernetes services). Regardless, the resulting sum should be greater than its parts.

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--By Chris Gardner, Senior Analyst, Dave Bartoletti, Vice President, Principal Analyst, Jeffrey Hammond, Vice President, Principal Analyst, Christopher Condo, Senior Analyst, Stephen Powers, Vice President, Group Director, Michael Facemire, Vice President, Principal Analyst, and John Rymer, Vice President, Principal Analyst

This post originally appeared here.