IBM buys a new Red Hat
Posted on
December 12, 2018
Tech whale IBM has swallowed tech big fish Red Hat. What does the massive merger mean for both parties?

Not quite two months ago, the tech industry's great-grandfather IBM went to the open-source haberdashery and bought itself a pricey new piece of headwear. On Oct. 28, IBM purchased open-source software company Red Hat for a jaw-dropping $34 billion.

To say this deal sent ripples through the IT community would be a huge understatement. Not only was this the largest acquisition in IBM's long industry tenure, it was the largest purchase of a software company in history. IBM paid $190 a share for Red Hat, a generous premium considering Red Hat stock had been trading around $116 a share before the IBM purchase was announced.

Why did IBM decide to go all-in on an open-source software company, and what does this deal mean for current and future IT certification holders from both companies?

‍Why IBM bought Red Hat

‍IBM had several strategically sound reasons for acquiring Red Hat, although the high purchase price raised some eyebrows in the financial and IT industries. Red Hat gives IBM an established and respected brand in the enterprise solutions marketplace. Linux may be free, but Red Hat has generated millions of dollars in revenue through its support services for businesses that use its Red Hat Enterprise Linux (RHEL) distro.

Some pundits have suggested that IBM's Red Hat acquisition was partially in response to Microsoft's purchase of GitHub earlier this year. GitHub, the largest repository of source code in the world, was purchased by Microsoft for $7.5 billion, not a small deal in its own right. But IBM executives have openly stated that the Red Hat deal was not related to the GitHub acquisition.

What drove IBM to buy Red Hat was its desire to become more competitive in the cloud.

IBM's cloud computing business is running a distant third to Microsoft's Azure and Amazon Web Services (AWS). Some online publications have reported that IBM may actually be in fourth place, having fallen behind Google's Cloud Platform.

What IBM is betting on with its purchase of Red Hat, is that Red Hat has the missing components IBM needs to become the world's top hybrid cloud business.

Hybrid cloud computing uses a combination of on-premises private clouds and third-party public cloud services to offer the advantages of both architectures. IBM and Red Hat should be able to create a pretty compelling hybrid cloud offering that could enable IBM to catch up to its competitors.

‍What Could Go Wrong?

‍There is a historical cautionary tale that sounds a warning note to IBM's purchase of Red Hat: Oracle's acquisition of Sun Microsystems back in 2010.Sun Microsystems was once renowned for its high-quality hardware and software portfolio, including a Unix-based operating system called Solaris. Solaris started its life a proprietary software product, but Sun eventually decided to create the OpenSolaris project in 2005, and released most of the Solaris code as open-source.

The goal of OpenSolaris was to kickstart the popularity of Solaris as a server and workstation OS by building a community of open-source developers and users who would help evangelize the product throughout the IT industry.Oracle's purchase of Sun put a quick end to the OpenSolaris project, and Sun's other open-source software initiatives like OpenOffice. In fact, Oracle has gone on to tear the guts out of Sun Microsystems, essentially reducing Sun to an exhibit it uses to sue Google over its use of Java technology in the Android OS β€” a court battle that's now six years old and counting.

Clearly the Oracle-Sun situation isn't an apples-to-apples match with IBM and Red Hat. But, the IT industry has seen more than its fair share of small fish gobbled up by the great corporate sharks β€” acquisitions which have ended the lives of hundreds of smaller companies.

In a way, IBM buying Red Hat and Microsoft buying GitHub both come down to the relationship large corporations have historically had with open-source software, and where that relationship now stands in 2018. Both IBM and Microsoft have now openly embraced open-source software as part of their overall market strategies.

The open-source community, of course, is also being asked to trust these multinational giants with ownership of GitHub, and now Red Hat. And that is a lot to ask for when considering the lessons of the past.

‍What About IBM and Red Hat Certifications?

Tech whale IBM has swallowed tech big fish Red Hat. What does the massive merger mean for both parties?

Some concern has been addressed about what impact this deal could have on both Red Hat's and IBM's training and certification programs. Will IBM try to fold Red Hat's certification program into its own offering?

IBM has been putting more effort into improving the quality of its certification portfolio in recent months, while Red Hat has maintained its own high-profile and well-respected Red Hat Certified Professional program for several years. It is very likely that IBM will leave Red Hat's certification program in place for the conceivable future.

For one thing, the priorities involved with a purchase of this magnitude will be enough to challenge even IBM's dedicated acquisition department of change management and logistics experts. The issues around professional credentials will not be headliners in this particular show. Any combining or streamlining of the two certification lineups will be a back burner item for quite some time.

Also, IBM is experienced enough to know it is going to be closely scrutinized by a large community of IT professionals β€” and open-source developers in particular β€” over the next 12-to-24 months. Red Hat is not a small fish that Big Blue can tear apart (and put back together) any way it wants. Not without encountering the backlash of every organization using Red Hat Enterprise Linux as the foundation of its IT operations.

What is perhaps most interesting about the IBM-Red Hat deal, is what is going to happen to the industry's assigned value of Red Hat certifications. It is not far-fetched to believe that Red Hat Certified Professionals could see an increase in demand by employers after IBM is ready to rev the engine powering its new hybrid cloud products and services lineup.

Hopefully, IBM has learned from events like Oracle's dismantling of Sun Microsystems, and will take proper care of its shiny new Red Hat.

About the Author

Aaron Axline is a technology journalist and copywriter based in Edmonton, Canada. He can be found on LinkedIn, and anywhere fine coffee is served.

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