IBM has just announced its intention to acquire Linux provider Red Hat for approximately $34 billion. IBM describes the deal as “the most significant tech acquisition of 2018.”
It’s certainly one of the year’s biggest deals. IBM says acquiring Red Hat will help it become the No. 1 hybrid-cloud provider in what should be a $1 trillion market.
A combined IBM-Red Hat should also be huge for the future of cloud computing. More specifically, the hybrid cloud.
Right now, a great deal of cloud activity involves companies essentially renting space in the data centers of Amazon, Microsoft and Google. But IBM believes that’s only 20% of the complete cloud journey.
The other 80%, IBM adds, will involve shifting business applications to hybrid clouds, extracting more data, and optimizing every part of the business.
Hybrid clouds are important to this plan, because they can connect public, private and hybrid clouds to on-premises systems. They also can network one or more clouds to other clouds.
Not every company wants to be locked into the proprietary technology platforms of Amazon, Microsoft or Google. That’s where IBM hopes to come in.
Today’s New York Times says IBM wants to be the “corporate Switzerland of cloud computing,” and that’s about right. IBM says Red Hat Linux will be the foundation for hybrid computing, a common platform across all environments, based on open standards and therefore cloud-agnostic.
IBM also says customers will benefit from the Red Hat deal by gaining an enterprise-grade open hybrid cloud, a path to migrate workloads to the cloud, consistent management across multiple clouds, and new levels of cloud security.
To be sure, hybrid cloud is already quite common. A recent IBM survey finds that 85% of organizations operate multicloud environments now. And most of the remaining 15% plan to do so in the next three years.
IBM is hardly a Linux newcomer. In fact, IBM has been a Red Hat Linux partner for years. And all of IBM’s high-end mainframes and servers are enabled for the enterprise version of Red Hat’s OS.
Tip of the (red) hat
Red Hat is hardly a slouch, either. Founded 25 years ago, the company is now the world's top provider of Linux to corporations.
For Red Hat's most recent fiscal year, the company took in revenue of $2.9 billion. Yes, Linux, being an open-source OS, is free. But Red Hat charges for its software enhancements and technical support.
What’s more, Red Hat Linux is now used by 90% of the Fortune 500, according to IBM. The OS also enjoys a robust developer ecosystem, with some 8 million developers worldwide.
IBM is betting $34 billion that its prediction of a hybrid-cloud future is right.