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Red Hat CEO on IBM, VMware and hybrid cloud coopetition

Two years into his tenure as Red Hat CEO, Paul Cormier discusses his company's relationship with IBM and how it's competing with its own partners in hybrid cloud.

BOSTON -- Red Hat President and CEO Paul Cormier has a unique perspective on how his company has evolved from an enterprise Linux vendor to a hybrid cloud purveyor -- he's been with the company for 21 years.

Hired as the company's 120th employee, Cormier served as executive vice president of engineering and president of products and technologies from 2008 to 2020, when he took over as CEO following IBM's 2019 acquisition of Red Hat for $34 billion. He works alongside Arvind Krishna, the architect of the Red Hat deal within IBM, succeeding Ginni Rometty as CEO of IBM in 2020.

In public comments this week during IBM's Think conference, Krishna said Red Hat products form the backbone of IBM's hybrid cloud strategy, and that Red Hat's revenues have grown more than 17% each quarter since the companies merged. Red Hat sales also spearheaded the 8% overall revenue growth IBM reported last month for the first quarter of 2022.

It's clear how Red Hat has affected IBM; SearchITOperations caught up with Cormier at this week's Red Hat Summit to discuss how IBM has affected Red Hat.

What's been IBM's impact on Red Hat since the acquisition? How has it changed?

Paul Cormier: Surprisingly not that much, to tell you the truth. Big partnerships and the partner ecosystem are a really big part of our platform success. [Krishna] knew from the beginning and continues to know, the only way that we could keep intact was for IBM to take a neutral stance. So we haven't integrated anything into the company. Our numbers roll up through IBM. I see [Krishna] as chairman of the board -- that's the relationship we have. But they've never gotten involved with our strategy, with our operations, with where we're going or where we should go. The way he characterized it is that IBM can be opinionated on Red Hat, but it can't be the other way around.

At the same time, IBM has a pretty rich history and big research division. Is there anything on which you might collaborate?

Paul Cormier, Red HatPaul Cormier

Cormier: Just as we would with any partner, we work with their product engineering groups in depth to make sure that integration is smooth. They actually pay Red Hat a royalty, as would any other partner, for the use of OpenShift. We collaborate in the field as we would with other partners because their field organization gets compensated on Red Hat products -- we don't get comped on IBM products, but their field does. They bring us leads. They open the door to a CIO's office occasionally for us if they have a good relationship there. But we also do that with Accenture. We also work with many of IBM's competitors.

You're working with IBM's competitors and your own competitors now, including VMware's Tanzu. But the end of the day, end-user companies are going to choose a strategic partner for that kind of DevOps platform. So how does Red Hat win in that scenario, when so many customers also have VMware, Microsoft or Oracle in-house?

Cormier: It's a hybrid world, and I think we have the best platform for a hybrid world. We compete with VMware Tanzu for that, but containers are really a Linux distro. So VMware, with Tanzu, they have to become a commercial Linux distributor overnight. And we've got a 21-year head start on that.

What about going up against, say, Azure or AWS that have on-premises plays?

We compete sometimes, but cloud hyperscalers are our best business partners first.
Paul CormierPresident and CEO, Red Hat

Cormier: But their on-premises plays are a little different. If you look at Amazon's AWS Outposts, it's really more about bringing Amazon services in almost as a gateway to on-premises. It's the same for Azure Stack or Arc, and they both require a specialized hardware stack. We really don't see those as a general-purpose on-premises platform -- we compete sometimes, but cloud hyperscalers are our best business partners first. Hybrid cloud is also multi-cloud. We have to go pretty deep with Amazon engineering and with Microsoft engineering to integrate Azure Red Hat OpenShift and Red Hat OpenShift Service on AWS. I can't imagine them doing that with each other. I also can't imagine them getting in the business of doing general-purpose Linux on any hardware on premises. That's one reason I think they all partner with us -- customers want hybrid, but we also bring workloads to them. And that's what they're most concerned about. I don't want to speak for them, but for the most part, whether it runs in Amazon EKS, AKS or OpenShift, I get the sense from them that they don't really care.

Among customers, how much do you see hybrid cloud and multi-cloud that involved moving between clouds, versus centrally managing apps and services that stay where they are?

Cormier: I don't see it moving between things. I see it as, 'We've got a whole bunch of applications and some portion is going to run on premises and some portion is going to run in this cloud, and another portion is going to run in that cloud for various reasons.' That's what's really changed. I remember a customer in the beginning, 14 years ago, saying, '90% of my applications are going to be in one cloud in five years.' Well, that same customer has less than 20% [in one cloud now]. They're even starting to build on-premises clouds for various applications. The fact is, when they really started to move applications, it required them to take a big-picture look, an architectural look at what the applications were.

Red Hat's former senior director of product strategy for hybrid cloud, Brian Gracely, said after he went to last month, 'Red Hat's challenge with OpenShift is there's going to be a set of customers who will take the stack the way you give it to them, and there's another set of customers who are less centralized in their architecture. We're seeing more and more central IT groups not have as much power or as much authority to dictate everything as they did years ago.' From your perspective, how does Red Hat navigate that challenge?

Cormier: This is where IBM can help us occasionally. We did a big project for Delta Airlines going hybrid, from the CEO and the CIO down. They had various reasons they needed some applications to be on premises; other reasons they didn't want to be in one cloud. Sometimes, as you get down into the IT groups, you see an Azure group or the AWS group for some applications. Of course, they're not going to see beyond their own four walls. But because hybrid now is being seen and executed as an architecture, the CIO is very involved in many, if not most of those changes.

I was at a bank in Europe about a month ago. They have a CTO that's responsible for the infrastructure, a CIO responsible for the applications and a COO over both of them -- we see this structuring a lot. They have 8,000 applications, three cloud providers and on premises. I said, 'Do you guys realize you're going to have 28,000 different versions of your applications to develop, manage and operate?' And of course, the applications guy was very concerned about that. The COO was very concerned about that. We got the three of them talking, and now they're moving to OpenShift based on that conversation. I also meet with the COO once a month to make sure we are on track together. The good news for us is it's an architectural decision now.

Read more about Red Hat's OpenShift roadmap in Part 2 of this Q&A.

Beth Pariseau, senior news writer at TechTarget, is an award-winning veteran of IT journalism. She can be reached at [email protected] or on Twitter @PariseauTT.

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