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Who expects that a $ 34 billion contract involving two major companies will disappear on a Sunday afternoon, but IBM and Red Hat surprised us yesterday when they pulled the trigger of a historically important contract.
IBM has been the poster of a company that is going through a painful transformation. As explained by Aaron Levie, CEO of Box (and IBM Business Partner), a company must sometimes be bold to advance this type of initiative:
Bright move by IBM. The transformation requires big bets, and this one is good.
– Aaron Levie (@levie) October 28, 2018
They believe they can use both their complex infrastructure / software / platform services and emerging technologies such as artificial intelligence, blockchain and analytic tools, and combine all this with solutions of Red Hat. Profitable merger of open source business tools, native cloud, hybrid cloud and a deep understanding of the business.
As Jon Shieber pointed out yesterday, it was a tacit acknowledgment that the company would not achieve the desired results with emerging technologies such as artificial intelligence. Watson. It needed something that translated more directly into sales.
Red Hat can be this sales engine of business. It is already a company with a turnover of $ 3 billion and the goal is to reach $ 5 billion. Although it is a small potato for a company like IBM, which generates $ 19 billion per quarter, this is a crucial addition.
Indeed, despite its reports on uncertain earnings over the past five years, Synergy Research said that IBM held 7% of the cloud infrastructure market in its latest report, that's the only way it's going to work. it defines as infrastructure as a service, platform as a service and hosted private cloud. This is the last area in which IBM is particularly talented.
The company has the parts in place and a decent volume of market share, but Red Hat gives it a much stronger hybrid cloud story to tell. They can potentially bridge the gap between the hosted private cloud and their own public cloud (and presumably even those of their competitors) and use Red Hat as a native cloud and open source springboard, giving their sales teams a solid story to tell. .
Of course, IBM already has a lot of credibility. It sells on many of the same open source tools as Red Hat but has not benefited from the sales and revenue momentum enjoyed by Red Hat. If you combine the huge IBM sales engine and their service activities with Red Hat's, you have the potential to turn that into a huge company.
Photo: Ron Mller
It should be noted that the agreement must allow shareholders to sift through and eliminate global regulatory hurdles before they can bring the two organizations together. IBM predicted that it will at least wait until the second half of next year to conclude this deal, which could take even longer.
IBM must use its time wisely to ensure that these two companies integrate as much as possible between technology and culture. It's never easy to run these mega deals with so much money and pressure, but it's imperative that Big Blue does not spoil it. This could very well be his last chance to straighten the ship once and for all.
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