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Can IBM Wear Its Red Hat & Retain OSS Talent?

IBM is a company in dire straits and it’s acquiring one of the biggest contributors to GitHub in Red Hat.

IBM’s blockbuster acquisition of Red Hat for $33.4 billion to create a hybrid-cloud powerhouse is a fascinating gamble and demonstrative of the more collaborative and open-source software ecosystem of how the Cloud is scaling.

IBM already has some interesting initiatives that get a lot of hype such as the supposedly emerging tech of Watson artificial intelligence and blockchain enterprise collaboration with the likes of Visa that’s truly impressive in its scope.

Red Hat can be a subscription revenue driver and enterprise sales engine. It can definately give IBM more street cred among developers and potentially even attract talent, but can it retain Red Hat’s core ethos and culture in the process of an enterprise acquisition?

According to Synergy Research IBM has just a 7 percent share of the cloud infrastructure market. This as the likes of AWS, Azure and Alibaba are surging in their cloud reputations and growth. Realistically even the likes of Salesforce and Google are taking market share away from the likes of Oracle and IBM.

The Cloud Wars are real and they have implications for how AI, blockchain, analytics and cybersecurity are implemented for thousands of businesses.

AWS and Microsoft are approaching “duopoly” status here, and it has far-reaching implications on the future of technology, even as Amazon shows potential to become a digital advertising and consumer artificial intelligence player.

Red Hat gives IBM a much more solid hybrid cloud story to tell but is it enough to retain Red Hat employees that might be under threat from jobs moving off-shore in such an acquisition? Red Hat’s stock is surging after the news, but IBM’s is not. That’s a reflection of investor confidence in IBM generally.

Red Hat’s has a solid position as the leading Linux distribution provider in the business world but it’s not clear if the enterprise movement to “take-over” open source software (OSS) ecosystems to try to grab talent is a justifiable rational for this kind of price tag. If it backfires, it could ruin IBM’s hope of turning its fortunes around.

Andrew Harrer | Bloomberg | Getty Images

Microsoft pivoted to the Cloud in what can only be called a successful transition, but can IBM do the same with the hybrid-cloud and OSS? There may not simply be room in the market for this to work out well, even as the acquisition is likely only to be finalized in Q2 of 2019.

Software engineers are the premium of what makes the world go around in technology. IBM still has an incredible B2B partnership ecosystem. At 107 years old, to say that it’s a mature company would be an understatement, but it’s hard for the legacy behemoths to keep up.

Red Hat is an enterprise software company with an open source development model and it will need more than its secret sauce to save IBM. There’s no guarantee such a big bet will pay off. The history of such major acquisitions in software are nearly without precedent, but many analysts remain skeptical as well as the software development community.

Red Hat is a fraction of the size of IBM, but IBM needs to transform or die. This puts the microscope of OSS as the driving force of the future of the Cloud. With IBM’s bigger base of customers Red Hat could in the short-term truly thrive. Red Hat is also a bridge to better partnerships with the very companies IBM cloud competes with. Is this the beginning of a more collaborative era of the Cloud?

For the future of software development this is one of the biggest stories in technology of 2018. IBM needs to wear its Red Hat with pride, and embrace a future where even old companies must be willing to take titanic risks in order to survive. The cross-selling/integration opportunity is immense, the stakes could not be higher for International Business Machines Corporation. IBM wearing its Red Hat means allowing Red Hat to modernize it, without stunting its innovation or allowing its talent to churn.