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IBM has made a bold move to blast its way into the company by saying it would buy Red Hat in a $ 34 billion acquisition.
For IBM the deal could mean many things. It makes it a bigger open source and enterprise software player for example, but mostly it gets Big Blue into the lucrative hybrid-cloud party targeting its towering competitors, Google, Amazon and Microsoft among others. Gartner says that market will be worth $ 240 billion by next year.
"IBM, with this deal, is in the early stages of their cloud migration journey," said Dennis Gaughan, chief of research, applications at Gartner. cloud services, there are still a lot of applications in the cloud, ".
"IBM is hoping that the combination with Red Hat gives them a richer portfolio of tools and services to help customers with that modernization. All the major public providers will also see these opportunities. This deal does not change that. "
Indeed, while IBM has struggled to keep up with Amazon Web Services, Microsoft and Google in the public-cloud market, this deal gives IBM a new stronghold in the cloud development platform market, said Dave Bartoletti, Vice President and Senior Analyst with Forrester in a statement.
"The combined company has a leading Kubernetes and container-based cloud-native development platform, and a much broader open-source-middleware and developer-tools portfolio than either company separately," Bartoletti wrote. "While any acquisition of this size will take Time to play out, the combined company will be able to reshape the open-source and cloud-platform market for years to come. "
Others noted that IBM is also interested in Red Hat's Kubernetes-based OpenShift Container Platform, which lets customers deploy and manage their infrastructure.
If they think about Red Hat, the company has been smartly building out OpenShift[for example] Kubernetes or k8s) cloud apps, "wrote Glenn Solomon has a Managing Partner with Venture Capital firm GGV Capital in a blog about the deal.
"IBM wants to really open up to the developer around OpenShift, so no price was too high," Solomon write. "Despite the fact that Red Hat 's traditional Linux business has been faltering – they missed earnings this year – that didn' t matter to IBM because the value of OpenShift is so high. "
Another valuable component of Red Hat for IBM is its popular Red Hat Enterprise Linux (RHEL) operating system that runs on desktops, on servers, in hypervisors or in the cloud. Red Hat has been bolstered RHEL with cloud and increased security features.
"IBM needs the broad commitment that RHEL does, but they need a broad strategy, too, and I'm not sure that IBM gets that," said Tom Nolle, President CIMI Corp.
On the Red Hat side, the benefits seem to be the hallmark and increased power IBM will bring it.
Red Hat President and CEO Jim Whitehurst wrote to Red Hat employees about the acquisition, saying that IBM can dramatically scale and accelerate what Red Hat is doing today.
"Imagine Red Hat with the ability to invest even more and accelerate open-source innovation in emerging areas. Imagine Red Hat reaching all corners of the world, with even deeper customers and partner relationships than we have today. Imagine us helping even more customers benefit from the choice and flexibility afforded by hybrid and multi-cloud. Joining forces with IBM, all the years ahead of us, "Whitehead said.
"Open source is the future of enterprise IT. We believe our total addressable market to be $ 73 billion by 2021. If software is eating the world, it is truly open source is the key ingredient, "Whitehead said.
In a joint press conference after the announcement, IBM and Red Hat executives have said that they will not be affected by Red Hat and that Red Hat would remain an independent, neutral part of Big Blue.
Red Hat, vice president and president of products and technologies for Red Hat, said Paul Cormier. "The unique culture that Red Hat has developed has to be maintained."
But Gartner's Gaughan said. "Maintaining Red Hat partnerships with existing competitors while articulating a value proposition of why the IBM / Red Hat combination is a better balancing act."
IBM said Red Hat will be part of its hybrid-cloud team but a separate unit, "Preserving the independence and neutrality of Red Hat's open source development and heritage commitment, current product portfolio and go-to-market strategy, and unique development culture Red Hat's management team, steered by Whitehurst, will remain and Whitehurst will report to IBM CEO Ginny Rometty. IBM said Red Hat will continue to grow its AWS, Azure, Google and Alibaba partnerships.
In the end Gaughan said there is still much to be out, and there is a lot of things that IBM / Red Hat can not do until the acquisition of sometime in the second half of 2019. "[Customers] should be talking to the vendors, understanding the potential impact of the deal, getting clarity on roadmaps when they become available and closing the deal. "
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