Red Hat will remain independent: IBM CEO
By Edwin Yapp May 9, 2019
- Ginni Rometty re-stresses Red Hat’s independence post-merger
- DOJ approves merger, EU and others pending; company to remain a separate entity
IBM Corp has pledged to the world’s IT developers and executives to keep Red Hat Inc as an independently run company, according to its chairman and chief executive officer (CEO) Ginni Rometty.
Speaking as a guest at the ongoing Red Hat Summit in Boston from May 7-9, Rometty said she believes that it’s a perfect moment for Big Blue to acquire the open source software giant, and that she couldn’t be happier for this to happen.
"I don't have a death wish for US$34 billion," Rometty quipped at a Q&A session on stage with Red Hat CEO & president Jim Whitehurst. "I'm not buying them to destroy them. It's a win-win [for us and our clients], as more innovation can come out of it [this merger].”
On Oct 29, 2018, Big Blue surprised the world by coughing up US$34 billion to acquire Red Hat, approximately US$190 per share in cash, a 63% premium to its closing share price on Oct 26.
Observers at the time said the deal is by far IBM’s biggest acquisition to date. This deal dovetails the largest ever IT deal four years ago when the world witnessed Dell Technologies paying a whopping US$64 billion to take over EMC Corp.
Rometty had then said the acquisition of Red Hat was a "game-changer" as it changes everything about the cloud market. “IBM would become the world’s No 1 hybrid cloud provider, offering companies the only open cloud solution that will unlock the full value of the cloud for their businesses.”
On stage on May 7, the IBM CEO was putting her best foot forward to try and convince developers, partners, analysts, the media and delegates at the Boston Convention and Exhibition Centre that she doesn’t intend to change how Whitehurst and Red Hat operate.
She reiterated the fact that both she and Whitehurst are in agreement that change is not afoot.
“The team has done a fantastic job and we know the job they do for [their] clients,” she told about 10,000 delegates, who cheered her response. “I‘m extremely respectful of preserving that... and this is first and foremost in a win for our clients.”
Why reassurance is needed
Rometty’s reassurance came about eight months after the initial announcement because some customers and partners were wary about IBM’s impending takeover of Red Hat.
The maker of open source software, services and tools has been dubbed as a “Switzerland” of the IT world – it has a reputation of being technology agnostic – precisely because of its open source legacy.
Founded in 1993, the Raleigh, North Carolina vendor has its roots developing open source software based on the Linux operating system. The core proposition is its ability to be tailor-made to fit the needs of the users using it – besides being free to use.
But the pivotal moment for the company really came when it banked on designing its open source software that was specifically targeted for enterprise use in 2003. Although its software is free to download, only Red Hat paying subscribers get enterprise-grade tools, support and services from Red Hat.
The company’s flagship product was first called Red Hat Linux Advanced Server, later to be renamed Red Hat Enterprise Linux or RHEL (pronounced 'real') as it is known today.
Red Hat's bet paid off handsomely and the software player is now the leading enterprise Linux operating software provider, raking in US$3.4 billion in revenue in its latest earning report.
Red Hat has also since developed other software products such as OpenShift, its open source container software platform aimed at conveniently helping modern developers create, test, run and deploy their applications to the cloud.
Its growth and reputation were built upon the notion that it is fiercely independent and developed its wares strictly from the collective collaboration of the open source community, something that software developers are particularly sensitive to.
After the acquisition news broke last October, the scuttlebutt was that the industry, specifically developers, weren’t too happy about the move. There were multiple concerns over what IBM would do with Red Hat, with respect to how it may corporately dictate its direction, culture and policies.
There were also fears over conflicts of interest, as Red Hat partners all the major public cloud providers including Amazon Web Services, Microsoft Azure and Google Cloud Platform. IBM buying Red Hat could put these relationships in jeopardy, some industry watchers have argued. Meanwhile, some customers and partners were also uneasy about the proposed acquisition, citing uncertainties in future product roadmaps going forward.
The reassurance from IBM’s Rometty was designed in part to allay these fears, as the acquisition is expected to move forward because the United States Department of Justice has given the all-clear to the merger.
Digital News Asia (DNA) put some of these questions to Whitehurst in an earlier briefing session before his evening keynote for APAC media, including asking how the acquisition is expected to play out in Southeast Asia.
Whitehurst remained consistent with his message, noting that Red Hat will continue to be run as a standalone entity.
“Red Hat will show up as Red Hat," he stressed. Because we don’t have regulatory approval yet from the European Union and a couple of other jurisdictions, we can’t talk as though we’re [IBM and Red Hat] one as yet.
“But we can publicly say that all our products will survive in their current form and continue to grow,” he argued.
“We will continue to support all our products; we’re separate entities and we’re going to have separate contracts, and there is no intention to de-emphasise any of our products and we’ll continue to invest heavily in it.”
The reassurance from Whitehurst was also echoed by his lieutenant Paul Cormier, Red Hat’s executive vice president and president of products and technologies.
Cormier told tech site TechCrunch that Red Hat will keep its ‘Swiss neutrality’ status, even with moving to IBM at some point soon.
“I think [the partnership] is a testament to [the fact] that we are going to be separate and really keep our Switzerland status and give the same experience for developers and operators across anyone’s cloud.”
Edwin Yapp reports from Red Hat Summit 2019 in Boston, at the invitation of Red Hat Inc. All editorials are independent. He is contributing editor to Digital News Asia and executive consultant at Tech Research Asia, an advisory firm that translates technology into business outcomes for executives in Asia Pacific.