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Red Hat Acquisition by IBM: A Real Game Changer

Posted on November 3, 2018

The year 2018 is almost over and we have seen some major company mergers and acquisitions over this time period. Some of these mergers or acquisitions surely raised eyebrows while others were sure to happen. The recently announced deal by IBM to acquire Red Hat is making all the buzz at the moment. The widely known multinational company IBM announced on 29th October 2018 that it decided to acquire Red Hat for $34 billion dollar deal. Red Hat will get $190 per share from IBM.  Red Hat is an American software company known for its open source products and services based on the Linux system.. For IBM who has been dealing with a declining revenue over the last five years, this acquisition will surely raise their portfolio in the cloud platform and financial gain. Even though IBM has taken over companies in the past, the Red Hat acquisition is the biggest one in its history. Red Hat is an American software company known for its open source technology products with its headquarters in Raleigh, North Carolina was founded in 1993. IBM, one of the world’s biggest computer service and product provider is headquartered in New York. The IBM – Red Hat partnership wasn’t started yesterday, it goes back to 1999.

Now the question most would ask is why Red Hat, why such an acquisition?  Red Hat is a blooming player in the cloud deployment sector. It offers a persistent foundation for the public, private and hybrid cloud deployment and management thus giving its users the right cloud solution. The various Red Hat products help in managing multiple cloud platforms. While there is a cloud battle going on between the tech giants for the number one spot, IBM has been lagging because of its poor performance. So this acquisition will be a boost for Big Blue when it is still behind companies like AWS, Microsoft, and Google and for someone who admitted that their public cloud market is in fact shrinking, Red Hat acquisition is the golden ticket for IBM. The main goal of IBM is to be the number one hybrid cloud provider. Even though the hybrid cloud has been the topic of many talks, no one has mastered it thereby giving IBM a chance to emerge itself in this area. IBM chairman Ginni Rometty already stated that this acquisition will be a game changer for IBM, also it’s a great chance for them to invest in open source.

There was a concern about the acquisition among many because of the Red Hat’s open source culture. No need to worry because Red Hat will work as a separate unit in IBM Hybrid Cloud unit. For Red Hat, the major benefits include a wider and newer audience, an increase in open source impact, the large scale of resources and environment for growth. There will be significant impact on India too. IBM has decided to take over 1,000 Red Hat employees in India on its payroll because of the deal. Major Indian systems like Bombay Stock Exchange (BSE), National Stock Exchange (NSE), Life Insurance Corporation of India (LIC), Aadhaar, GST, Railways, State Bank of India (SBI), Central Board of Direct Taxes and Employees’ Provident Fund Organisation (EPFO) and other core banking services run on Red Hat open source software services. This means that IBM will get clients with higher transactions giving IBM another point! One sure thing from this deal is that Red Hat’s popularity will prosper and this era of IBM will create new career options. Formation of IBM-Red Hat hybrid cloud platform will be a great opportunity for cloud engineers and Red Hat certified professionals. So brushing up your skills or getting expert training will help your career.

For Red Hat, this acquisition is monumental because it shows how much recognition open source technology has gained in this digital age. Also, it will be a great chance for them to expand their horizon and resources. And for someone who has been dealing with a falling revenue, IBM’s profit margin can be improved by this acquisition and also a shot at hybrid cloud market. The young generation of IT techies can also take advantage of this merger because of the possibilities of new career options. It might take some time for IBM to get in the same line as other dominant players, but we will witness tremendous changes in the cloud market in the coming years and hopefully new services from this partnership.

Manju Elizebeth MathewDigital Marketing Trainee at IPSR

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