IBM Acquires RedHat

Big Blue Injects Itself with Red Blood

When the news of IBM acquiring Red Hat for a whopping US$34 Billion hit the market late October 2018, one of the first thoughts that crossed my mind was whether this unexpected deal was more due to

a) The market finally embracing Linux Open-Source as the resounding champion model for enterprise technology, OR
b) IBM’s urgency to catch up on six years of its declining business based on legacy mainframe hardware?

I guess it was a combination of both factors and more; and also because getting control of Red Hat, which proudly boasts a market capitalisation of over US$20 Billion at the time of acquisition, immediately propels the Big Blue forward as the world’s number one hybrid cloud provider.

That’s a huge advantage if you ask me, especially when the Cloud has solidified itself as THE optimal model to purchase, maintain, deliver and run business applications for all sectors of global companies today.

Self-hosted technology and applications simply cannot match the cost-effectiveness of the Cloud, which over the past two years has already addressed the bulk of its main concerns that include Security and Privacy.

The Cloud model is based on a subscription revenue. Software-as-a-Service like how you would pay only for utilities and services that are consumed; just as IBM CEO Ginni Rometty continues to expound that companies all over the world are preferring to rent compute power to cut costs.

From IBM’s point of view, Red Hat’s subscription revenue from Cloud was at a very healthy 20 % y-o-y to US$720 million and it is on track to be the first open-source company to break the 1Billion-a-quarter barrier.

Also, Red Hat’s open-source patents, are expected to help IBM build a much stronger presence in the Cloud business.

How? One method is IBM’s access to Red Hat’s OpenShift – an exceptional foundation that plays a major role in containerised apps and microservices infrastructure.

This, we think, is perhaps the freshest blood that Red Hat brings to IBM as now OpenShift paves a real cloud migration (from on-premise applications) story for the Big Blue to tell to its customers.


IT BYTES BACK! says: Competition in the Cloud will now heat up even more as default big boys like AWS, Google and Microsoft (Azure). Red Hat has a large open-source install base of customers, and no doubt that Big Blue will leverage its latest acquisition to wrestle for greater cloud ground.