IBM Wraps Red Hat Acquisition, 'Not Talking About Layoffs'

With IBM‘s acquisition of Red Hat now formally completed, both companies are working to reassure customers and channel partners that the new arrangement will be good for technology-hungry enterprises and for the MSPs, VARs, resellers and others that help them build and manage their IT systems.

The companies formally announced the closure of the $34 billion acquisition Tuesday, along with reassurances that the deal will allow Red Hat to maintain its independence and long history of a progressive and successful open-source culture.

IBM’s acquisition of Red Hat, announced with a splash last October, is designed to increase the stakes and opportunities of both companies in the cloud marketplace — especially in hybrid cloud. The move comes more than 20 years after both companies first began working together, dating back to when Red Hat was just a startup offering its open-source Linux operating system as a free download or on CDs at technology conferences.

Red Hat’s Paul Cormier

“When we started on this journey of Linux many years ago, of making Linux the ubiquitous platform out there and then further on down the line really building our portfolio around that to build a truly hybrid cloud product portfolio, our goal had always been to make that the ubiquitous set of technologies and platforms across the enterprise,” said Paul Cormier, executive vice president and president of products and technologies for Red Hat. “I think today what we’ve seen and what we start on is that journey on steroids. With IBM taking that forward, it will accelerate that journey for us in spades.”

Arvind Krishna, senior vice president of IBM’s cloud and cognitive software division, said the Red Hat acquisition continues IBM on a path of being involved with open-source software for more than 20 years.

“We fundamentally believe that open source is a way to bring innovation to the market,” said Krishna. “We have this common belief of what hybrid cloud means to our clients. We believe that hybrid cloud unlocks tremendous value and is the only way forward for our clients.”

And with only about 20% of the company’s customers making a move to hybrid cloud so far, according to IBM’s research, that means there are plenty of business opportunities for the two companies to work on together, he said.

“This, what we’re calling chapter two of the cloud journey, is what excites us both,” said Krishna.

One oft-mentioned concern from outsiders is that IBM’s purchase of Red Hat Linux would squash Red Hat’s positive culture and douse the creative juices of its developers, workers and staff.

Cormier again worked to counter those fears Tuesday, repeating the recent words of Ginni Rometty, IBM’s chairman, president and CEO, who said that IBM has no desire to meld the cultures of the two very different companies together.

“Our culture has been built on what has made us successful — bringing our products through …

… an open-source model,” said Cormier. That just continues. I don’t even think IBM will have an opinion on what our culture should be.

And for channel partners of both companies, the messages from both Cormier and Krishna were clear — each company will continue to utilize its own independent channel partner network and will not impede on the other.

IBM’s Arvind Krishna

“Both companies have sales forces and both have channel programs, and it will remain that way,” said Krishna. “We would love every possible partner to be partners for both, but they are not becoming one.”

Most importantly, the acquisition is not about cost synergies between the two companies, he continued.

“We are not talking about layoffs. We’re not talking about any of those things. This acquisition is about all of our revenue synergy and growth going forward.”

For customers, the benefits of the paired companies revolves around their combined capabilities for helping with hybrid cloud and multicloud environments, said Krishna. “Clearly, clients are seeing the benefit that this is going to bring going forward. I think it’s the same way as Linux accelerated over the last 20 years, by being a business that was small – you had a few developers playing around with it – to where it now is on a majority of servers in the entire world.”

Mark Enzweiler, senior vice president of global channels and alliances for Red Hat, told Channel Futures that the two companies have been telling partners and customers for months that Red Hat’s continuing independence will be an important result of the acquisition.

Red Hat and IBM partners who are today not partners with the other company will have opportunities to seek those mutual partnerships if they desire, he said, but it will be up to them. Some partners have made inquiries about how they might apply to expand those arrangements, he said.

“We both have a process in place and if you want to be partner of the other then you come in, fill out your skills application and each [IBM global region] makes the decisions on who they will bring in,” said Enzweiler. “I think that process is pretty well understood. No problem, there’s a way for you to become a Red Hat or IBM partner. I’ve been in this partner business for around 30 years and I feel really good about how this is coming together.”

Tim Beerman, chief technology officer at Ensono, an MSP specializing in hybrid IT infrastructure, told Channel Futures that as a partner of both companies, he sees the finalization of the IBM-Red Hat deal as, well, a big deal.

Ensono’s Tim Beerman

“I see that as very positive,” especially if IBM can leave Red Hat alone to continue to do its work in open source software and Linux, he said.

One benefit of the deal is that it could result in Red Hat getting more money to do research and development.

“There are pros and cons to being a part of a big company. It could be very positive if there is increased investment from IBM,” he said.

Beerman said he doesn’t anticipate any significant downsides to the deal, other than the remote possibility that Red Hat could somehow get sucked into driving IBM’s internal needs.

“I don’t think that IBM will let that happen,” he added. “We’ll see where IBM takes it now and where the market will move with us.”

Several IT analysts continue to see …

… a positive outlook for the acquisition and for the two companies working together in the future.

“The deal is likely to work very well,” said Charles King, principal analyst with Pund-IT. “IBM and Red Hat have worked closely together for over two decades and mutually support thousands of business customers. They know how to collaborate successfully and their closer pairing will ensure stability and continuity for their global client base.”

For channel partners of both companies, they should see improvements in support and sales assistance through the acquisition, said King.

“More importantly, with IBM’s commitment to ensure Red Hat’s independence, partners and customers can be assured that their existing relationships and service agreements won’t change much, if at all. The fact that Red Hat’s CEO and current management team will continue in their roles with IBM is another sign of this continuity,” said King.

For both companies, their focus on open, hybrid cloud isn’t mere window dressing.

“Both companies see it as representing the future of global business computing,” King added. “If channel partners are already heading in that direction, it’s all to the good; If not, they should contact IBM and Red Hat to consider how they can get their services and offerings up to speed.”

Hurwitz Group’s Jean Bozman

Another analyst, Patrick Moorhead of Moor Insights & Strategy, said he sees the deal as an opportunity for IBM to gain ground in the cloud space due to Red Hat being at the forefront of hybrid cloud.

“If played right, this could be successful for both. IBM gains hybrid cloud capabilities and access to a customer base and Red Hat gets a massive sales force and channel,” said Moorhead.

Jean Bozman, vice president and principal analyst with Hurwitz & Associates, said both companies are doing a good job of assuring their customers and partners that they will continue to work with them as they always have even as the acquisition takes effect.

“I think in the end the way they say it is it’s all about the customers,” said Bozman. “Red Hat will get more exposure and in deeper with customers than it could before, and for IBM, this gets them deeper into open-source accounts more than it is already with its open-source software history. I always thought the whole point of the acquisition is IBM viewing Red Hat as a catalyst and as a change agent that’s going to allow IBM to do things it couldn’t do before.”

For channel partners, the messages from both companies that they can continue their independent relationships with IBM and Red Hat is good news, said Bozman.

“The channel partners won’t have to throw out what they are doing,” she said.