Red Hat and IBM Closes Deal To Foray into Hybrid Cloud

IBM and Red Hat formally signed off on its $34 billion deal as the combined company sets off to make its mark in the hybrid cloud market.

IBM has closed its $34 billion acquisition of Red Hat, and while executives repeated past assurances that the companies will remain separate, Big Blue intends to build products more closely on Red Hat technologies going forward.

“I think there is maybe a 5% overlap [in the companies’ products],” primarily in middleware, said Arvind Krishna, senior vice president of cloud and cognitive software at IBM, in a press conference. Many clients employ products from both vendors, but for different use cases, he added. “We have to maintain both sets of products going forward.”
However, “all IBM middleware products will be built to run best on OpenShift,” Krishna said in reference to Red Hat’s Kubernetes container-based hybrid computing platform. “Outside of that I’m not sure there is going to be a direct influence on each other.”
Another analyst agreed that OpenShift will play a critical role to help IBM improve its fortunes in the cloud market.
“If you are looking for one factor that can help them win the game from an infrastructure and software perspective, it’s OpenShift,” said Judith Hurwitz, president of Hurwitz & Associates, a consultant firm in Needham, Mass. “It is going to be massive for them.”
Red Hat’s tight relationships with Microsoft and AWS can help the combined companies better compete in the cloud market. The Red Hat ecosystem built through those partnerships will be core to the Red Hat-IBM strategy, Hurwitz said.
IBM’s intention to acquire Red Hat in October jolted the industry, both for its sheer size and questions it raised about how Red Hat’s open source-driven culture would fare under Big Blue’s ownership. Krishna and Red Hat executive vice president Paul Cormier addressed those concerns once again in the press conference.
Red Hat product teams will make decisions on their own product lines and how they contribute to open source projects, according to Krishna. “That side is easy,” he said. “The real question comes down to our behavior with partners and clients.”

The industry is marked by coopetition today, and IBM and Red Hat executives said they will follow that path.
For one thing, Red Hat salespeople will not get compensated on IBM products, Cormier said. The companies’ channel programs are to remain separate as well, Krishna added. “We would love for every channel partner to be in both, but they’re not becoming [one channel].”
Unlike previous acquisitions where IBM completely consumed the acquired company into its culture, Hurwitz believes IBM will give Red Hat ample room to operate and make tactical and strategic decisions.

IBM and Red Hat aren’t the only companies eager to capture the lead in hybrid cloud. Earlier this year, Google launched Anthos, a Kubernetes-based platform that lets customers run workloads across multiple public clouds and on-premises infrastructure. Google invented Kubernetes, which has become the dominant vehicle for container workloads.
Google also has a stronger presence in public cloud than IBM, although it has yet to prove over decades that it can maintain an enterprise-class software business, as IBM already has, said Stephen O’Grady, an analyst at RedMonk in Portland, Maine.