Beginning of July, one of the largest and most significant IT acquisitions was officially concluded. What kind of forecast awaits us? Cloudy red to mostly blue we would say, and here are some tips on how to prepare yourself and your clients for the upcoming weather.
IBM has always understood very well end-to-end needs of enterprise customers. However, implementation has often been problematic, especially if we take into consideration the number of recent internal reorganizations and “optimizations“. This is neither unknown nor unusual and clients and partners nevertheless had a very clear (though sometimes limited) picture of what to expect from this modern IT giant. We have been cooperating successfully in both local and foreign markets for years now, and it’s hard to get angry with your “first love”, especially if some parts of the relationship are still working even better than when we first met. #romance #alwaysfaithful
After all, we are happy to witness the largest IT acquisition of a software company in the history so far, although the purchased side does not prefer this terminology. As it was officially concluded a couple of weeks ago, IBM acquired Red Hat for $34 billion with the goal of jointly becoming a global market leader with a particular focus on hybrid cloud services. But what does this really mean for us as customers and partners, both domestically and internationally?
We have officially closed on the landmark acquisition of @Redhat. Together, we will unlock the true value of hybrid cloud for business and the world. Learn more: https://t.co/4s2YnRACJI via @Reuters pic.twitter.com/y2mhZCNLTA
— IBM (@IBM) July 9, 2019
The Purchase of the Technology Debt (Which Finally Came to Collect)
With a clear focus on the value of its products and a strong connection to the open source community, Red Hat (whom we at CROZ have met over the last four years of intensive use of products such as OpenShift, Fuse, Ansible…) really gives the impression of a more agile and faster organization which brings much more to IBM than just ‘hybrid’ cloud partnership. Our collaboration with Red Hat has been very transparent, efficient and thin on verticals so far, with support easily accessible and very focused.
This solid relationship Red Hat has with the open source community is probably the most valuable asset responsible for the $34 billion transaction, says Krešimir Musa, director of consulting services at CROZ. It turned out that Red Hat had timely, and long before IBM, bet all its chips on Kubernetes, Apache Camel, Ansible, and similar platforms… and successfully predicted the sequence of events in today’s hybrid cloud and DevOps context. He further highlights:
The model that has been successfully built with Linux for a long time, has also delivered a superb result here. Since our beginnings as an IBM partner, we have been regular attendees of the IBM Think conferences, and a slide from Cormier’s this year’s presentation simply states that OpenShift was the major milestone for Red Hat 7 years ago and truly answers the question of why Mrs. Rometty had to pay $34 billion for IBM to remain an active player in the (hybrid) cloud domain. IBM was simply late due to certain technical decisions – primarily related to the Kubernetes ecosystem and integration components. Unfortunately, we will never know what the market would look like today, if 7 years ago a container orchestration platform based on Docker and Kubernetes appeared on the IBM mainframe.
This year at IBM Think 2019 conference, Paul Cormier, Vice President of Red Hat, spoke about the impact of open-source technology on company development and industry in general.
The Cure for the Blue Giant: “Fresh” Culture Marketing and a New Ally
In most of the online comments & reviews on the merger of these two “worlds” we can see a highlighted reference to the (agile) culture as one of Red Hat’s major benefits for IBM, but there are few potential issues and concerns related to this topic.
First of all, even birds can sing by now that you cannot buy culture, you need to build one together. It will take years and years for IBM to replicate current Red Hat’s „vibe“, which is also very explicitly confirmed by almost all official announcements which state organizations will retain their autonomy in work and behavior. How should they share the same culture then? Via Facebook?
Furthermore, is Red Hat’s culture “too easy-going” for IBM’s “procedural” size? Maybe, but where there is a will, there is a way. From a coaching perspective, it will be very interesting and a pleasure to watch this transformation and mutual learning and evolution of both sides.
In addition, another questions arise: who will prevail in the future, the “blue” or the “red” technology trend or team, if not even mindset? What the future actually brings and how will both organizations reconcile their R&D departments, current products on the market, roadmaps of the current ones and new ones?
Answering these questions will be the most concrete success indicator of this newly formed alliance and important factor for choosing one vendor over the other and also a trigger which will outweigh the potential selection of their competing solutions by end clients. That’s why IBM and Red Hat need to be really quick and clear about this.
Red Hat CTO Chris Wright wrote about most exciting upcoming technologies on the recent online Q&A session.
Considering these challenges alone, it is undeniable that both organizations can learn a lot from each other and that we have a win-win situation in the market. In particular, we can conclude that this is a powerful alliance in the fight against AWS, Google and others.
Everything Is the Same, Yet Everything Has Changed
As you have already read about the acquisition when it was originally published, this is undoubtedly a good business deal from various perspectives. But what does this actually mean for end clients? Those considering buying an IBM or Red Hat product? Those who already use them? Those that have one vendor’s products and would like to replace them with another one’s. Those to whom the statement that “nothing will change” is not enough?
We were recently in Prague at the Red Hat EMEA Partner Conference and what we can confirm is that in the future, Red Hat will rely as much as possible on its affiliate network and the support it can receive through its partners, both in terms of sales and from the perspective of end-to-end services for the clients. But the fact is that in spite of high visibility and additional demand gained through its new IBM channels, Red Hat is still about the size of a pre-merger organization with limited resources.
Although in Prague the information surrounding the acquisition itself was shrouded in secrecy, there was a clear message that, after the merger, a high focus on customer innovation will remain, as well as more intensive development of industry & vertical specializations (such as telecommunications).
What’s new in the world of @RedHat_Services after the @IBM acquisition?@johnallessio says little changes in our dedication to customer success. Read his thoughts on the blog: https://t.co/c6v0PlvSxD pic.twitter.com/azZlYaJJkI
— Red Hat, Inc. (@RedHat) July 23, 2019
When to Play Blue and When Red?
Looking at our history and strong R&D team, we at CROZ are currently in a very grateful position due to adopted experience of working with both vendors, and we can very clearly for specific business context identify a “true match” for an individual product or a combination of products from both vendors. That is why we will stop asking prophetic questions (which is obviously very popular in commenting this topic) and use the rest of this article to materialize our thoughts in the form of a backlog list. Resolving this backlog could potentially lift some of the fog present on the market. Nevertheless, the responsibility for resolving the items on the list is shared, it belongs to both vendors and us partners, but also to the customers themselves:
- Clarify and communicate transparently as soon as possible the IBM and Red Hat product road-maps, eliminate the dilemmas of what is happening with similar products as well as customers’ fears that the wrong strategic decisions will destroy good platforms (such as OpenShift); this is a major factor driving customers to alternative and in most cases worse solutions currently available in the market.
- Design adequate mechanisms and provide support for easy migration of existing IBM and / or Red Hat customers to products that they currently prefer more, which were competitive until just yesterday – this is the point where the greatest impact of this alliance must be felt, as well as…
- Reconcile the issue of pricing and product licensing – although it has been stated that “things will continue to work as they were”, the disproportionate price ratio and different licensing method can be confusing for a potential IBM classic customer who now has a more “accessible” Red Hat product – or perhaps he doesn’t?
- Clarify IBM’s and Red Hat’s sales force approach and attitude towards joint clients, whether the goals are “reconciled”, and whether we are talking here about the same synergy that is so much advertised at the global C-level.
- Clients will have to make decisions empirically based on well-designed PoCs, pilot projects and MVP iterations – based on our experience, this concept has proved to be the best way to “break the ice” and create irrefutable evidence in the context of “client’s own backyard”, with us in a role of experienced independent party to moderate and coach clients through the process by providing them with relevant data and putting them in a decision-making position focused on the business goals.
You Don’t Need to Decide Right Now, Just Make the First Step
Certainly there is more to this topic, the priorities are highlighted, but at the moment, from the client’s perspective, the most important thing is to simply to take the plunge, choose the direction which should be confirmed with a controlled experiment, and simply – get started.
Unfortunately, we are all witnessing that this disruptive event has caused the market to stagnate for too long regarding various new projects and business decisions, in the field of hybrid cloud and in other fields, just because some of the issues mentioned above were not resolved on time. On the other hand, looking at the projects we are working on in the foreign markets such as the UK, Austria and Germany, we have noticed that our clients, from banking and retail sector use both vendors very complementary and pragmatically. Well aware of the risks, but without too much fear of what the future will bring, they combine the best of the entire joint offering.
Talking with my colleagues, our director of application development, Ivan Krnić, compared this business arrangement to Disney & Pixar case that ultimately ended happily for all parties included, and that’s why we hope very much that the future of IBM and Red Hat will inflame the engineering playfulness of the child in all of us. Because if you remember, in the popular novella of Antoine de Saint-Exupery, the home of the Little Prince is an asteroid that the writer located under the name B6121. This information stands out as very important one in the concept of the book, because the writer explains that the adults can only imagine this planet if the exact figure is stated.
Likewise, adults just need clear information from IBM and Red Hat to be able to see the bigger picture and make decisions which they can challenge & defend. And they need it fast.
