On Sunday, IBM announced that it would be acquiring technology company RedHat for $34 billion. The acquisition is one of the largest ever for a technology company deal and will also put IBM in a leading position for hybrid cloud services.
“Most companies today are only 20 percent along their cloud journey, renting compute power to cut costs,” said Ginni Rometty, IBM Chairman, President and Chief Executive Officer. “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 optimizing every part of the business, from supply chains to sales.”
IBM chose RedHat for its open source architecture, which enables greater interoperability and speeds digital transformation. The joint entity will focus on hybrid multi-cloud systems that are designed to bring workloads to the cloud that aren’t there yet.
In a statement on the transaction, both companies highlighted their 20-year relationship as vendor partners. IBM 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. In addition, 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.
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.
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. Jim Whitehurst also will join IBM’s senior management team and report to Ginni Rometty. IBM intends to maintain Red Hat’s headquarters, facilities, brands and practices.
Both companies have a significant portfolio of state and local government clients which will be maintained after the transaction is completed. By combining, the new companies will however, have a significant value proposition to take to the market as public sector organizations typically seek hybrid cloud and multi-cloud solutions as they work through digital modernization plans. Both companies continued support for the open source community will also help foster ongoing innovation in that space, which will be a boon for state and local government organizations as well.
The transaction is expected to close in 2019 following regulatory approvals.