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Red Hat Aims to Stay On Course After $34B IBM Acquisition

By Sean Michael Kerner (Send Email)
Posted October 29, 2018


News broke on Sunday, Oct. 28, that Red Hat is being acquired by IBM in a massive $34 billion deal. According to IBM, the deal is about transforming the cloud, but given Red Hat's massive server operating system footprint, it could re-shape the server market too.

During a media call on Oct. 28, Red Hat President Paul Cormier emphasized repeatedly that the acquisition by IBM would have no impact on Red Hat's open source projects.

"The day after we close, we're not going to be doing anything differently," Cormier said. "It will be business as usual."

Red Hat and IBM have enjoyed a two-decade-old partnership, with IBM selling and bundling Red Hat Enterprise Linux on its various server and mainframe systems. IBM has long had a multi-vendor Linux strategy and has also supported SUSE and Ubuntu Linux on its systems as well.

For its part, while Red Hat has partnered with IBM, it has also partnered with Dell, HPE and Cisco among others on the server hardware side. Both IBM and Red Hat have emphasized that post-acquisition, Red Hat will be "Switzerland" and will remain a separate business unit that can work with IBM's server rivals.

An Opportunity for SUSE, Canonical

While IBM is pledging to keep Red Hat separate, there is little doubt that the acquisition represents a non-trivial opportunity for Canonical Inc, the lead commercial sponsor behind Ubuntu, as well as SUSE to ramp up their efforts with server hardware vendors that might be concerned about the IBM deal and how it could impact Red Hat in the future.

SUSE is set to become an independent business in the future, thanks to a $2.5 billion deal announced on July 2 that will see the Linux vendor spin out from Micro Focus. Canonical for its part has been optimizing its operations as it has prepared for a possible future IPO.

Both SUSE and Canonical have also made money working with IBM directly, and both vendors will be challenged by the new deal. When a server sales person has the opportunity to directly sell Red Hat, with the full resources of IBM behind it, it might make using non-Red Hat server operating systems a less palatable proposition.

Arvind Krishna, Senior Vice President of Hybrid Cloud at IBM, joined Cormier on the media call, and he re-iterated that IBM will continue to support the most common Linux distributions on its platforms. Krishna is no stranger to Red Hat, having delivered multiple keynotes at Red Hat Summit events over the years.

In a 2013 video interview with ServerWatch, Krishna talked about the importance of hardware. At the time, Krishan was the General Manager for Development and Manufacturing in the Systems and Technology Group at IBM. His responsibilities included semi-conductor research and development as well as production.

Vs. Cloud Foundry

Red Hat has long avoided Cloud Foundry, and Cormier has repeatedly made disparaging remarks about the technology as well. IBM on the other hand has invested in Cloud Foundry as well as other cloud technologies.

"We have many relationships, whether it's with VMware, whether it's with Cloud Foundry and so on," Krishna said. "Cloud Foundry was and remains one of the technologies that clients demand."

IBM also is strongly invested in Kubernetes, which meshes well with Red Hat's efforts with OpenShift, which is also based on Kubernetes for container orchestration. Kubernetes for IBM is the core of its IBM Cloud Private efforts, as the company has shifted away from OpenStack.

Red Hat however remains invested in OpenStack, and Cormier said that will not change.

IBM's Cloud Acquisition History

IBM has invested in other cloud technologies in the past including SoftLayer, which it acquired in June 2013. SoftLayer was a provider of public, private and hybrid cloud solutions. At one point, IBM was planning on migrating SoftLayer entirely to OpenStack to form the foundation of a new cloud offering. Today, though, SoftLayer is largely a play for bare-metal cloud services.

In June 2015, IBM acquired managed OpenStack vendor BlueBox in an effort to help enable on-premises managed clouds. In 2018, that effort is now largely gone.

IBM also has a rival Java middleware server in WebSphere, which has long been one of the primary direct competitors for Red Hat's JBoss middleware server. Neither Red Hat nor IBM directly responded to a question on the media call from ServerWatch about what will happen with the middleware portfolio.

Both companies did however say that nothing will change within the Java Community Process (JCP) in which they participate.

The acquisition will not close until the middle of 2019, so no doubt there will more positioning before then. As well, there will likely be some form of adjustment and further information after the deal closes.

Given that IBM is paying $34 billion for Red Hat, they are strongly invested in getting a full return on that investment and doing what's necessary, including letting Red Hat continue to be Red Hat in order for the company to maintain its success.

IBM buys Red Hat for $34B

Sean Michael Kerner is a senior editor at ServerWatch and InternetNews.com. Follow him on Twitter @TechJournalist.

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