IBM BUY­ING RED HAT: HOW WILL IT IM­PACT THE RE­GIONAL CHAN­NEL?

Both com­pa­nies have strong chan­nel re­la­tion­ships and this move could be good for Mid­dle East­based chan­nel part­ners

Channel Middle East - - Editor’s Notes -

IBM’s re­cent an­nounce­ment that it will ac­quire open source ven­dor Red Hat for $34bn is still be­ing parsed through­out the IT in­dus­try, but for the re­gional chan­nel it should be seen as a promis­ing move that could in­crease busi­ness and rev­enue for part­ner busi­nesses. But why do I sug­gest so?

The ac­qui­si­tion, which IBM says is be­ing made to in­crease the stakes and op­por­tu­ni­ties of both com­pa­nies in the cloud mar­ket­place – espe­cially in hy­brid cloud – comes more than 20 years af­ter both first be­gan work­ing to­gether, dat­ing back to when Red Hat was just a start-up of­fer­ing its open-source Linux oper­at­ing sys­tem as a free down­load or on CDs at tech­nol­ogy con­fer­ences.

That long his­tory is one rea­son the deal makes sense for both busi­nesses, Ginni Rometty, chair­man, pres­i­dent and CEO of IBM said in a state­ment.

Given that the cloud is be­lieved to be a $1trn po­ten­tial mar­ket, bring­ing both com­pa­nies’ rich chan­nel ecosys­tems to­gether will be a good thing for part­ners be­cause it will add power to their go-tomar­ket strate­gies.

Be­cause the ac­qui­si­tion is still await­ing reg­u­la­tory ap­provals, it’s still un­clear whether the com­pa­nies will con­tinue to main­tain sep­a­rate chan­nel re­la­tion­ships and struc­tures in the fu­ture.

That said, the ac­qui­si­tion is great fit for both com­pa­nies as well as for part­ners. In fact, many chan­nel part­ners in the Mid­dle East to­day are al­ready in­vest­ing in var­i­ous as­pects of open-source soft­ware, so the deal will likely fur­ther those in­vest­ments. This ac­qui­si­tion if ap­proved, has the po­ten­tial to take Red Hat and its so­lu­tions to a whole new level of scale and broader in­vest­ment into the hy­brid cloud ecosys­tem.

Given that Red Hat, which al­ready earns

about 75% of its rev­enue through the chan­nel, it will need to con­tinue its strong re­la­tion­ships with part­ners to con­tinue grow­ing that fig­ure.

IBM on its part, is ac­quir­ing Red Hat, in part, due to Red Hat’s strong rev­enue growth, and Big Blue has stated that Red Hat will be run as an in­de­pen­dent divi­sion of the Hy­brid Cloud group.

In the mean­time, chan­nel ven­dors should in­de­pen­dently keep track of what’s hap­pen­ing as the deal pro­gresses to mon­i­tor their op­tions and sta­tuses.

Prac­ti­cally, there should be no im­me­di­ate im­pact on re­la­tion­ships or op­er­a­tions as this ac­qui­si­tion is not sched­uled to close un­til well into 2019. But strate­gi­cally, this does likely mean that Red Hat’s chan­nel re­la­tion­ships will start to be more like IBM chan­nel re­la­tion­ships start­ing in 2020 to 2021 af­ter this ac­qui­si­tion takes place, as­sum­ing that it goes through.

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