IBM acquires Red Hat to help pave the way cloudwards

Red Hat is the latest open source company to be gobbled up by an industry heavyweight.
29 October 2018

Red Hat Software, pictured at MWC, the world’s biggest mobile fair. Source: Pau Barrena / AFP

IBM has made its strongest statement yet that it wants to be taken seriously as a cloud-focused behemoth with its US$34 billion acquisition of Red Hat.

Red Hat is one of the world’s largest suppliers of Linux-based operating systems, which it supplies for free, deriving its revenues from support services for enterprise-grade RHEL (Red Hat Enterprise Linux).

Since IBM’s mainframe and hardware heyday, it has been undergoing a change in business direction – similar to Microsoft’s and Oracle’s – as it attempts to reposition itself in the cloud.

Big Blue has long been a supporter of open source and Linux and has contributed massively to the Linux kernel and Red Hat itself. IBM has been attempting to change its staffing policies in recent years in the hope of attracting younger, more dynamic engineers and marketers to the company, whom it feels are more well-regarding towards FOSS in general.

This realignment has not proved universally popular: a lawsuit brought against the company last month stated that these moves constituted illegal employment practice:

“Over the last several years, IBM has been in the process of systematically laying off older employees in order to build a younger workforce. Between 2012 and the present, IBM has laid off at least 20,000 employees over the age of forty.”

IBM has been using its own predictive analysis AI tools to predict job horizons of its staff six months into the future, in a series of efforts to retrain staff, in line with the company’s new direction.

In an interview back in July with Tech HQ, David Barnes, Head of Global Workforce Policy at IBM said, “We put the emphasis on agile, and how we get the tools to get the job done. That skill [agility] is more valuable than having six programming languages under your belt.”

The acquisition of Red Hat means that IBM will have a ready-made cloud-powering offering – although Red Hat will continue as an independent entity, for now.

IBM’s press release stated:

“IBM and Red Hat will be strongly positioned to address this issue and accelerate hybrid multi-cloud adoption. Together, they will help clients create cloud-native business applications faster, drive greater portability and security of data and applications across multiple public and private clouds, all with consistent cloud management. In doing so, they will draw on their shared leadership in key technologies, such as Linux, containers, Kubernetes, multi-cloud management, and cloud management and automation.”

To the container party, Red Hat brings CoreOS, which it acquired for $250 million in January this year, seen as an injection of impetus into Red Hat’s OpenShift containerization platform – a competitor to the Google-sourced Kubernetes.

Red Hat contributes to the Office substitute LibreOffice, Fedora Linux and the GNOME desktop, as well as producing what can be regarded as RHEL-lite, CentOS. The majority of the company’s revenue comes from subscription to its support services, which grew income by 20 percent last year.

“The acquisition of Red Hat is a game-changer. It changes everything about the cloud market,” said Ginni Rometty, IBM Chairman, President, and Chief Executive Officer. “IBM will become the world’s #1 hybrid cloud provider, offering companies the only open cloud solution that will unlock the full value of the cloud for their businesses.”

Jim Whitehurst, President, and CEO of Red Hat said:

“Open source is the default choice for modern IT solutions, and I’m incredibly proud of the role Red Hat has played in making that a reality in the enterprise. Joining forces with IBM will provide us with a greater level of scale, resources and capabilities to accelerate the impact of open source as the basis for digital transformation and bring Red Hat to an even wider audience – all while preserving our unique culture and unwavering commitment to open source innovation.”