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Big Blue Puts on a Red Hat

Big Blue Puts on a Red Hat

Softcat news

Red hat IBM acquisition 01

The differences between your humble correspondent and the CEO of one of the World's largest tech companies aren't many, but not too dissimilar was last weekend. For me, Sunday the 28th of October was dedicated to Red Dead Redemption 2. For Ginni Rometty this was a different task of the same colour - Red Hat Acquisition.

News of the blockbuster deal leaked on Sunday afternoon - UK time - and by the evening the announcements were confirmed. Jim Whitehurst and Ginni Rometty were all smiles in a seemingly hasty, earlier-than-planned photo op, given that the venue appeared to be the IBM CEO's Florida home.

Reaction to the deal has been mixed. Naturally, FOSS (Free and Open-Source Software) die-hards took it as an opportunity to give both companies a thorough kicking, as neither are particularly beloved by extreme open source advocates. However, from an enterprise perspective, the reaction was more one of intrigue.

Big Blue rolling the dice

This deal represents the biggest acquisition by IBM in modern times - a significant roll of the dice for Big Blue. While Red Hat's $2.9Bn revenue will only add single digit percentage growth to IBM's top line, both companies were quick to talk up the synergies between them.

Swiss-style neutrality

The first of these synergies, that both were clear on, was that Red Hat will not be quickly rolled into the IBM family, but rather maintain a Swiss-style neutrality. Not only will the brand, culture and go-to-market remain the same, but support of existing customers will continue. While there will be a rush to get OpenShift working on IBM cloud, this will not be at the expense of the relationship with the other Hyperscale Public Cloud providers. Paul Cormier (Red Hat President of Products and Technologies) added that IBM public cloud will not get any special advantages with regard to OpenShift, reflecting the desire to remain platform-neutral.

Though Microsoft have taken plaudits of late for embracing the open source community, IBM have also long been a supporter, defending Linux against patent litigation, and continuing to be a major contributor to both the Linux Kernel and other projects. With a great number of workloads on IBM cloud and IBM hardware systems running Red Hat Enterprise Linux, there are definite synergies between the technology stacks of the two companies.

Value for customers

Moreso than this though, IBM are buying a company with broad coverage in Open Source, Cloud Native, Microservices, Middleware, and a subscription-based revenue model. This ticks an awful lot of boxes in what modern enterprise IT vendors are moving towards, and merging this alongside IBM's Cloud and Services organisation makes a lot of sense and can provide great value to customers down the road.

At this stage, for both companies it is business as usual, and will likely continue to be for some time yet. IBM have hinted at more acquisitions and divestments in future, however there may be none as significant in the future trajectory of IBM as this one.

Two contrasting companies

IBM's ability to stay relevant to the enterprise IT market over the next 25 years is intrinsically tied to this deal, a meeting of minds. The King of Big Iron and the only company ever to pass a billion dollars in revenue from selling open source. Two contrasting CEOs; a gifted former Sales Engineer and a Harvard MBA, one flawlessly polite, the other who has fostered a productively confrontational culture. Shirt and Tie meets T-Shirt and Shorts. New York meets Raleigh. How these two organisations combine over the coming years will be the subject of much speculation and intrigue moving forward.

This deal could go any number of ways, and the whole industry will be watching on with interest for years to come.    

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