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IBM, Red Hat, Hybrid Clouds and the IoT

December

 

IBM has stated that its acquisition of Red Hat for a massive $33 billion willmake the company the #1 hybrid cloud provider in an emerging $1 trillion growth market. IBM currently has a $19 billion hybrid cloud business and the company is a leader in private cloud services. That position will be enhanced by employing Red Hat’s expertise in helping enterprises create and deploy private clouds. The deal is expected to close in the second half of 2019 when Red Hat will join IBM's Hybrid Cloud team as a separate unit.

The two companies have been partners for 20 years, with IBM serving as an early supporter of open source Linux, which has become the standard operating system for cloud infrastructures. IBM is also collaborating with Red Hat to help develop and expand enterprise-grade Linux. Between them, the two companies have contributed more to the open source community than any other organization.

Red Hat’s business model was based on taking free open-source software, making improvements and bundling it with tools and services. This was followed by the development of the various software items that are needed to power computing clouds. 

The open source model has been very successful. The company’s products and services have been deployed by more than 90% of the Fortune Global 500. They include the Red Hat®OpenStack®Platform, which virtualises resources from industry-standard hardware, organizes them into clouds, and allows users to access what they need. And OpenShift, which enables applications to be developed and deployed on the customer’s preferred infrastructure: private, public or hybrid.

Hybrid clouds and IoT 
Private clouds are managed by the user – an enterprise — and they will typically be in the location where important data is protected. Hybrid clouds are an infrastructure that has links between private clouds and public clouds, which are managed by a third party. They enable the advantages of both types of cloud in a single entity; for example, day-to-day activities like email can be kept on a public cloud and sensitive information retained in a private cloud. Hybrid clouds are therefore a cost-effective way of renting computing power, but they also enable integration with other cloud environments such as those of ecosystem partners and that is a very significant benefit.

As the deployment of IoT devices continues to rise, along with the tangible benefits of data analysis, businesses are recognising the limitations of employing centralised cloud services, which take too long to deliver timely insights. Therefore enabling real-time analysis a hybrid cloud solution is an attractive option since it facilitates the acquisition and analysis of data close to the source, i.e. the IoT edge. It combines the benefits of a regular on-premise environment with a cloud-based system. However, there is a caveat: latency.  The distance between the data source and the analytics resource is limited, but this constraint will be virtually eliminated when 5G ultra low latency services are operational.
Processing and analysing data close to the source generates real-time information and enables data to be analysed at the local level. Real time analysis is performed in a local computing facility, e.g. an intelligent IoT gateway, which functions as a de facto local cloud.  However, this should be seen as a complementary development to long term analytics employed in a central facility, where it is used to discover hidden patterns, unknown correlations, market trends, customer preferences and other useful business information. 

Conclusions   
History tells us that large acquisitions have integration challenges. Often there are cultural differences and product portfolios need to be aligned, which can lead to turf wars. Aligning product portfolios is never easy, but the deal doesn’t close until H2 next year so there would seem to be enough time. IBM has bought an open source, developer driven software company that has a dynamic bottom-up culture. IBM is perceived as being a top-down corporation. The decision to incorporate Red Hat in IBM's Hybrid Cloud team as a distinct unit appears to recognise that there is a significant difference as well as a way of minimising the impact. IBM has stated that it is committed to retaining Red Hat’s culture, leadership and practices. Moreover when it comes to open source there is a cultural fit.  IBM is a supporter of the open source community, which started with a $1 billion investment in Linux 20 years ago.

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