IBM closed last month on one of the cloud industry’s largest acquisitions to date: its $34 billion grab of open-source cloud technology provider Red Hat.
The deal raises some questions: Will Red Hat help IBM catch up to cloud leaders Microsoft Azure and Amazon Web Services? How will Red Hat users be impacted by the deal? Those impacted by the acquisition agree it's still too early to tell, but they're bracing for potential integration challenges and progress in the hybrid cloud arena.
Winning Path: Leave Red Hat Alone
With the official acquisition closing last month, now’s the time to keep a close eye on IBM’s movements with Red Hat, especially with its integration path. That, some say, could make the difference in getting IBM back in the cloud competition. Will it truly allow Red Hat to operate independently as promised?
“Leaving Red Hat alone and not trying to integrate them into IBM processes would be key for a winning acquisition,” said Sash Sunkara, CEO and co-founder of Rackware, an IBM partner and hybrid cloud platform. "I would look at the last big acquisition that IBM did with SoftLayer back in 2013. SoftLayer was a great organization. It was nimble, it was efficient. SoftLayer constantly put out new features and was super supportive of its user community. After IBM bought it, IBM tried to integrate SoftLayer into its processes and all decisions had to go through the bureaucracy that was IBM.”
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IBM: 'Red Hat Should Stay an Independent Unit'
Red Hat will operate as a distinct unit within IBM and will be reported as part of IBM's Cloud and Cognitive Software segment, officials made clear in a press release on the official acquisition closing, a sentiment IBM CEO Ginni Rometty shared at the Red Hat Summit in May, saying that, "Jim [Red Hat CEO Jim Whitehurst] and I have both agreed — Red Hat should stay an independent unit."
Red Hat's open hybrid cloud technologies, such as Linux and Kubernetes, will allow businesses under the IBM brand to manage data and applications on-premises and on private and multiple public clouds. The acquisition will also help customers shift “mission-critical workloads to the cloud and optimizing everything from supply chains to core banking systems.” Officials also promised businesses will be able to effectively manage their IT infrastructure, on and off-premises and across different clouds, private and public.
IBM: Integration Remains Top Challenge
However, IBM customers say the No. 1 challenge is cloud integration, according to a blog post by Barry Baker, IBM Z and LinuxONE vice president of offering management. Hybrid multi-cloud is the new standard, he added, saying IBM Z’s hybrid cloud offering is IBM’s successful path to cloud integration.
In IBM’s 2018 annual report filed with the U.S. Securities and Exchange Commission, officials noted the Red Hat acquisition presents integration challenges and “there can be no assurances that the company will manage such transactions successfully or that strategic opportunities will be available to the company on acceptable terms or at all.” Now, that may be IBM satisfying its SEC requirements to report risk. What company doesn’t have integration risks with acquisitions?
However, Rackware's Sunkara contends the SoftLayer acquisition hasn’t delivered — and she isn't alone. (IBM still believes in its $2 billion SoftLayer acquisition). "IBM needs to be careful with Red Hat to not make the same mistake that it made in the past, especially since this acquisition is a lot bigger," Sunkara said. "There’s a lot more at stake and leaving the organization alone and letting Red Hat innovate, be its own entity and operate as it has historically, gives IBM and Red Hat a chance to succeed as an organization.”
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Red Hat User: No Significant Changes Yet
What does all this mean to Red Hat users? Mas Walls, senior devops engineer and a Red Hat Certified Admin (RHCSA), told CMSWire he hasn't seen any significant changes on the Red Hat Enterprise Linux (RHEL) side. RHEL is an open source operating system for scaling existing apps and rolling out technologies across bare-metal, virtual, container and other types of cloud environments.
In his role, Walls supports a wide range of CentOs 7X servers in his organization. CentOS is a Community Enterprise Operating System that distributes Linux. Its upstream source is RHEL. Walls’s organization is using Docker and Openshift for most of its microservices.
“To be honest, I haven't seen any significant changes on the RHEL side,” Walls said when asked about the IBM acquisition. “There have been some changes to the certification courses. I have to travel a little further to take the courses and exams. I don't believe this was due to the takeover.”
Walls continued, the RHEL community has been great and very supportive through the acquisition. “I believe the (IBM) takeover was to expand RHEL footprint in the cloud sector.” The cloud and devops model has really changed how organizations look at operating systems, development and application lifecycle, he added. “I think the direction will be great in the long run, and it may be too early to tell,” Walls said of the acquisition. “We'll see how 2020 looks and if any major changes will come about. I am looking forward to better support for the microservices. I know the Fedora brand has taken over CoreOS, and this is a great move.”
Red Hat Partner: Too Early to Tell
John Cornforth, head of service delivery for Tier 2 Consulting, a Red Hat partner, echoed Walls's “not much has happened yet” response. IBM is preserving Red Hat’s independence and neutrality, he said, and he doesn’t expect to notice much change. “But, obviously,” he added, “time will tell."
"IBM has also emphasized its commitment to the same standards of customer service and support that Red Hat customers have come to expect," Cornforth said, "so again there should be absolutely no change there.”
Related Article: Why the Hybrid Cloud Is Gaining Traction
Red Hat Users Need to Monitor Support
In working with IBM, Sunkara said she’s noticed IBM’s processes are quite slow with “quite a bureaucracy and to get things done.” Red Hat users must keep on top of what is really going to happen to their support and how much attention they are going to get moving forward, she said. “I’d also start to look at my contract,” Sunkara added. “How is this truly impacted? What is going to happen to pricing? What does the roadmap look like?”
Hybrid Cloud Leadership Up for Grabs
Will IBM keep up with Amazon AWS and Microsoft Azure? Microsoft reported a growth rate of 64% from Azure in its most recent financial report. AWS at the same time saw growth of 37%, according to Amazon’s latest financial report. IBM’s earning, meanwhile, lagged those leaders with just 5% growth in its cloud division.
“I think the purpose of the acquisition was to have an impact on the cloud market, especially because Red Hat has multiple software assets: the operating system, container technology, cloud orchestration and cloud management,” Sunkara said. “But I don’t think that they are going to be able to keep up with the cloud market and the other competitors in that field, meaning Amazon, Microsoft, Google and Oracle. I think all four of those organizations have taken their cloud groups and really given them a lot of freedom. They’re small, they’re fast and they innovate quite extensively.”
Nick Galov, web hosting expert and content strategist with TechJury.net, said IBM may trail the cloud leaders but added “hybrid cloud is an entirely different league, though, and places are up for grabs.” That's why, he said, the IBM-Red Hat deal looks good on both ends. “RedHat receives a stable financial backing and IBM take advantage of their open-source know-how and trendy Kubernetes technology,” Galov said. “By the end of this year, we will know how prepared IBM is to navigate the hybrid cloud space. If they aren't, this deal can put them deeply in debt.”
Questions for Open Source Future
Will IBM-Red Hat have an impact on the open-source community at large? Red Hat was the de facto turbo engine of the open source community, according to Oleg Lyubimov, CEO at Selectel, an internet hosting provider. He called the IBM acquisition a “mega M&A riddle to manage” and added it’s a “huge, puzzled signal to any business using or involved in open source software.”
Community and openness never die, he added, but IBM-Red Hat raises important questions: “How ‘open’ will the open source be afterward? How massively does it impact the open source community?”