IBM's Red Hat acquisition could be "disastrous", says Puppet exec

IBM and Red Hat merger

IBM shocked the tech industry earlier this year when it snapped up open source stalwart Red Hat in a $34 billion mega-deal.

The acquisition marks the biggest software merger in history, and the general assumption is that IBM is intending to leverage Red Hat's experience in the cloud computing market to bolster its own efforts in this area as it seeks to pivot from old-school on-premise infrastructure to newer revenue streams.

Some disagree with this view, however. Nigel Kersten is vice-president of ecosystem engineering at open source firm Puppet, and previously served as CIO, CTO and chief technical strategist. Kersten expressed doubts about the idea that IBM is buying Red Hat for its cloud credentials.

"I find all the commentary claiming that this is IBM's cloud play hilarious," Kersten said, "cause I think it's just ridiculous. I mean, Red Hat are clearly more relevant in that world than IBM, and there's lots of really good stuff Red Hat are doing like OpenShift, Kubernetes - there's a somewhat tenuous link there, but I wouldn't put Red Hat in the same class as, say, Github for attracting the 'new world order', so to speak."

"And if you look at Red Hat, their business is still primarily a RHEL [Red Hat Enterprise Linux]-plus-services business. They're quite well-situated for the future, I think, but they're still an operating system company. They're going to be like that for a long, long time."

While Red Hat is keen to talk about the work it does with containers, application development and cloud deployment, income from its infrastructure subscriptions division (which is largely made up of RHEL) comprised around three quarters of its overall annual revenue for 2018.

"They need it to look like a cloud play, to be cynical," Kersten said. "I mean, this is the company that's been doing fake cloud accounting for the last five years and going 'more dollars get spent on us on cloud than Amazon!'. Just because you've put cloud in the name of Rational Server, doesn't mean it's a cloud product, and you can't keep booking services revenue as cloud."

In spite of his reservations, Kersten admitted that the acquisition gives IBM the potential to gain substantially more relevance in the cloud market. "Maybe they'll give Red Hat a crapload of money and they'll essentially take over the cloud business - which will take over all of IBM eventually."

"I could see them making OpenShift really enterprise-friendly, and maybe making a serious play against Pivotal Cloud Foundry. I think if you look at the federation between Pivotal/EMC/VMware, IBM/Red Hat probably looks a lot better against them than IBM did."

Despite the potential, Kersten expressed fears over the merger's potential risk. He warned that staff who joined Red Hat as part of the CoreOS acquisition - who are heavily steeped in open source culture - may face a "culture clash" when they join a company as huge and monolithic as IBM.

"I could see it being a disastrous merger, to be honest."

Having said that, if the acquisition was a risk, then Kersten thinks it was a necessary one: "I think IBM probably needed to make a 'hail mary' move of some kind," he said. "They either need to follow the YouTube model or the Apple NeXT acquisition, where NeXT ended up essentially running the company, and then with YouTube, Google did the thing of letting them preserve their brand, their headquarters, and slowly pulling them into the company but not trying to disturb it too much - so it feels like some combination of that's going to be needed."

Adam Shepherd

Adam Shepherd has been a technology journalist since 2015, covering everything from cloud storage and security, to smartphones and servers. Over the course of his career, he’s seen the spread of 5G, the growing ubiquity of wireless devices, and the start of the connected revolution. He’s also been to more trade shows and technology conferences than he cares to count.

Adam is an avid follower of the latest hardware innovations, and he is never happier than when tinkering with complex network configurations, or exploring a new Linux distro. He was also previously a co-host on the ITPro Podcast, where he was often found ranting about his love of strange gadgets, his disdain for Windows Mobile, and everything in between.

You can find Adam tweeting about enterprise technology (or more often bad jokes) @AdamShepherUK.