Did IBM Just Create the Industrys Most Expensive White (or Blue or Purple) Elephant?

Following the somewhat shock announcement that IBM is to acquire Red Hat, the speculation about what this means for open source and for the Red Hat eco system has been rife. Social media and message boards have been full of tongue in cheek comments about what the colour hat may become.
Perhaps the most succinct social media post I have seen which encapsulates the worry and concern about this acquisition was from Arthur McLaughlin of JP Morgan Chase who posted “surely IBM + Red Hat = IBM” on his linkedin feed.

Despite the assurance from Red Hat CEO, Jim Whitehurst that the company will be left alone, operate independently and will continue on the same open source mission, many people, most importantly people from within Red Hat and the Red Hat eco system, are not convinced that business will remain as usual.
IBM's track record on acquisitions adds to the doubt and concern of Red Hatters. Look at Softlayer, it became IBM Cloud, then blue mix, then IBM Cloud again – the point being that the strategy has changed multiple times since the acquisition. Anyone looking at Red Hat CEO's comments and applying some common sense will know that he no longer controls the future of Red Hat's direction. Even if the intent today is to "leave it alone" there is no guarantee that stance will remain the case in the future.
At DSA, we have doubts about the sense in the acquisition. Some of the explanations coming from IBM's CEO Ginni Rometti, leave us asking more questions that many of the other commentators have been writing about this huge acquisition.
How is it possible to measure who is the world’s largest hybrid cloud provider?
Ginni tells us that this acquisition will make IBM the number one provider of hybrid cloud. That’s really difficult to measure and if IBM had made that claim before the proposed acquisition they may have been able to argue it. It depends how you define "hybrid cloud provider". Clearly Red Hat doesn’t add any datacentre estate to the portfolio, so we are talking about cloud service providers that are building their infrastructure on platforms like Openstack and perhaps companies that are building on premise clouds using open source.
However, given that both Ginny and Jim tell us that the company will be left alone, we then have to ask what’s the net benefit here for customers? They could already purchase and implement Red Hat via IBM, and if left the same then IBM will take the same approach as always, which is to build the infrastructure that customers want. VMware, Microsoft, AWS, IBM Cloud, On Premise Openstack, it doesn’t matter. IBM can and do integrate it all for their customers today. So, if nothing changes at Red Hat, what benefit do customers see from the acquisition? It's hard to see what they will get tomorrow what they could not already get today from these two companies. Acquisitions which do not deliver something extra for customers tend not to work (think Symantec and Veritas).
Notwithstanding whether the company is or isn’t the number 1 hybrid cloud player, we have another question which we feel is more significant, "Is the claim of cloud portability really a winner here?"

The press announcements made a big play on how this acquisition will enable "IBM and Red Hat to provide an open approach to cloud, featuring unprecedented security and portability across multiple clouds”. Here is where we are scratching our heads even more. Portability across clouds is coming and whichever way you cut it, IBM and Red Hat are unlikely to be the secret sauce here. There are a swath of technologies that are allowing application mobility across multiple clouds independent of OS or Virtualisation platform. Add containers and microservices into the mix and it's hard to see how IBM and Red Hat will separate themselves from the pack in terms of hybrid cloud portability. The advance of technology means that companies will be able achieve portability even in and out of competing clouds in very short order.

Another major unanswered question is "What will happen to the Red Hat storage projects like Ceph and Gluster?” How does the open source approach play in IBM's significant storage business? In our view, this technology competes with IBM storage game plan and is not so complementary as the union in the the cloud space. Our best guess is that this part of the Red Hat business will not be left alone.

Whilst the storage products may not be grabbing the headlines in this "story" the Red Hat community will be worried, and this brings me to the biggest question of all.

How will the Red Hat community respond to this acquisition over time?

Others don’t share my pessimism over the deal, Malaysian storage guru and avid blogger Chin Fah Heoh is supportive of the IBM+Red Hat equation, but as he writes in his blog (Pondering Red Hat's future with IBM), IBM needs to leave Red Hat alone for the benefits to pay off.

We spoke to an executive based in Singapore who has previously served at both companies, who encapsulated just how vital the eco system will be here. "The power of an Open Source company comes from how the community views and respects it. The rock stars are not the richest, but the most credible and respected. The community takes no direction from any one single company but gears towards it by sheer belief in is leaders and its contribution to the development as a whole. The success of this $34 billion buyout will therefore depend on whether the community sees it fit to support the Red Hat division within IBM or whether it decides that Red Hat has sold its open source soul to IBM."

Whether our own skeptism on the technology “fit” turns out to be founded or not, it seems that anyone and everyone that knows anything about Redhat understands that IBM have to keep the community on board. That’s the value, and if they don’t, they will see those individuals move to support other linux and open source distributions. After all that is the beauty and freedom of open source.

Currently, we are seeing a lot of concern from existing Red Hat employees as to whether IBM will indeed leave them alone. If you look at the pages on reddit the concern is palpable. Locally we have seen ASEAN VP being vocal and super positive with his LinkedIn posts, we wouldn't expect anything else from an experience leader. He has a job to do and corporate messaging to echo.

However, speaking to employees who understandably prefer to give their views “off the record”, they are worried. One comment from a current Singaporean employee reflects the general concern, "It doesn't matter what the leaders say, I will wait to see what really happens". It’s a common thing to hear in any acquisition, but in an open source company as pointed out above, the success of this acquisition will depend on the people more than the technology.

If the people are not happy, the major benefactors of this acquisition could yet turn out to be distributions like Fedora, Suse, Debian and Ubuntu.

The colour of the hat is really going to matter here. If the colour of Red Hat’s, “hat” becomes blue or even purple, that is likely to spell a wasted $34billion dollars, but that leads me back to the big question I asked at the start, if Red Hat remains as is, what has changed?

Other than the nice purchase price for Red Hat shareholders, it’s difficult to see how the Red Hat community and customers and even IBM customers materialise any benefit here.

Whilst some analysts are drinking the “cool aid” that this will transform the cloud landscape, I don’t buy that, and I don’t see the likes of Azure, AWS, Google or even Ali who are starting to make their cloud play even blinking at this announcement, it simply won’t put a ripple in their game plans.

So where will this go. There are too many moving parts here to predict, but as we look at it, we can see a range in the possible outcomes.

If IBM can do what they have not been great at before and truly leave Red Hat to lead the open source space and keep the eco system happy, whilst it may not transform the cloud landscape as advertised, it will become a strong business unit that should continue to flourish with the might of IBM behind it. 

However, if IBM loses the good will of the eco system, this deal has the potential to become the industry’s most expensive white elephant, or maybe that elephant that will be blue or purple!

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