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APAC enterprises, analysts weigh in on IBM-Red Hat deal

Mega-deal could accelerate adoption of open source software and extend the reach of OpenStack and OpenShift across the region

Some enterprises and industry analysts in Asia-Pacific have welcomed IBM’s jaw-dropping $34bn acquisition of Red Hat, noting that the deal will accelerate the adoption of open source software across the region.

In an interview with Computer Weekly, Eugene Yeo, CIO of regional fibre broadband and mobile service provider MyRepublic, said Red Hat will, in particular, be able to leverage IBM’s resources and footprint in enterprise IT to further solidify its leadership in open source software.

Although IBM has a long history of working in open source, claiming that it is partly responsible for the open source movement’s success, Yeo sees IBM as a follower rather than a leader in open source software. He said the move will elevate IBM’s standing in the open source community, as well as extend the reach of OpenStack and OpenShift in the market.

Agreeing, Vernon Turner, executive analyst at Singapore-based technology advisory firm Ecosystm, said the open source side is “good for everyone in the APAC region”, but noted that the acquisition also showed that IBM’s cloud business was under pressure from Amazon Web Services, Google and Alibaba Cloud.

Rather than a desperate move to catch up with cloud rivals, as some other analysts have claimed, the deal was a “strategic move” by IBM to elevate its position in cloud computing for several reasons, said Turner.

For example, he noted that with more applications being developed as cloud-native, IBM has had to raise its standing among developers following Microsoft’s acquisition of GitHub.

Also, just about every multinational company does not want any cloud lock-in, so IBM needed something that enabled it to be a major hybrid cloud player, said Turner. “This move was necessary as SoftLayer wasn’t necessarily getting it done for IBM,” he added.

Then there is also IBM Watson, which propelled Big Blue into the artificial intelligence (AI) space. Turner said that with Watson starting to gain some maturity, IBM could have felt the need to bolster its cloud offerings to go hand-in-hand with expected Watson demand, given that AI and cloud computing are intrinsically linked technologies.

“In terms of scale, the deal was quite extraordinary in the sheer dollar value,” said Turner. “Ironically, the price IBM paid per Red Hat share at the time of acquisition was at, or near, the stock’s price a few weeks ago, and there could be some Red Hat shareholders who might think the price IBM paid was actually too low.”

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Although IBM and Red Hat executives – including Damien Wong, Red Hat’s vice-president and general manager for ASEAN, South Korea, Hong Kong and Taiwan – have repeatedly stressed that Red Hat will remain independent and that its partnerships with IBM’s cloud rivals will remain, there are reservations over whether IBM will keep to its word if faced with pressure from financial markets to deliver returns from the acquisition.

“We use multiple public cloud services and our infrastructure is run on Red Hat OpenStack and OpenShift,” said MyRepublic’s Yeo. “Only time will tell if IBM will follow through on its promises.”

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