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IBM-Red Hat juggernaut targets hybrid clouds

IBM and Red Hat plan to build a raft of complementary open source products to capture a huge hunk of the hybrid cloud market, but not offend their respective partners.

This week's blockbuster IBM-Red Hat deal shakes up the open source and hybrid cloud markets, but much work remains...

to explain to customers how they'll reconcile product overlaps and partnerships.

Red Hat will join IBM's hybrid cloud business under this week's $34 billion proposed acquisition, but it will continue to function as an independent entity, according to IBM. Ginni Rometty, CEO of IBM, pledged to ensure Red Hat's open source development heritage and neutrality, and she projected that the two companies will gain a dominant position in the hybrid cloud market via open source.

"This is all about the open source and proprietary battle in the cloud, and we see [the deal] as resetting the hybrid cloud landscape," Rometty told analysts in a call this morning. "We think users prefer an open cloud in the next chapter of their cloud journey, and we plan to serve as Switzerland, now having access to the world's largest open source community," she said.

Both Rometty and Jim Whitehurst, Red Hat's president and CEO, claimed there is little to no overlap in their platforms, applications or development tools, although there is some in the hybrid cloud area.

"But even there, we see those offerings as eventually complementary," Whitehurst said.

The deal deepens IBM's access to Red Hat's portfolio, particularly Linux and OpenShift, as well as the company's 8 million developers, said Al Gillen, analyst at group vice president at IDC. However, it also complicates IBM's hybrid and private cloud story.

"IBM has been committed to Cloud Foundry, so now they will have to rationalize what this means to Cloud Foundry's overlap with OpenShift," Gillen said. "There has to be more to be said there. It's just not true there is no overlap."

Some overlap among the companies' respective development tools is to be expected, and over time, those tools can merge or target specific markets, Gillen said.

"But I assume, at this point, IBM went after Red Hat because they wanted to get at their portfolio. So, I would guess Cloud Foundry loses and OpenShift wins," he said. "It's not like IBM has a massive financial investment in Cloud Foundry."

For corporate users and developers, the IBM-Red Hat combination better enables them to accelerate their hybrid and multi-cloud adoption, Rometty and Whitehurst said. A top priority is to help users create cloud-native applications faster and implement greater portability and security of those applications across both open source and proprietary clouds, using technologies such as Linux, containers, Kubernetes, cloud management tools, and AI and machine learning.

"Typically, our customers have at least five different clouds, ranging up to as many as 15 clouds that are both open and proprietary," Rometty said. "What they have been asking us to do is to give them a single [cloud] platform that goes across those environments, and this [deal] gives them the sort of openness they need to transport data across hybrid [environments]."

IBM has had a long commitment to open source. It invested $1 billion in internal research and development efforts in 1998, and it followed that up in 2001 with a $40 million donation of proprietary development technologies to the open source community, which became the Eclipse Project.

IBM has been committed to Cloud Foundry, so now they will have to rationalize what this means to Cloud Foundry's overlap with OpenShift.
Al Gillenanalyst and group vice president, IDC

The IBM-Red Hat relationship also extends back 20 years, Rometty noted, with a collaboration to create enterprise-class versions of Linux and, more recently, to market Kubernetes and hybrid cloud offerings for larger corporate shops.

Both companies said they will work cooperatively with the other to build and enhance Red Hat partnerships, including those with major companies they are in coopetition with, such as AWS, Google, Microsoft Azure and Alibaba.

Some analysts expressed concern about how each company will juggle its existing partnerships, but also said such relationships are simply the nature of the business now.

"You can't cleanly break companies apart and say, 'These are my competitors, and these are my partners.' Things are much more complicated," IDC's Gillen said. "If Microsoft can bring OpenShift users to its cloud because of a better value proposition and shun IBM and Red Hat, why wouldn't they do that?"

IBM also pledged its continued commitment to Red Hat's open governance, contributions to and participation in the open source community, and current development model. Big Blue will also commit to the continued freedom of open source through various efforts, including the Patent Promise, GPL Cooperation Commitment, the Open Invention Network and the LOT Network.

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