Market Updates

The road ahead for Red Hat post its Acquisition by IBM

November, 2018

Overview

IBM’s investment in Red Hat has certainly caught attention from the IT world which came as one of the largest acquisition in recent years, following Dell’s acquisition of EMC Data Storage. It is difficult to surmise, how the merger of these two companies would mean for the creation of new business model for Red Hat. We have witnessed many acquisitions that went wrong in the past due to synergy mismatches. With Red Hat being the pioneer in open source, offering RHEL and Fedora which are quite successful among enterprises it adds value to enhance its product categories with Red Hat’s portfolio.

Key Areas

Cloud: IBM is expected to focus on Red Hat’s OpenShift and gain the cloud market. IBM is likely to look to market OpenShift to its customers as their cloud platform. The Red Hat is expected to remain a separate business unit. Certainly, IBM will look to strengthen its position in cloud, containerized apps and microservices from this merger with Red Hat. It also means that IBM has to deal with Red Hat’s partners which are its competitors within the cloud space, including Amazon Web Services, Microsoft Azure, Google Cloud.

Unix: Most of Red Hat’s success contributes to the factor that Unix migrates well with Linux. It faces competition from Solaris (acquired by Oracle) as a major part of Red Hat’s revenue comes from Unix to Linux migration. The acquisition by IBM means that it can position itself better from the competitions from the giants in future. With strong backing from IBM, Red Hat can now leverage its strategy to compete with Microsoft and Oracle offering cheap products and with easy integration capability.

The acquisition paves way for IBM to make use of RHEL OS. It can also benefit from the Red Hat developers and strengthen its IT infrastructure services. It will pose challenge to AWS with open source in cloud offering. We need to wait few years to understand what synergies are created by the two companies to make the $34 billion deal, a profitable one for both the sides in near future. IBM is expected to maintain the Red Hat brand name for its products and likely to benefit from current Red Hat customer base as well. However, it has to sort out its middleware products for its use, among the similar applications, such as JBoss and WebSphere, 3scale and API Connect, among others.

– Swarup Bhowal,
Research Analyst - ICT,
Infoholic Research