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IBM, Red Hat customers should watch acquisition closely

IBM said Red Hat will remain independent after its $34 billion deal goes through, and there are reasons for customers to believe that.

Customers and prospects of both companies should closely watch IBM's plans to acquire open source software stalwart Red Hat, but there is no need to sound the chimes of doom, according to some experts.

With its acquisition of Red Hat, known for its Linux distribution and prominent contributions to the Kubernetes container orchestration system, IBM wants to lead the industry in multi-cloud and hybrid cloud deployments. Executives stressed that they want to preserve Red Hat's reputation as a neutral vendor that has forged partnerships with all major public cloud providers -- but time will tell if that comes to pass.

"Whenever you pay a high price for a company that has a unique position in a market, you have to work hard and smart to protect and nurture that business," said John Dinsdale, chief analyst and research director at Synergy Research Group in North Kingstown, R.I. "So far, IBM seems to be saying the right things. This will come down to how well IBM follows through in the first year after the deal closes."

In the last 20 years, Linux and Java have been the key technologies behind promises of platform portability, and Kubernetes has gained a similar reputation. IBM has now consolidated its position in all three areas, said James Governor, London-based co-founder of analyst firm RedMonk.

Acquisitions often produce winners and losers among products. In one prominent example, after its 2007 acquisition of BEA Systems, Oracle quickly de-emphasized its own application server and pushed resources into BEA's WebLogic. Similarly, IBM's WebSphere Java application server competes with Red Hat's JBoss.

Acquisitions also prompt customer concerns about whether the software they have significantly invested in will become deprecated, but that may be less of a concern here, Governor said.

"IBM has an almost unhealthy obsession with supporting older technology," Governor said. "It's in the company's DNA." On the other hand, Red Hat would not have accepted the deal if it believed IBM would attempt to persuade JBoss customers to adopt WebSphere instead, he said.

Customer concerns over performance and data residency have driven demand for on-premises computing stacks that incorporate public cloud features. IBM's entry in this area is Cloud Private, while Microsoft offers Azure Stack and Oracle has Cloud at Customer.

The battle for multi-cloud is done. ... It's about the next-gen computing platform, a compute continuum across public clouds and on premises.
Holger Muellerprincipal analyst, Constellation Research

IBM has essentially given up on the public cloud markets, but it can be a good partner with the public cloud giants going forward, said Holger Mueller, principal analyst at Constellation Research in San Francisco.

Multi-cloud management isn't IBM's ultimate goal, Mueller said. "The battle for multi-cloud is done," he said. "It's about the next-gen computing platform, a compute continuum across public clouds and on premises."

On paper, the pairing could provide significant value for IBM and Red Hat customers in that regard. The next steps, as with any major acquisition, are for IT decision-makers to gain clarity on roadmap plans from both companies, and start initial conversations about how they fit into their present and future landscapes.

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