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IBM acquires open source firm Red Hat in a “game-changing” deal

Deal accelerates IBM’s high-value business model, making IBM the #1 hybrid cloud provider in an emerging $1 trillion growth market

Ginni Rometty, Chairman, President, and CEO of IBM with James M. Whitehurst, CEO of Red Hat

In what could well be one of the biggest tech mergers, IBM has announced that it has acquired the open source cloud software for approximately $34 billion.

“The acquisition of Red Hat is a game-changer. It changes everything about the cloud market,” said Ginni Rometty, IBM Chairman, President and Chief Executive Officer. “IBM will become the world’s number one hybrid cloud provider, offering companies the only open cloud solution that will unlock the full value of the cloud for their businesses.

“Most companies today are only 20 percent along their cloud journey, renting compute power to cut costs,” she added. “The next 80 percent is about unlocking real business value and driving growth. This is the next chapter of the cloud. It requires shifting business applications to hybrid cloud, extracting more data and optimising every part of the business, from supply chains to sales.”

According to IBM, the acquisition will bring together the best-in-class hybrid cloud providers and will enable companies to securely move all business applications to the cloud. Stating that almost 80 per cent of companies are hesitant to adopt hybrid cloud solutions due to the  proprietary nature of today’s cloud market, IBM says that the acquisition would go a long way in promoting open source thereby resulting in much greater adoption.

“Over the last couple of years, Linux has emerged as the number one operating system for business applications both on premise and on the cloud. In addition, containers and Kubernetes technologies have become the common fabric for both modernizing existing applications and writing cloud-native applications,” said Arvind Krishna, Senior Vice President, IBM Hybrid Cloud.

“Together, IBM and Red Hat will bring this value to our clients, building on the progress IBM has already made with our $19 billion hybrid cloud business,” he added.

IBM also says it will remain committed to Red Hat’s open governance, open source contributions, participation in the open source community and development model, and fostering its widespread developer ecosystem.

“IBM and Red Hat will remain committed to the continued freedom of open source, via such efforts as Patent Promise, GPL Cooperation Commitment, the Open Invention Network and the LOT Network,” said the statement from IBM.

IBM and Red Hat also will continue to build and enhance Red Hat partnerships, including those with major cloud providers, such as Amazon Web Services, Microsoft Azure, Google Cloud, Alibaba and more, in addition to the IBM Cloud. At the same time, Red Hat will benefit from IBM’s hybrid cloud and enterprise IT scale in helping expand their open source technology portfolio to businesses globally.

Upon closing of the acquisition, Red Hat will join IBM’s Hybrid Cloud team as a distinct unit, preserving the independence and neutrality of Red Hat’s open source development heritage and commitment, current product portfolio and go-to-market strategy, and unique development culture. Red Hat will continue to be led by Jim Whitehurst and Red Hat’s current management team. Whitehurst also will join IBM’s senior management team and report to Rometty. IBM intends to maintain Red Hat’s headquarters, facilities, brands and practices.

“IBM’s commitment to keeping the things that have made Red Hat successful – always thinking about the customer and the open source community first – make this a tremendous opportunity for not only Red Hat but also open source more broadly,” said Paul Cormier, President, Products and Technologies, Red Hat. “Since the day we decided to bring open source to the enterprise, our mission has remained unchanged. And now, one of the biggest enterprise technology companies on the planet has agreed to partner with us to scale and accelerate our efforts, bringing open source innovation to an even greater swath of the enterprise.”

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