Over a decade ago, IBM was known for its advances in cloud computing. But the company lost out for a few years to Amazon.com and Microsoft both of which prevailed in the cloud arena.
Acquiring Red Hat for $34 billion is the most expensive deal in IBM’s history and CEO Ginni Rommetty indicates that she believes it will be a “defining moment in IBM’s cloud journey.” (ref WSJ). When stymied by the acumen of Microsoft and Amazon, IBM developed a counterpunch strategy known as the “hybrid cloud,” that allowed their client companies to use the cloud but to keep their most sensitive data on internal computers. Red Hat counts thousands of companies among its customers and fits well into that strategy. It will exist as a stand-along business unit within IBM and will be “neutral when it comes to which companies’ cloud computing services it steers clients,” an arrangement that has been developed to address concerns that full-on integration into IBM might damage Red Hat’s market reputation and hurt customer relations. Red Hat has developed its services using the free Linus open-source operating system, offering its own version of the software as well as training and technical support to clients. Red Hat CEO Jim Whitehurst will continue in his position, while also serving in the position of IBM Senior Vice President and reporting directly to IBM CEO Rommetty. It’s said that the success or failure of dealing with Red Hat will also shape how Rommetty’s continued time at the helm of IBM is viewed. At the present time, reviews on her tenure are mixed, with some analysts seeing leadership difficulties relating to IBM’s 22 straight quarters of year over revenue declines, followed by 3 quarters of growth in 2017, and then more declines. We will be enthusiastic followers of the coming months with Red Hat among IBM company strategies. All the moving parts – the necessity of moving together and toward shared, common goals.