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IBM Buys Red Hat In Mega-Deal

IBM Buys Red Hat In Mega-Deal


$34bn paid for open-source business.


Recently, IBM made a pretty stunning announcement. Tech acquisitions are made all the time, so the fact that IBM was dipping into the penny jar to snap up another company isn’t in itself particularly surprising.

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But when this much money is involved, it was always bound to raise an eyebrow or two.

The company in IBM’s crosshairs was open-source cloud software firm Red Hat, and the total sum paid for acquisition of the business was $34bn, which is a huge sum of money, whichever way you slice it. Did IBM overpay? That’s certainly the view of some analysts and if you compare the value against Red Hat’s share price prior to the news then it would appear to be the case. However, as a few industry articles have pointed out, Red Hat wasn’t itching to be bought in the first place so IBM was faced with having to pay a premium if it wanted access to Red Hat’s cloud expertise.

And, boy, it really, really did. According to IBM’s own release on the acquisition, this is a “game-changer”, and one that will make IBM become the world’s number one hybrid cloud provider.

IBM looks to the cloud

And there is really is no doubt as to why IBM wanted to buy Red Hat: the cloud. IBM is looking to gain a presence, to potentially arrest declining year-on-year revenues that have beset the organisation in recent times. There is also a view among some analysts that IBM’s business in the cloud has been found wanting, so buying a company that is such an established and major player in the cloud software space will give it the leg-up that many feel its Hybrid Cloud division - which Red Hat will now become a unit of - needs in order to keep up with the times. IBM’s own release on the deal is clear in its ambition of “offering companies the only open cloud solution that will unlock the full value of the cloud for their businesses”.

Why cloud computing matters

When a major outfit such as IBM looks to the cloud, it begs the question as to whether SMEs could also find cloud computing beneficial? Certainly, there are various reasons why SMEs should consider cloud-based programmes and systems to help them stand out from the crowd.

From a financial standpoint, cloud computing has become more and more attractive, providing a more flexible IT infrastructure than more traditional, on-site IT teams. Cloud-based IT has the potential to allow an organisation to be more dynamic, providing solutions to real-time needs while cloud solutions can also grow with a company. Cloud resources can also be paid for as required, so businesses stand to save costs in this respect also.

Cloud computing can provide a boost to productivity, with software such as Office 365 having changed the way workers can communicate compared with stricter, location-specific office environments. Simultaneous and collaborative working can now be employed alongside flexible workspaces, and businesses can benefit from a more productive and dynamic workforce as a result.

The cloud has also provided businesses with more peace of mind when it comes to data security as cloud backups offer SMEs an additional preventative measure against the kind of online threats that larger businesses have been better equipped to deal with in the past.

For many smaller businesses, a hybrid cloud solution - where some resources are managed in-house and others are provided outside of the business - could be the way forward. Where the IBM-Red Hat deal might help all businesses in the long run is that it can potentially address the issue of proprietary cloud solutions and increase business adoption of an open, multi-cloud environment.

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