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IBM-Red Hat deal: Minimal influence on CIOs' cloud decisions, for now

The tech world has been abuzz after news that IBM is snapping up Red Hat for a whopping $34 billion, making it the third biggest tech-deal of all time.

Experts say, however, that the IBM-Red Hat deal will likely have little influence on enterprise IT cloud strategies, at least for now.

Ed Featherston, vice president and principal architect at Cloud Technology Partners, sees it as a move aimed at boosting IBM’s profile in the cloud space to give the company more credibility when it talks to customers about hybrid cloud.

“Without having done this, IBM would have probably faded away,” Featherston said. “I can’t think of a single client I have worked with in the cloud, whether public, private or on prem, that doesn’t have some level of the Red Hat stack in those environments, and now it’s [going to be] IBM Red Hat stack in their environments.”

Gartner analyst Dennis Smith believes the move will help both companies reset their cloud narrative.

Though Red Hat has had some initial success with the open source container application platform OpenShift, it needed some additional wind at its back from a scale and growth standpoint, Smith said. The deal also provides IBM with the potential to have a better story when talking to clients about their legacy applications, he added.

“Assuming [these clients] are a very loyal IBM customer and have a very large legacy footprint that they are looking at moving into some type of a cloud environment, they have additional options now,” Smith said.

IBM-Red Hat deal: Will it affect the cloud landscape?

During a media call earlier this week, Arvind Krishna, senior vice president of IBM Hybrid Cloud, said the acquisition redefines the cloud market.

“As our clients are moving to hybrid cloud, and they all use multiple cloud, they need the technology and they need a platform that lets them operate in that environment with security and comfort of portability,” Krishna said. “Together, that’s what we can get for them.”

But Gartner analyst Lydia Leong believes the IBM-Red Hat deal will have very little impact on the current cloud landscape and should not influence buying decisions related to public cloud.

Red Hat’s relative strength in on premises container solutions does not transform into any form leadership in the cloud market, Leong said. Containers are not cloud, she said, they are an infrastructure construct that customers may use as part of a cloud solution, just like they use virtual machines as part of a cloud solution.

Major public cloud vendors — AWS, Microsoft Azure and the Google Cloud Platform — all offer Kubernetes-based container services that come at no extra charge to their customers, she said. The customer pays for the infrastructure cost but doesn’t pay extra to run containers, she explained.

“Plus, the use of containers, regardless of whether or not that includes Kubernetes, doesn’t make applications magically portable,” she added.

But IBM has continued to look for ways to build business outside of its on-premises infrastructure, sales and services business. Having ownership of a Linux distribution that is used widely across all the cloud vendors could be an interesting way for IBM to build cross-cloud services, said Scott Cameron, Azure Principal Solution Architect at Insight.

“But I don’t see it immediately affecting most of our customers and how they deploy cloud,” Cameron said.

Should CIOs care?

At least to start, Featherston believes CIOs have nothing to be worried about. The IBM-Red Hat deal is expected to close sometime in the second half of next year. As long as IBM lets Red Hat be Red Hat — allowing the open source provider to continue with the way it has conducted business — the impact for CIOs, whether they choose to go with IBM or not, should be minimal, he said.

He also sees no reason for existing IBM customers to think about changing their cloud strategy because if anything, the deal will ultimately give them more flexibility.

“They can feel safer if they want to stay with an IBM cloud model,” he said. “But they don’t have to feel that it’s a risk if they go elsewhere because they are still going to be an IBM customer, they are still going to be running Red Hat in AWS [if they decide to go with Amazon cloud].”




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