IBM also known as the Big Blue has acquired Red Hat for a whopping $34 billion in the largest software acquisition deal in the world. It is also the largest investment in the history of the 100 plus years of existence of IBM. The first mention of the potential deal started in October 2018. It had to cross some major roadblocks before the final deal went through. The first major roadblock was the approval of the U.S. Department of Justice. The deal needed the stamp of approval from the Department and it got in May 2019. The second big roadblock was the EU but it was removed when the EU gave its unconditional approval at the end of June 2019.
IBM has been in the market for such a long time to become the oldest technology company in the world and the key to such longevity is its strategic business plan. On one hand, it has been noticed that IBM does not think twice before letting go of the projects or products that it feels will not be profitable in the long run. On the other hand, it also wastes very less time in deciding its investments in the deals that it feels will strengthen its position in the market or reap them great rewards in the long run. IBM has made remarkable contributions to the world of technology that has a significant impact on the lives of the common people as well as large corporates. The company is credited for the invention of Hard Drives, Floppy Disks, ATMs and so on.
RedHat is a Linux developer started by Bob Young and Mark Ewing in March 1993. It has been a leader in the Linux based software industry and is considered one of the best in the world. Linux is the most important operating system based on UNIX for the development of open source projects and mostly cloud-based software. Clouds all over the world are built on Linux except Microsoft’s Azure. However, Microsoft has started adopting Linux in Azure as a bulk of Azure cloud has been developed and designed on Linux Virtual Machines. Moreover, many of these VMs have been developed by Red Hat.
The importance of Red Hat is unprecedented especially in the era of Cloud Technologies. There was a time when the former CEO of IBM commented that the work that IBM performs cannot be done of the cloud. The company has come a long way from that and now IBM is a cloud believer. The acquisition of Red Hat implies that IBM is giving a lot of importance to the growth and spread of the technologies and it will work in sync with them to make something important for the world of technology.
According to reports, IBM has allowed Red Hat’s current CEO Jim Whitehurst to continue to head the team. Moreover, he has been roped in the senior management of IBM and he will be directly reporting to IBM CEO Ginny Rometty. This will allow Jim to run Red Hat almost as he used to before but with added help from IBM and also working together with other teams of IBM. Currently, Red Hat has over 12,500 employees.
The main reason behind IBM’s investment in Red Hat is to position itself as a cloud power and also gain insights into the world of open source. IBM’s cloud was kind of primitive as compared to the leaders of the market, top-positioned Amazon Web Services and second positioned Microsoft Azure. After the acquisition of Red Hat, IBM will conquer the 3rd position but will still be lacking way behind Azure at a mere 8% of the total global market. However, IBM is not even looking at direct head to competition with the leaders. Its main motive is to expand its own business. IBM Cloud’s majority of the clients are the enterprises that are legacy IBM users. Now, IBM can look to make new customers with the name of Red Hat with them in the cloud space as well as Red Hat’s expertise with Linux.