Oct
30
2018
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The hybrid cloud market just got a heck of a lot more compelling

Let’s start with a basic premise that the vast majority of the world’s workloads remain in private data centers. Cloud infrastructure vendors are working hard to shift those workloads, but technology always moves a lot slower than we think. That is the lens through which many cloud companies operate.

The idea that you operate both on prem and in the cloud with multiple vendors is the whole idea behind the notion of the hybrid cloud. It’s where companies like Microsoft, IBM, Dell and Oracle are placing their bets. These died-in-the-wool enterprise companies see their large customers making a slower slog to the cloud than you would imagine, and they want to provide them with the tools and technologies to manage across both worlds, while helping them shift when they are ready.

Cloud-native computing developed in part to provide a single management fabric across on prem and cloud, freeing IT from having two sets of tools and trying somehow to bridge the gap between the two worlds.

What every cloud vendor wants

Red Hat — you know, that company that was sold to IBM for $34 billion this week — has operated in this world. While most people think of the company as the one responsible for bringing Linux to the enterprise, over the last several years, it has been helping customers manage this transition and build applications that could live partly on prem and partly in the cloud.

As an example, it has built OpenShift, its version of Kubernetes. As CEO Jim Whitehurst told me last year, “Our hottest product is OpenShift. People talk about containers and they forget it’s a feature of Linux,” he said. That is an operating system that Red Hat knows a thing or two about.

With Red Hat in the fold, IBM can contend that being open source; they can build modern applications on top of open source tools and run them on IBM’s cloud or any of their competitors, a real hybrid approach.

Microsoft has a huge advantage here, of course, because it has a massive presence in the enterprise already. Many companies out there could be described as Microsoft shops, and for those companies moving from on prem Microsoft to cloud Microsoft represents a less daunting challenge than starting from scratch.

Oracle brings similar value with its core database products. Companies using Oracle databases — just about everyone — might find it easier to move that valuable data to Oracle’s cloud, although the numbers don’t suggest that’s necessarily happening (and Oracle has stopped breaking out its cloud revenue).

Dell, which spent $67 billion for EMC, making the Red Hat purchase pale by comparison, has been trying to pull together a hybrid solution by combining VMware, Pivotal and Dell/EMC hardware.

Cloud vendors reporting

You could argue that hybrid is a temporary state, that at some point, the vast majority of workloads will eventually be running in the cloud and the hybrid business as we know it today will continually shrink over time. We are certainly seeing cloud infrastructure revenue skyrocketing with no signs of slowing down as more workloads move to the cloud.

In their latest earnings reports, those who break out such things, the successful ones, reported growth in their cloud business. It’s important to note that these companies define cloud revenue in different ways, but you can see the trend is definitely up:

  • AWS reported revenue of $6.7 billion in revenue for the quarter, up from $4.58 billion the previous year.
  • Microsoft Intelligent Cloud, which incorporates things like Azure and server products and enterprise services, was at $8.6 billion, up from $6.9 billion.
  • IBM Technology Services and Cloud Platforms, which includes infrastructure services, technical support services and integration software reported revenue of $8.6 billion, up from $8.5 billion the previous year.
  • Others like Oracle and Google didn’t break out their cloud revenue.

Show me the money

All of this is to say, there is a lot of money on the table here and companies are moving more workloads at an increasingly rapid pace.  You might also have noticed that IBM’s growth is flat compared to the others. Yesterday in a call with analysts and press, IBM CEO Ginni Rometty projected that revenue for the hybrid cloud (however you define that) could reach $1 trillion by 2020. Whether that number is exaggerated or not, there is clearly a significant amount of business here, and IBM might see it as a way out of its revenue problems, especially if they can leverage consulting/services along with it.

There is probably so much business that there is room for more than one winner, but if you asked before Sunday if IBM had a shot in this mix against its formidable competitors, especially those born in the cloud like AWS and Google, most probably wouldn’t have given them much chance.

When Red Hat eventually joins forces with IBM, it at least gives their sales teams a compelling argument, one that could get them into the conversation — and that is probably why they were willing to spend so much money to get it. It puts them back in the game, and after years of struggling, that is something. And in the process, it has stirred up the hybrid cloud market in a way we didn’t see coming last week before this deal.

Oct
29
2018
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Assessing IBM’s $34 billion Red Hat acquisition

As you look at the $34 billion IBM-Red Hat deal announced yesterday, if you follow the enterprise closely, it seems like a good move, at least on its face. It could be years before we understand the true value of it for IBM (or lack thereof, depending on how it ultimately goes). The questions stands then, is this a savvy move, a desperate one or perhaps a bit of both. It turns out, it depends on whom you ask.

For starters, there is the sheer amount of money involved, a 63 percent premium on Friday’s closing price of just under $117 a share. IBM spent $190 a share, but as Ray Wang, founder and chief analyst at Constellation Research said, Red Hat didn’t necessarily want to be sold, so IBM had to overpay to get their company.

Wang sees cloud, Linux and security as the big drivers on IBM’s part. “IBM is doubling down on the cloud, but they also are going for a grab in Linux for their largest and most important open source communities and some of the newer tech on Red Hat security,” he told TechCrunch. He acknowledges that it’s a huge premium for the stock, but he believes IBM needs the M&A action to drive down customer acquisition costs and drive up cross sell.

Photo: Ron Miller

IBM is placing a big bet here says Dharmesh Thakker, general partner at Battery Ventures, believing it to be worth 30x its current earnings in the next 12 months. “Needless to say, the hybrid cloud opportunity that we have been working on the last few years, is real and IBM/Cisco/HP/Dell all want a piece of this action going forward as the $300B in datacenter spend gets dislocated by public and hybrid cloud vendors,” Thakker explained in a statement.

He believes this deal could actually trigger a new set of mega mergers between the traditional tech vendors and cloud native, container and DevOps companies over the next few months.

IBM CEO Ginni Rometty was positively giddy at the prospects of a combined IBM-Red Hat in a call with analysts and press this morning, pointing out that only 20 percent of enterprise workloads have been moved to the cloud. She sees a big opportunity, one she projects to be worth $1 trillion by 2020. Keeping in mind you should take market projections with a grain of salt, this is undoubtedly a big market and one that Oracle and Microsoft have also targeted.

She said that Red Hat was a rare company indeed. “Red Hat on its own has been a high value company and has done a great job with strong growth, is highly profitable and generates cash. There are not many companies out there that look like that in this area,” Rometty said.

Slide: IBM

Dan Scholnick, general partner at Trinity Ventures, whose investments have included New Relic and Docker, was not terribly impressed with the deal, believing it smacked of desperation on IBM’s part.

“IBM is a declining business that somehow needs to become relevant in the cloud era. Red Hat is not the answer. Red Hat’s business centers around an operating system, which is a layer of the technology stack that has been completely commoditized by cloud. (If you use AWS, you can get Amazon’s OS for free, so why would you pay Red Hat?) Red Hat has NO story for cloud,” he claimed in a statement.

That might not be an entirely fair assessment. While Red Hat Enterprise Linux is a big part of the company’s revenue, it’s not the only piece. Over the last couple of years it has moved into Kubernetes and containerization and has grown the cloud native side of the business alongside RHEL.

In fact, Forrester analyst Dave Bartoletti sees the cloud native piece as being key here. “The combined company has a leading Kubernetes and container-based cloud-native development platform, and a much broader open source middleware and developer tools portfolio than either company separately. While any acquisition of this size will take time to play out, the combined company will be sure to reshape the open source and cloud platforms market for years to come,” he said.

Photo: IBM

Wang believes the deal could hinge on how long Red Hat CEO Jim Whitehurst, who had led the company for over a decade, stays with the unit. According to IBM, they will maintain the Red Hat brand and operate it as an independent entity inside Big Blue. “If Whitehurst doesn’t stick around for awhile, the deal could go south,” he said. But the company could dangle the CEO job when Rometty decides to leave as incentive to stay.

Regardless, Wall Street was not entirely happy with IBM’s move with their stock down all day. Needless to say the 63 percent premium IBM paid for the stock has driven Red Hat higher today.

The deal must pass shareholder muster, but given the premium IBM has offered, it’s hard to believe they would turn it down. In addition, since these companies operate across the world, they are subject to the global regulatory approval process. They won’t officially come together until at least the second half of next year at the soonest. That’s when we might begin to learn whether this was a brilliant or desperate move by IBM.

Oct
29
2018
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IBM is betting the farm on Red Hat — and it better not mess up

Who expects a $34 billion deal involving two enterprise powerhouses to drop on a Sunday afternoon, but IBM and Red Hat surprised us yesterday when they pulled the trigger on a historically large deal.

IBM has been a poster child for a company moving through a painful transformation. As Box CEO (and IBM business partner) Aaron Levie put it on Twitter, sometimes a company has to make a bold move to push that kind of initiative forward:

They believe they can take their complex mix of infrastructure/software/platform services and emerging technologies like artificial intelligence, blockchain and analytics, and blend all of that with Red Hat’s profitable fusion of enterprise open source tools, cloud native, hybrid cloud and a keen understanding of the enterprise.

As Jon Shieber pointed out yesterday, it was a tacit acknowledgement that company was not going to get the results it was hoping for with emerging technologies like Watson artificial intelligence. It needed something that translated more directly into sales.

Red Hat can be that enterprise sales engine. It already is a company on a $3 billion revenue run rate, and it has a goal of hitting $5 billion. While that’s somewhat small potatoes for a company like IBM that generates $19 billion a quarter, it represents a crucial addition.

That’s because in spite of its iffy earnings reports over the last five years, Synergy Research reported that IBM had 7 percent of the cloud infrastructure market in its most recent report, which it defines as Infrastructure as a Service, Platform as a Service and hosted private cloud. It is the latter that IBM is particularly good at.

The company has the pieces in place now and a decent amount of marketshare, but Red Hat gives it a much more solid hybrid cloud story to tell. They can potentially bridge that hosted private cloud business with their own public cloud (and presumably even those of their competitors) and use Red Hat as a cloud native and open source springboard, giving their sales teams a solid story to tell.

IBM already has a lot of enterprise credibility on its own, of course. It sells on top of many of the same open source tools as Red Hat, but it hasn’t been getting the sales and revenue momentum that Red Hat has enjoyed. If you combine the enormous IBM sales engine and their services business with that of Red Hat, you have the potential to crank this into a huge business.

Photo: Ron Mller

It’s worth noting that the deal needs to pass shareholder muster and clear global regulatory hurdles before they can combine the two organizations. IBM has predicted that it will take at least until the second half of next year to close this deal and it could take even longer.

IBM has to use that time wisely and well to make sure when they pull the trigger, these two companies blend as smoothly as possible across technology and culture. It’s never easy to make these mega deals work with so much money and pressure involved, but it is imperative that Big Blue not screw this up. This could very well represent its last best chance to right the ship once and for all.

Oct
28
2018
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Forget Watson, the Red Hat acquisition may be the thing that saves IBM

With its latest $34 billion acquisition of Red Hat, IBM may have found something more elementary than “Watson” to save its flagging business.

Though the acquisition of Red Hat  is by no means a guaranteed victory for the Armonk, N.Y.-based computing company that has had more downs than ups over the five years, it seems to be a better bet for “Big Blue” than an artificial intelligence program that was always more hype than reality.

Indeed, commentators are already noting that this may be a case where IBM finally hangs up the Watson hat and returns to the enterprise software and services business that has always been its core competency (albeit one that has been weighted far more heavily on consulting services — to the detriment of the company’s business).

Watson, the business division focused on artificial intelligence whose public claims were always more marketing than actually market-driven, has not performed as well as IBM had hoped and investors were losing their patience.

Critics — including analysts at the investment bank Jefferies (as early as one year ago) — were skeptical of Watson’s ability to deliver IBM from its business woes.

As we wrote at the time:

Jefferies pulls from an audit of a partnership between IBM Watson and MD Anderson as a case study for IBM’s broader problems scaling Watson. MD Anderson cut its ties with IBM after wasting $60 million on a Watson project that was ultimately deemed, “not ready for human investigational or clinical use.”

The MD Anderson nightmare doesn’t stand on its own. I regularly hear from startup founders in the AI space that their own financial services and biotech clients have had similar experiences working with IBM.

The narrative isn’t the product of any single malfunction, but rather the result of overhyped marketing, deficiencies in operating with deep learning and GPUs and intensive data preparation demands.

That’s not the only trouble IBM has had with Watson’s healthcare results. Earlier this year, the online medical journal Stat reported that Watson was giving clinicians recommendations for cancer treatments that were “unsafe and incorrect” — based on the training data it had received from the company’s own engineers and doctors at Sloan-Kettering who were working with the technology.

All of these woes were reflected in the company’s latest earnings call where it reported falling revenues primarily from the Cognitive Solutions business, which includes Watson’s artificial intelligence and supercomputing services. Though IBM chief financial officer pointed to “mid-to-high” single digit growth from Watson’s health business in the quarter, transaction processing software business fell by 8% and the company’s suite of hosted software services is basically an afterthought for business gravitating to Microsoft, Alphabet, and Amazon for cloud services.

To be sure, Watson is only one of the segments that IBM had been hoping to tap for its future growth; and while it was a huge investment area for the company, the company always had its eyes partly fixed on the cloud computing environment as it looked for areas of growth.

It’s this area of cloud computing where IBM hopes that Red Hat can help it gain ground.

“The acquisition of Red Hat is a game-changer. It changes everything about the cloud market,” said Ginni Rometty, IBM Chairman, President and Chief Executive Officer, in a statement announcing the acquisition. “IBM will become the world’s number-one hybrid cloud provider, offering companies the only open cloud solution that will unlock the full value of the cloud for their businesses.”

The acquisition also puts an incredible amount of marketing power behind Red Hat’s various open source services business — giving all of those IBM project managers and consultants new projects to pitch and maybe juicing open source software adoption a bit more aggressively in the enterprise.

As Red Hat chief executive Jim Whitehurst told TheStreet in September, “The big secular driver of Linux is that big data workloads run on Linux. AI workloads run on Linux. DevOps and those platforms, almost exclusively Linux,” he said. “So much of the net new workloads that are being built have an affinity for Linux.”

Oct
28
2018
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IBM to buy Red Hat for $34B in cash and debt, taking a bigger leap into hybrid cloud

After rumors flew around this weekend, IBM today confirmed that it would acquire open source, cloud software business Red Hat for $190 per share in cash, working out to a total value of $34 billion. IBM said the deal has already been approved by the boards of directors of both IBM and Red Hat but is still subject to Red Hat shareholder and regulatory approvals. If all goes as planned, the acquisition is expected to close in the latter half of 2019.

The deal is all about IBM, which has long continued to rely on its legacy server business, taking a bigger bet on the cloud, and very specifically cloud services that blend on-premises and cloud-based architectures — something that the two companies have already been working on together since May of this year (which now might be looked at as a test drive). Red Hat will be a distinct unit within IBM’s Hybrid Cloud team — which is already a $19 billion business for IBM, the company said — and it will continue to focus on open-source software. 

“The acquisition of Red Hat is a game-changer. It changes everything about the cloud market,” said Ginni Rometty, IBM Chairman, President and Chief Executive Officer, in a statement. “IBM will become the world’s number-one hybrid cloud provider, offering companies the only open cloud solution that will unlock the full value of the cloud for their businesses.”

The combined businesses will be able to offer software in services spanning Linux, containers, Kubernetes, multi-cloud management, and cloud management and automation, IBM said. IBM also added that together the companies will continue to build partnerships with multiple cloud providers, including AWS, Microsoft’s Azure, Google Cloud, Alibaba and others, alongside the IBM Cloud.

As Josh Constine notes here, it’s one of the biggest-ever tech acquisitions, and arguably the biggest that is dedicated primarily to software. (Dell acquired EMC for $67 billion, to pick up software but also a substantial hardware and storage business.)

While companies like Amazon have gone all-in on cloud, in many cases, a lot of enterprises are making the move gradually — IBM cites stats that estimate that some 80 percent of business workloads “have yet to move to the cloud, held back by the proprietary nature of today’s cloud market.” Buying Red Hat will help IBM better tap into an opportunity to address that.

“Most companies today are only 20 percent along their cloud journey, renting compute power to cut costs,” she continued. “The next 80 percent is about unlocking real business value and driving growth. This is the next chapter of the cloud. It requires shifting business applications to hybrid cloud, extracting more data and optimizing every part of the business, from supply chains to sales.”

On top of that, it will give IBM a much stronger footing in open source software, the core of what Red Hat builds and deploys today.

“Open source is the default choice for modern IT solutions, and I’m incredibly proud of the role Red Hat has played in making that a reality in the enterprise,” said Jim Whitehurst, President and CEO, Red Hat, in a statement. “Joining forces with IBM will provide us with a greater level of scale, resources and capabilities to accelerate the impact of open source as the basis for digital transformation and bring Red Hat to an even wider audience –  all while preserving our unique culture and unwavering commitment to open source innovation.”

While IBM competes against the likes of Amazon, the companies will see to remain partners with them with this acquisition. “IBM is committed to being an authentic multi-cloud provider, and we will prioritize the use of Red Hat technology across multiple clouds” said Arvind Krishna, Senior Vice President, IBM Hybrid Cloud, in a statement. “In doing so, IBM will support open source technology wherever it runs, allowing it to scale significantly within commercial settings around the world.”

IBM said that Red Hat will add to its revenue growth, gross margin and free cash flow within 12 months of closing.

Jul
31
2018
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The Istio service mesh hits version 1.0

Istio, the service mesh for microservices from Google, IBM, Lyft, Red Hat and many other players in the open-source community, launched version 1.0 of its tools today.

If you’re not into service meshes, that’s understandable. Few people are. But Istio is probably one of the most important new open-source projects out there right now. It sits at the intersection of a number of industry trends, like containers, microservices and serverless computing, and makes it easier for enterprises to embrace them. Istio now has more than 200 contributors and the code has seen more than 4,000 check-ins since the launch of  version 0.1.

Istio, at its core, handles the routing, load balancing, flow control and security needs of microservices. It sits on top of existing distributed applications and basically helps them talk to each other securely, while also providing logging, telemetry and the necessary policies that keep things under control (and secure). It also features support for canary releases, which allow developers to test updates with a few users before launching them to a wider audience, something that Google and other webscale companies have long done internally.

“In the area of microservices, things are moving so quickly,” Google product manager Jennifer Lin told me. “And with the success of Kubernetes and the abstraction around container orchestration, Istio was formed as an open-source project to really take the next step in terms of a substrate for microservice development as well as a path for VM-based workloads to move into more of a service management layer. So it’s really focused around the right level of abstractions for services and creating a consistent environment for managing that.”

Even before the 1.0 release, a number of companies already adopted Istio in production, including the likes of eBay and Auto Trader UK. Lin argues that this is a sign that Istio solves a problem that a lot of businesses are facing today as they adopt microservices. “A number of more sophisticated customers tried to build their own service management layer and while we hadn’t yet declared 1.0, we hard a number of customers — including a surprising number of large enterprise customer — say, ‘you know, even though you’re not 1.0, I’m very comfortable putting this in production because what I’m comparing it to is much more raw.’”

IBM Fellow and VP of Cloud Jason McGee agrees with this and notes that “our mission since Istio’s launch has been to enable everyone to succeed with microservices, especially in the enterprise. This is why we’ve focused the community around improving security and scale, and heavily leaned our contributions on what we’ve learned from building agile cloud architectures for companies of all sizes.”

A lot of the large cloud players now support Istio directly, too. IBM supports it on top of its Kubernetes Service, for example, and Google even announced a managed Istio service for its Google Cloud users, as well as some additional open-source tooling for serverless applications built on top of Kubernetes and Istio.

Two names missing from today’s party are Microsoft and Amazon. I think that’ll change over time, though, assuming the project keeps its momentum.

Istio also isn’t part of any major open-source foundation yet. The Cloud Native Computing Foundation (CNCF), the home of Kubernetes, is backing linkerd, a project that isn’t all that dissimilar from Istio. Once a 1.0 release of these kinds of projects rolls around, the maintainers often start looking for a foundation that can shepherd the development of the project over time. I’m guessing it’s only a matter of time before we hear more about where Istio will land.

May
08
2018
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Microsoft and Red Hat now offer a jointly managed OpenShift service on Azure

Microsoft and Red Hat are deepening their existing alliance around cloud computing. The two companies will now offer a managed version of OpenShift, Red Hat’s container application platform, on Microsoft Azure. This service will be jointly developed and managed by Microsoft and Red Hat and will be integrated into the overall Azure experience.

Red Hat OpenShift on Azure is meant to make it easier for enterprises to create hybrid container solutions that can span their on-premise networks and the cloud. That’ll give these companies the flexibility to move workloads around as needed and will give those companies that have bet on OpenShift the option to move their workloads close to the rest of Azure’s managed services like Cosmos DB or Microsoft’s suite of machine learning tools.

Microsoft’s Brendan Burns, one of the co-creators of Kubernetes, told me that the companies decided that this shouldn’t just be a service that runs on top of Azure and consumes the Azure APIs. Instead, the companies made the decision to build a native integration of OpenShift into Azure — and specifically the Azure Portal. “This is a first in class fully enterprise-supported application platform for containers,” he said. “This is going to be an experience where enterprises can have all the experience and support they expect.”

Red Hat VP for business development and architecture Mike Ferris echoed this and added that his company is seeing a lot of demand for managed services around containers.

Apr
30
2018
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RedHat’s CoreOS launches a new toolkit for managing Kubernetes applications

CoreOS, the Linux distribution and container management startup Red Hat acquired for $250 million earlier this year, today announced the Operator Framework, a new open source toolkit for managing Kubernetes clusters.

CoreOS first talked about operators in 2016. The general idea here is to encode the best practices for deploying and managing container-based applications as code. “The way we like to think of this is that the operators are basically a picture of the best employee you have,” Red Hat OpenShift product manager Rob Szumski told me. Ideally, the Operator Framework frees up the operations team from doing all the grunt work of managing applications and allows them to focus on higher-level tasks. And at the same time, it also removes the error-prone humans from the process since the operator will always follow the company rulebook.

“To make the most of Kubernetes, you need a set of cohesive APIs to extend in order to service and manage your applications that run on Kubernetes,” CoreOS CTO Brandon Philips explains in today’s announcement. “We consider Operators to be the runtime that manages this type of application on Kubernetes.”

As Szumski told me, the CoreOS team developed many of these best practices in building and managing its own Tectonic container platform (and from the community that uses it). Once written, the operators watch over the Kubernetes cluster and can handle upgrades, for example, and when things go awry, the can react to failures within milliseconds.

The overall Operator Framework consists of three pieces: an SDK for building, testing and packaging the actual operator, the Operator Lifecycle Manager for deploying the operator to a Kubernetes cluster and managing them, and the Operator Metering tool for metering Kubernetes users for enterprises that need to do chargebacks or that want to charge their customers based on usage.

The metering tool doesn’t quite seem to fit into the overall goal here, but as Szumski told me, it’s something a lot of businesses have been looking for and CoreOS actually argues that this is a first for Kubernetes.

Today’s CoreOS/Red Hat announcement only marks the start of a week that’ll likely see numerous other Kubernetes-related announcements. That’s because the Cloud Native Computing Foundation is its KubeCon developer conference in the next few days and virtually every company in the container ecosystem will attend the event and have some kind of announcements.

Mar
31
2018
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Red Hat looks beyond Linux

The Red Hat Linux distribution is turning 25 years old this week. What started as one of the earliest Linux distributions is now the most successful open-source company, and its success was a catalyst for others to follow its model. Today’s open-source world is very different from those heady days in the mid-1990s when Linux looked to be challenging Microsoft’s dominance on the desktop, but Red Hat is still going strong.

To put all of this into perspective, I sat down with the company’s current CEO (and former Delta Air Lines COO) Jim Whitehurst to talk about the past, present and future of the company, and open-source software in general. Whitehurst took the Red Hat CEO position 10 years ago, so while he wasn’t there in the earliest days, he definitely witnessed the evolution of open source in the enterprise, which is now more widespread than every.

“Ten years ago, open source at the time was really focused on offering viable alternatives to traditional software,” he told me. “We were selling layers of technology to replace existing technology. […] At the time, it was open source showing that we can build open-source tech at lower cost. The value proposition was that it was cheaper.”

At the time, he argues, the market was about replacing Windows with Linux or IBM’s WebSphere with JBoss. And that defined Red Hat’s role in the ecosystem, too, which was less about technological information than about packaging. “For Red Hat, we started off taking these open-source projects and making them usable for traditional enterprises,” said Whitehurst.

Jim Whitehurst, Red Hat president and CEO (photo by Joan Cros/NurPhoto via Getty Images)

About five or six ago, something changed, though. Large corporations, including Google and Facebook, started open sourcing their own projects because they didn’t look at some of the infrastructure technologies they opened up as competitive advantages. Instead, having them out in the open allowed them to profit from the ecosystems that formed around that. “The biggest part is it’s not just Google and Facebook finding religion,” said Whitehurst. “The social tech around open source made it easy to make projects happen. Companies got credit for that.”

He also noted that developers now look at their open-source contributions as part of their resumé. With an increasingly mobile workforce that regularly moves between jobs, companies that want to compete for talent are almost forced to open source at least some of the technologies that don’t give them a competitive advantage.

As the open-source ecosystem evolved, so did Red Hat. As enterprises started to understand the value of open source (and stopped being afraid of it), Red Hat shifted from simply talking to potential customers about savings to how open source can help them drive innovation. “We’ve gone from being commeditizers to being innovators. The tech we are driving is now driving net new innovation,” explained Whitehurst. “We are now not going in to talk about saving money but to help drive innovation inside a company.”

Over the last few years, that included making acquisitions to help drive this innovation. In 2015, Red Hat bought IT automation service Ansible, for example, and last month, the company closed its acquisition of CoreOS, one of the larger independent players in the Kubernetes container ecosystem — all while staying true to its open-source root.

There is only so much innovation you can do around a Linux distribution, though, and as a public company, Red Hat also had to look beyond that core business and build on it to better serve its customers. In part, that’s what drove the company to launch services like OpenShift, for example, a container platform that sits on top of Red Hat Enterprise Linux and — not unlike the original Linux distribution — integrates technologies like Docker and Kubernetes and makes them more easily usable inside an enterprise.

The reason for that? “I believe that containers will be the primary way that applications will be built, deployed and managed,” he told me, and argued that his company, especially after the CoreOS acquisition, is now a leader in both containers and Kubernetes. “When you think about the importance of containers to the future of IT, it’s a clear value for us and for our customers.”

The other major open-source project Red Hat is betting on is OpenStack . That may come as a bit of a surprise, given that popular opinion in the last year or so has shifted against the massive project that wants to give enterprises an open source on-premise alternative to AWS and other cloud providers. “There was a sense among big enterprise tech companies that OpenStack was going to be their savior from Amazon,” Whitehurst said. “But even OpenStack, flawlessly executed, put you where Amazon was five years ago. If you’re Cisco or HP or any of those big OEMs, you’ll say that OpenStack was a disappointment. But from our view as a software company, we are seeing good traction.”

Because OpenStack is especially popular among telcos, Whitehurst believes it will play a major role in the shift to 5G. “When we are talking to telcos, […] we are very confident that OpenStack will be the platform for 5G rollouts.”

With OpenShift and OpenStack, Red Hat believes that it has covered both the future of application development and the infrastructure on which those applications will run. Looking a bit further ahead, though, Whitehurst also noted that the company is starting to look at how it can use artificial intelligence and machine learning to make its own products smarter and more secure, but also at how it can use its technologies to enable edge computing. “Now that large enterprises are also contributing to open source, we have a virtually unlimited amount of material to bring our knowledge to,” he said.

 

Jan
30
2018
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Red Hat acquires CoreOS for $250 million in Kubernetes expansion

 Red Hat, a company best known for its enterprise Linux products, has been making a big play for Kubernetes and containerization in recent years with its OpenShift Kubernetes product. Today the company decided to expand on that by acquiring CoreOS, a container management startup, for $250 million. Read More

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