IBM is to acquire Red Hat, a leading provider of open source technology. [shutterstock: 1039493233, metamorworks]
IBM and Red Hat announced that the companies have reached a definitive agreement under which IBM will acquire all of the issued and outstanding common shares of Red Hat for $190.00 per share in cash, representing a total enterprise value of approximately $34 billion.
“The acquisition of Red Hat is a game-changer. It changes everything about the cloud market,” said Ginni Rometty, IBM Chairman, President and Chief Executive Officer. “IBM will become the world’s first hybrid cloud provider. It will offer companies the only open cloud solution that will unlock the full value of the cloud for their businesses.”
“Most companies today are only 20 percent along their cloud journey, renting compute power to cut costs,” Rometty added. “The next 80 percent is about unlocking real business value and driving growth. This is the next chapter of the cloud. It requires shifting business applications to hybrid cloud, extracting more data. Additionally, it needs to optimize every part of the business, from supply chains to sales.”
In a recent webcast, Arvind Krishna, Senior Vice President, IBM Hybrid Cloud, said that the primary motivator for the acquisition was for IBM and Red Hat to help customers generate value with hybrid cloud environments. “Customers need the right technology and applications for open source. IBM and Red Hat can deliever those together”, he said.
“Open source is the default choice for modern IT solutions. I’m incredibly proud of the role Red Hat has played in making that a reality in the enterprise,” said Jim Whitehurst, President and CEO of Red Hat. “Joining forces with IBM will provide us with a greater level of scale, resources and capabilities. Consequently, we will be able to accelerate the impact of open source as the basis for digital transformation and bring Red Hat to an even wider audience. At the same time, we are able to preserve our unique culture and unwavering commitment to open source innovation.”
Bringing together best-in-class hybrid cloud providers
This acquisition brings together the best-in-class hybrid cloud providers and will enable companies to securely move all business applications to the cloud. Companies today are already using multiple clouds.
However, research shows that 80 percent of business workloads have yet to move to the cloud, held back by the proprietary nature of today’s cloud market. This prevents portability of data and applications across multiple clouds, data security in a multi-cloud environment and consistent cloud management.
IBM and Red Hat will be strongly positioned to address this issue and accelerate hybrid multi-cloud adoption. Together, they will help clients create cloud-native business applications faster and drive greater portability. Furthermore, they will help with security of data and applications across multiple public and private clouds with consistent cloud management.
In doing so, they will draw on their shared leadership in key technologies. These include Linux, containers, Kubernetes, multi-cloud management, and cloud management and automation.
Evolution of a long-standing partnership
IBM’s and Red Hat’s partnership has spanned 20 years, with IBM serving as an early supporter of Linux, collaborating with Red Hat to help develop and grow enterprise-grade Linux and more recently to bring enterprise Kubernetes and hybrid cloud solutions to customers.
These innovations have become core technologies within IBM’s hybrid cloud business. Between them, IBM and Red Hat have contributed more to the open source community than any other organization.
“This announcement is the evolution of our long-standing partnership,” said Rometty. “This includes our joint Hybrid Cloud collaboration announcement in May, a key precursor in our journey to this day.”
In aforementioned webcast, Paul Cormier, President, Product and Technologies, Red Hat, was quick to ensure clients and partners that nothing will change. “The way we run today – not restricting customers, letting them put in any features they may like – will not change. Our deals with AWS, Google Cloud and more will not be affected. We will remain Switzerland in the way we interact with our partners.”
“Red Hat is a powerful brand, and IBM is not here to change it,” Krishna added. IBM will remain committed to Red Hat’s open governance and open source contributions. Its continuous participation in the open source community will foster its widespread developer ecosystem. In addition, IBM and Red Hat will remain committed to the continued freedom of open source. They aim to do that via such efforts as Patent Promise, GPL Cooperation Commitment, the Open Invention Network and the LOT Network.
When asked about how Red Hat in return will influence IBM’s culture, Arvind Krishna said, “IBM already has a very open culture which allows debate, and where democracy wins. However, I’m sure that Red Hat will have a positive influence on IBM, and we can both learn from each other.”
Authentic multi-cloud provider
IBM and Red Hat also will continue to build and enhance Red Hat partnerships. At the same time, Red Hat will benefit from IBM’s hybrid cloud and enterprise IT scale in helping expand their open source technology portfolio to businesses globally.
“IBM is committed to being an authentic multi-cloud provider. We will prioritize the use of Red Hat technology across multiple clouds,” said Arvind Krishna. “In doing so, IBM will support open source technology wherever it runs, allowing it to scale significantly within commercial settings around the world.”
When asked about how they will go about the U.S. public sector, Paul Cormier said, “IBM and Red Hat both have well-established public sectors. We are going to work together and compliment each other when appropriate.” Krishna added, “The U.S. has been very supportive of open source technology. The public sector can benefit even more from open source now.”
Working as a distinct unit
Upon closing of the acquisition, Red Hat will join IBM’s Hybrid Cloud team as a distinct unit. This will preserve the independence of Red Hat’s open source development heritage and commitment, current product portfolio and strategy.
“Red Hat being a separate unit within IBM is culturally and economically important,” Arvind Krishna commented. “On the one hand, the culture has to be maintained because it is so unique. On the other hand, business has to be kept distinct. After all, Red Hat also has to support other customers independently.”
Red Hat will continue to be led by Jim Whitehurst and Red Hat’s current management team. Additionally, Jim Whitehurst will join IBM’s senior management team and report to Ginni Rometty. IBM also intends to maintain Red Hat’s headquarters, facilities, brands and practices.
“IBM’s commitment to keeping the things that have made Red Hat successful – always thinking about the customer and the open source community first – make this a tremendous opportunity for not only Red Hat but also open source more broadly,” said Paul Cormier.