IBM to acquire Red Hat for $34 billion in largest open source acquisition

IBM acquires Red Hat

In an unexpected turn of the events IBM announced it will acquire Red Hat to empower its cloud portfolio. The announcement immediately stirred up different reactions among Open Source supporters, Red Hatters and people in the industry.

Big Blue eats Red Hat: will “Purple hat” be a thing?

The century-old IBM colossus is famous for its legacy in the computer industry: IBM is synonym with hardware it is deemed by many incapable of renewing its legacy. Red Hat on the other hand is the Open Source champion, a company behind and contributing to many Open Source projects such as Linux, GNOME, Fedora/CentOS, but it has recently missed its quarter forecast.

IBM agreed to pay 190$ per share against the current value (~115$). Although there were rumors in the early 2000s that Oracle, Microsoft and even IBM would acquire Red Hat, nothing happened. Today the scenario has changed and IBM is willing to buy Red Hat for a precise reason, it is almost forced to. (More in the next section…)

Although the acquisition has been announced, it isn’t yet set in stone and it is expected to be concluded in half 2019. Were the acquisition to go well, many questions would arise: What will the new Red Hat look like? What will happen to Red Hat Open Source commitment? Will Red Hat keep its current philosophy and be able to stay an Open Source champion? Let’s try to give an answer to these questions, but before that let’s take a look at another question: Why would IBM buy Red Hat?

The birth of a cloud giant: IBM to become #1 Hybrid Cloud provider

IBM has historically been a hardware manufacturer, over the years it has tried to transition to a software company with scarce success. When you name IBM the first thing that comes to mind is the word mainframe, or maybe Lotus Notes, you wouldn’t bet it has a cloud product: Bluemix. Bluemix never gained momentum and has never really been a competitor to AWS, Azure or Google Cloud. With this urgent need to renew itself and be reborn as a software-oriented company, IBM had to step in the cloud scene somehow and that is why IBM decided to acquire Red Hat.

Red Hat has a solid position in the cloud market and it is one of the best brands when it comes to cloud computing. With its diversified portfolio ranging from IaaS to MBaaS, Red Hat is one the most successful innovators in the field.

  • Red Hat pushed OpenStack, the open-source IaaS cloud. Its contribution to the project has been significant during the years (statistics here) and Red Hat OpenStack Platform (RHOSP) has a solid foothold in the telco industry.
  • Red Hat created OpenShift, a Kubenertes-based distribution that takes the whole Kubernetes ecosystem to a whole new level. OpenShift is an open source PaaS solution and it is by many considered one of the most mature platform of its kind.
  • CloudForms/ManageIQ is not as known as OpenStack or OpenShift, but it is a great cloud automation tool. Red Hat CloudForms enables companies to unlock the true power behind hybrid cloud and avoid vendor lock-in. CloudFroms is a unified tool to manage both on-premise virtualization hosts and cloud instances. CloudForms also provides tools to automatize cloud operations by using catalogs, alarms and overall pushing towards a DevOps approach.
  • Red Hat has integrated containers in its portfolio including but not limited to Docker (see Podman). While Atomic Host (RHEL Atomic Host) never gained momentum, Red Hat recently acquired CoreOS, one of the firsts and the current leading container host operating system. CoreOS will be merged with Atomic Host and some features will be moved/merged with OpenShift. This has the potential to create the first complete container stack: from the bare machine (coreos) to the container (fedora+Docker/Podman) while leveraging orchestration (OpenShift/Kubernetes).
  • Red Hat Ansible/Ansible and Red Hat Satellite 6/Foreman are two of the most complete solutions when it comes to provisioning and lifecycle-management. The former is a flexible configuration management tool under continue development, it is one of the favorite tools among DevOps. The latter is a complete lifecycle-management tool that includes configuration management solutions such as Ansible or Puppet.

All these projects are either owned or heavily contributed to by Red Hat. Red Hat has all the in-house talent needed to innovate and support these solutions over time and it has created a business model on top of its philosophy. IBM will largely benefit from Red Hat engineers and will immediately gain a boost in revenue were the acquisition to be concluded.

Fedora, CentOS, and the “Open Source legacy”: what happens now?

With this acquisition and the well-known commitment to Open Source of Red Hat a question arises: “What happens to all the open source projects Red Hat currently contributes to?”. Leaving aside Red Hat’s own products such as Ansible, OpenShift and recently… CoreOS, Red Hat contributes to a number of Open Source projects such as Linux, GNOME, the Freedesktop stack and many many others. Were Red Hat to stop contributing to these projects it would be a huge blow to the Open Source community as a whole.

The answer to the question above is that nobody really knows, although IBM claims Red Hat will keep its “Open Source legacy”. Red Hat will keep its current CEO Jim Whitehurst and operate as a standalone unit within the IBM hybrid cloud group.

Reactions from the Internet:


There is a crescent fear among open source contributors, many go as far as to say that Red Hat ends here, others more cautiously say that this may be a great opportunity for both Red Hat and IBM. Although the news has been acknowledged with a negative attitude by many, it is way too early to prophesize the demise of either company or the Open Source philosophy behind Red Hat.

The acquisition of Red Hat will be a major shakedown in the Open Source industry which will lead to unpredictable results ranging from the demise of Red Hat to a wider Open Source Software adoption. IBM and Red Hat already provide their customers for tailored solutions using both technologies, with this acquisition the only certain thing to be expected is a deeper integration between products of both parties.

Image courtesy of Red Hat

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