WHY DOES BIG BLUE RE­ALLY WANT A RED HAT?

Mint ST - - CORPORATE -

When I worked for In­ter­na­tional Busi­ness Ma­chines Corp. (IBM), it was soon af­ter the com­pany had ac­quired Lo­tus Labs Pvt. Ltd, which along with Notes, its client-server “shared workspace” of­fer­ing, had a set of ap­pli­ca­tions to ri­val Mi­crosoft’s then al­ready for­mi­da­ble arse­nal. IBM has, over the years, proven very dex­ter­ous at ac­quir­ing and then di­vest­ing var­i­ous arms within its soft­ware and hard­ware busi­nesses. For in­stance, some years ago, it sold its Thinkpad PC line to Len­ovo, a Chi­nese com­peti­tor.

IBM’S move in ac­quir­ing Lo­tus was to com­pete with Mi­crosoft in the en­ter­prise desk­top space. As is of­ten the case in the soft­ware world, com­pa­nies are ‘fren­e­mies’—that is both friends and en­e­mies at the same time. When it ac­quired Lo­tus, IBM was still man­u­fac­tur­ing PCS, all of which shipped with a Mi­crosoft op­er­at­ing sys­tem at the core. None­the­less, the hope was that users and en­ter­prises would plunk down in favour of Lo­tus’s suite of Of­fice ri­vals in­stead of Mi­crosoft Of­fice. Af­ter a few years of un­equal com­pe­ti­tion, Lo­tus’s of­fice suite of ap­pli­ca­tions bit the dust and were “off­loaded” to In­dia’s HCL Tech­nolo­gies Ltd last year.

My first gut re­ac­tion, when asked about IBM’S eye-pop­pingly ex­pen­sive $34 bil­lion ac­qui­si­tion, an­nounced on 28 Oc­to­ber, of Red Hat Inc. at more than 10 times Red Hat’s rev­enues of $2.9 bil­lion, was that IBM’S move was to garner con­trol of the cloud ecosys­tem. Red Hat has made a name for it­self as a provider of open­source sys­tems such as Linux, as well as in buy­ing up pro­pri­etary sys­tems and con­vert­ing them into stan­dard­ized open-source. Red Hat pro­vides cloud stor­age, op­er­at­ing sys­tem plat­forms, mid­dle­ware, ap­pli­ca­tions, man­age­ment prod­ucts, and sup­port, train­ing, and con­sult­ing ser­vices for these open-source plat­forms.

As Red Hat is a leader in the open­source cloud space, and as en­ter­prises the world over race to im­ple­ment cloud so­lu­tions con­sist­ing of both open-source and pro­pri­etary sys­tems, I thought that the IBM ac­qui­si­tion was to al­low Big Blue to com­pete with the likes of Mi­crosoft’s Azure, Google Cloud, and Ama­zon Web Ser­vices Inc. (AWS). When asked whether the move rep­re­sented a threat to In­dian and other IT ser­vice providers, my re­sponse was that it didn’t—since no ser­vice provider has re­ally sought to be­come a true cloud host­ing provider like AWS or Azure. They have con­tented them­selves with help­ing their clients plan and ex­e­cute their moves to a hy­brid cloud en­vi­ron­ment, and are happy to al­low AWS and oth­ers the drudgery of ac­tu­ally main­tain­ing a cloud en­vi­ron­ment.

Upon fur­ther ru­mi­na­tion though, I re­al­ize that my ini­tial as­sess­ment was flawed. This isn’t re­ally a bat­tle for cloud com­put­ing supremacy, though that re­mains a sec­ondary goal. The real goal is for pri­macy in the open-source mar­ket. As soft­ware and ser­vices providers in­crease their de­liv­ery of ‘dig­i­tal’ prod­ucts to their en­ter­prise cus­tomers in ‘agile’ com­put­ing projects, which use free open-source li­braries, hav­ing a strong hold over the open-source ecosys­tem will be­come a cor­ner­stone of the fu­ture ‘dig­i­tal­ized’ com­put­ing space for en­ter­prises. Fur­ther, it is be­com­ing in­creas­ingly ev­i­dent that most en­ter­prises will have a hy­brid en­vi­ron­ment, with user-fac­ing func­tions in a ‘dig­i­tal’ for­mat to al­low for a snazzy in­ter­face, and the back-of­fice sys­tems that re­spond to these dig­i­tal in­ter­faces in or­der to pro­vide the user a seam­less ex­pe­ri­ence through a re­sult en­gi­neered in the back-room, but de­liv­ered through a reimag­ined dig­i­tal fron­tend. Due to its in­de­pen­dence and sin­gle-minded ded­i­ca­tion to the open-source com­mu­nity, Red Hat has man­aged to build many strong on­go­ing re­la­tion­ships with ser­vice providers since it is viewed as an in­de­pen­dent. IBM, on the other hand, given the ‘fren­emy’ sta­tus it has since it both sells to and com­petes with ser­vice providers, has far fewer fric­tion­less re­la­tion­ships. The ac­qui­si­tion an­nounce­ment went to great lengths to en­sure clients that Red Hat will con­tinue to be run as an ‘in­de­pen­dent’ busi­ness within IBM’S hy­brid cloud di­vi­sion. It fur­ther clar­i­fied that Big Blue will con­tinue “fos­ter­ing the in­de­pen­dence and neu­tral­ity of Red Hat’s open-source her­itage and com­mit­ment, its cur­rent go-to-mar­ket strat­egy, its prod­uct port­fo­lio, and its ‘unique’ devel­op­ment cul­ture”. But Red Hat’s 12,000-plus peo­ple are a flea on the 385,000-em­ployee blue ele­phant’s back. A flick of its trunk will un­seat the flea, much to the glee of IBM’S ser­vices com­pe­ti­tion. IBM needs a good ma­hout.

Sid­dharth Pai is founder of Siana Cap­i­tal, a ven­ture fund man­age­ment com­pany fo­cused on deep sci­ence and tech in In­dia.

Newspapers in English

Newspapers from India

© PressReader. All rights reserved.