IBM’s Red Hat Acquisition: The Lowest Common Denominator

By Joe Clabby, Clabby Analytics

Without reading IBM’s or Red Hat’s press release on IBM’s $34 billion forthcoming acquisition of Red Hat, the open-source Linux provider, my immediate thought was this: “What does the acquisition of an operating system/infrastructure company do for IBM and its customers?”

Operating systems are all about “resource control.” Operating Systems control how system resources are used; how they access storage, network services, memory, CPU resources, and peripherals. An open-source operating system is wide open for developers to use to build applications in standard ways – enabling applications and databases to communicate more easily with one-another. Common infrastructure promotes program-to-program communications; it allows for configuration and security to be administered uniformly across systems environments; it facilitates communications and networking; and it provides systems/storage/network management facilities.

So, given that IBM already has several operating systems – and dozens-upon-dozens of infrastructure products – why would IBM want yet another operating environment/infrastructure offering?

My answer would be “To become the lowest common denominator for the whole ecosystem for modern, open systems.” As the lowest common denominator in the open source world, the Red Hat operating system and infrastructure environment would represent the baseline code that could drive everyone’s hardware; that could support anybody’s cloud infrastructure; that could control the entire security layer; that could offer high availability extensions; that could enable massively scalable clustered, parallel systems – and so on.

Red Hat provides IBM the base level code upon which most major open source initiatives would run. IBM could then take a lot of the value-added extensions from its many operating systems and start cascading that value into Red Hat – elevating Red Hat’s commercial strengths and extending those strengths to the open source community – which would then build even more value-add on top of the IBM-enriched operating system.

And, with the lowest common operating system denominator, IBM will be able to significantly influence the direction that the computing industry will take for years to come.

With Red Hat, IBM:

  • Will be able to accelerate innovation within the most popular open source Linux operating environment: Red Hat. This means that IBM and Red Hat can collaboratively influence the community for future product directions to drive innovation as well as enterprise value (and therefore implicitly to the open source Linux community).”
  • Will be able to create open and flexible interfaces to support industry, ecosystem and community innovation around IBM’s key strategic initiatives: artificial intelligence, cloud computing, analytics, and
  • Will be better able to build management environments across a multi-vendor ecosystem with diverse, services, systems and servers.
  • Will be better able to manage across multi-provider private/public/hybrid clouds (because IBM will create an open hybrid multi-cloud platform based on the most basic building block on which the enterprise relies on the Red Hat operating environment).

Imagine an IT environment wherein a common operating environment and related infrastructure simplifies the deployment, administration, and management of ALL systems within the enterprise and across multiple clouds. In this world:

  • Systems could be chosen based-upon their processing characteristics (enabling users to choose the best system to process a given workload – increasing systems processing efficiency while lowering costs).
  • Cloud providers could be chosen based on infrastructure capabilities as well as available services, cost, enterprise policies and proximity/regulatory requirements
  • Cross-platform, cross-vendor clouds could be managed in a transparent, consistent fashion. With Red Hat at the baseline, IBM would be able to build upon a consistent and open platform that can orchestrate resources across multiple system types and cloud providers (x86 servers, mainframes, LinuxONE servers, Power Systems, OpenPOWER – and more).
  • The lines between competing public and private cloud architectures and implementations would fade.

If the acquisition of Red Hat enables better integration; more advanced functionality; simplified management (hopefully with more AI overlay) – and generally lower cost computing – then this acquisition will pay big dividends for the open source community.

On the $34 Billion Price Tag

Think back to when IBM acquired Lotus for $3.5 billion – and thinking: “That’s a mistake.” Lotus technology enabled IBM to compete in several different markets – and easily brought its acquisition costs back home.

Over the years it should be noticed that IBM has a proclivity for making the right bids and taking the right gambles in its acquisitions (see here) – and then expertly managing the integration of the companies that they have acquired.

I also remember this colossal failure (by another IT company.)

Summary Observations

Most assuredly IBM has performed due diligence in its company valuation of Red Hat. This acquisition is not a risk for IBM – it’s a huge opportunity to reposition the company in the marketplace as the leader in open source computing. IBM will be able to recoup that investment through better-integrated systems, cloud, and management offerings over the next decade or so.

With the common, most basic element for open source enterprise computing (the most popular Linux), and with a strong desire to claim the hybrid computing high ground in clouds and cloud management; this Red Hat acquisition positions IBM at the heart of how heterogeneous systems operate. IBM/Red Hat will become the lowest common denominator upon which most major open source industry initiatives will be launched over the next several years.


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