So IBM is buying Red Hat (home of the largest Enterprise Linux distribution) for $34 billion and readers want to know what I think of the deal. Well, if I made a list of acquisitions and things to do to save IBM, buying Red Hat would have been very close to the top of that list. They should have bought Red Hat 10 years ago when the stock market was in the gutter.
Jumping the gun a bit, I have to say the bigger question is really which company’s culture will ultimately dominate? I’m hoping it’s Red Hat.
The deal is a good fit for many reasons explained below. And remember Red Hat is just down the road from IBM’s huge operation in Raleigh, NC.
Will Amazon, Google, and Microsoft now run out and buy SUSE, Ubuntu, Apache, etc? Yes.
Will there be a mad rush to create new Linux distros? No. I think that boat has already sailed and further Linux branding won’t happen, at least not for traditional business reasons.
Oracle has to hate this deal. Oracle’s Linux (the kernel part) is based on Red Hat. This will definitely cramp Oracle’s style. Most cloud providers resell Red Hat software, so now IBM will be getting money on their business. IBM could be in the position Microsoft has been for the last 30 years. For every PC made Microsoft got money.
Microsoft will hate this deal. Amazon will, too.
IBM’s core cloud technology and development stack has been seriously lagging the others, so Red Hat fills a huge void in IBM’s portfolio.
Here’s a question I haven’t heard being asked about this deal: Internally in IBM when one division uses another’s products, they pay for it including a profit margin. Internal sales at other software companies generally aren’t handled this way, which originated with the consent decree of 1956. IBM always took things to an extreme to give the right appearances (and boost earnings). Will they keep doing this or start doing what other companies do? I’d say that depends on Red Hat.
Looking forward, here is the key issue with this deal: Will IBM allow Red Hat to mostly operate independently … or will IBM do to them what they’ve done to so many other acquisitions and suck the life out of otherwise good companies? Will IBM continue to allow Red Hat to do its development work? Will Red Hat’s support team(s) be laid off and the work sent to IBM call centers in India? Will IBM start increasing prices to help its earnings statements? Or will IBM contribute big parts of its software portfolio for Red Hat to make open, improve, promote, etc? IBM really doesn’t know how to manage and promote its good stuff. This could be a big improvement for IBM. If they don’t kill Red Hat first.
These big questions have yet to be answered, of course. Only time will tell. But we’ll shortly begin to see hints. What happens to Red Hat management, for example? There are those who think Red Hat will, in many ways, become the surviving corporate culture here — that is if Red Hat’s Jim Whitehurst gets Ginni Rometty’s IBM CEO job as part of the deal. That’s what I am predicting will happen. Ginni is overdue for retirement, this acquisition will not only qualify her for a huge retirement package, it will do so in a way that won’t be clearly successful or unsuccessful for years to come, so no clawbacks. And yet the market will (eventually) love it, IBM shares will soar, and Ginni will depart looking like a genius.
And maybe Ginni is a genius, but it sure took her long enough to show it.
In the end the C-suite of IBM may be finally admitting to themselves what you and I have known for several years — that their strategic imperatives are not doing as well as they promised. They also know they’ve invested way too much in stock repurchases and way too little in the business. So with this Red Hat deal they’ve basically bet the farm to get themselves back in the game.
With Whitehurst at the top of IBM, the company will not only have an outsider like Gerstner was, it will have its first CEO ever who won’t be coming with a sales background. This is very good, because IBM will have a technical leader finally running the show.
Let’s review:
Ginni Rometty is past the age where IBM likes to retire CEO’s, which is 60.
Jim Whitehurst is 51, the age when IBM likes to hire new CEO’s.
I don’t see Whitehurst moving to Armonk, I do see IBM moving to Raleigh.
I do see Whitehurst as CEO of IBM in six months or less.
The Red Hat team will expand their products into new areas. IBM executives will retire in droves because they can’t compete and will resist learning something new.
IBM’s Distinguished Engineer Program and other paperwork-centric design engineering will soon be gone. Training will go from collecting badges on “mentoring, training, IBM processes” to “do you know how to do something technical?” Really technical like Red Hat, Cisco, Cloud, not paperwork processing or feel-good.
RedHat sales will explode with IBM’s big customers. Now the 1,800 largest IBM customers will-have a solution outside of Microsoft that they can respect. IBM Cloud will finally have a fully functional easy-to-develop Cloud solution with Red Hat where IBM owns the solution and is not just a VAR.
As I said, Microsoft will hate this deal, which is also bad news for Dell’s VMware and EMC divisions.
The deal should move IBM sales from its long obsession with profit or loss on gross revenues to a concentration on net new sales, killing the old Country Club sales force in the process.
Younger IBM management and younger IBMers will change the culture dramatically, making it more competitive. No, make that finally competitive.
Look for a huge shuffle in organization structures, reporting, departments, experience, and the current seven or eight tiers of management to be replaced with three or four.
Lots of old hands at IBM — the bulk of the current organization — will go.
Who knows, IBM might even become a cool place to work again.
That’s if they don’t screw it up.
“Look for a huge shuffle in organization structures, reporting, departments, experience, and the current seven or eight tiers of management to be replaced with three or four. ”
Ain’t never gonna happen.
Redhatters will be offshored immediately.
Bob, you need to share some of what you are smoking. This is the death knell of Red Hat and is going to trigger a wholesale migration to Ubuntu and CentOS. This will be a huge failure for IBM.
It’s a really big “IF” Bob, but I hope you’re right.
I think you have it backwards Bob, this could be the end of Red Hat. I purchase cheap Oracle Linux for our servers. This will be the end of that.
IBM will do as always, screw up the product and support. Red Hat will be part of the always impossible to understand IBM product lineup.
Only good thing for IBM is I’m busy getting Cognos out of my shop, another product IBM destroyed through terrible support, high prices, and zero innovation.
Microsoft is dancing right now, another market they can watch die.
Scott, CentOS is Red Hat Enterprise Linux, rebranded. If RHEL is gutted/ruined/the source is taken offline (it only has to be offered with binaries, which only go to paying customers), then there won’t be a CentOS to migrate to. And Ubuntu’s problem is their terribly short (by enterprise standards) support window of only 5 years. Maybe this represents a chance for SUSE to take off again. I guess that depends on how badly IBM wants to kill Oracle’s Linux business (which is another RHEL rebrand).
NerdTV Season 2, please!
These were almost my same thoughts. It’s a game changer for IBM. Except I don’t see Amazon, Google, and Microsoft running out to buy SUSE, Ubuntu, Apache, etc. Microsoft is married to Windows and Amazon and Google essentially roll their own linux. As for Whitehurst becoming CEO, I think that’s a wait-and-see. IBM’s board may think that too. But if he comes in and kicks ass he could be there soon. Bottom line though is this moves IBM from irrelevancy to a player. It literally saves the company.
IBM will WRECK Red Hat
BOB IS BACK !!!
(like “Winston is back” expression when he came back to Admiralty to take care of Britain).
Thank you !!!
PS: thank you for telling me the news I otherwise should wait to know of from the BBC only. Thank you for the technical journalist/historian/writer Bob Cringely. Best regards.
In “Life After Google” George Gilder seems pretty cock-sure this whole “cloud” thing is going to, if not evaporate entirely, be overcome by decentralization to take advantage of the spare capacity at the edges of the network. Although he emphasizes blockchain as the driving force in this re-decentralization of the internet, and one might rationally argue with this, there are other drivers such as 5G. 5G incorporates information-centric networking. ICN might be seen as The Carriers Strike Back.
Hi Bob,
I hope your are right, what that’s do I hear the sound of FreeBSD in the IT fog.
IBM paid a 64% premium for Red Hat, which is an indicator of a hail Mary play. I believe Bob when he characterizes this as Ginni R’s last hurrah. However, until time shows otherwise, I’m hard pressed to believe that Red Hat’s culture will prevail. I think it’s a year away from the support and related jobs moving overseas as the deal isn’t supposed to close until mid-2019 so management is going to keep a positive spin on this for as long as possible.
Bob,
I’m glad that you see a potential positive n this. I’ve agreed with you over the last 10 years about your negative views of IBM.
The key is whether redhat culture wins over IBM culture. Whitehurst would be great as CEO of IBM. IBM need to have the guts to end of life all their old power ibm cloud,,bluemix, AIX, websphere stack crap and switch to the Redhat stack. Sell all hosting data centres to equinix and just provide software and services,
Don’t know if it will happen, or the chances but it is their only hope,
Great analysis, please create a new Triumph of the nerds series V.II, nobody create a documentary like that, just great!, by the way your interview with Paul Allen was really good.
If some people at IBM are smart enough to buy Red Hat; then, they will likely to be smart enough to bring in outside specialists to deal with the restructuring of the two companies into an effective functional organization. Naturally who to keep and who to let go will be one of the first steps. The second necessary step will be to envision and develop a new physical environment (likely copy Apple’s!) All of the above, needs to happen sooner than later; if for no other reason to outrun potential competitors.
The first sign of screw up will be an attempt to “bluewash” Red Hat. Replace Red Hats HR, customer support and sales support with the current IBM systems, processes and people. IBM needs to eliminate all duplication and redundancies that result from the deal in order to realize the savings promised from the acquisition.
It’s too little, too expensive and too late. IBM has essentially acquired a suite of commodity products at a very expensive price and is promising, as IBM does from all acquisitions, to greatly expand the sales and revenue from the resulting acquisition by leveraging IBMs much larger sales force.
On the expenses side, IBM will, quite obviously, have to eventually retire duplicate products on either the Red Hat side or on the IBM side. And there is a lot of duplication. Customers on both sides will be frozen in uncertainty as to decide where to continue investing due to the uncertainty as to which products will be retired and which will go forward in the IBM suite. Past promises that duplicate products will be merged into a common future have largely just been marketing speak and have translated into customers being force to migrate off a discontinued product. Once customers are migrating off discontinued products, they will obviously examine both IBM and the competition, leading to further customer loss for IBM.
It truly is a Hail Mary move from an about to retire CEO. Putting a technologist in charge of a sales and marketing dominated organization would truly shake things up at IBM. Changing such a huge organization, which culturally and organizationally has always been sales and marketing dominated to technologically dominated would be an incredibly disruptive gamble. One wonders if IBMs board of directors would be willing to take such a gamble.
I think you need to curb the optimism Robert. As a former IBM employee, I have seen this scenario played out multiple times. This is indeed one of the bolder purchases IBM has made. It is equal to over a third of its annual revenue. But the entrenched bureaucracy (i.e. Armonk) will guarantee it fails. They will initially milk it for all of its current revenue, cannibalize its assets and off shore the work, turning into a “maintenance only” operation that requires no further investment. Once it becomes an empty shell, they will add it to re already $37 billion in good will. By paying $34 billion, a 63% markup, they have already added enormously to the good will. The only hope is that it is run as a self-standing subsidiary with minimal interference from the deadwood in Armonk. The best case scenario would be what you have proposed. I don’t know how it could happen though. If the current CEO and employees are still with Red Hat/IBM after 2 years there will be hope. If not, this is just another good company IBM has turned into a corpse. Think Lotus as a prime example of what could go wrong.
IBM will screw this up. Red Hat Linux will quickly become Pink Slip Linux as the entire operation is sent to India and anyone with talent leaves the company.
You physically cannot replace the current 7-8 levels of management with 3-4 levels due to the numbers involved. One manager cannot effectively manage more than 10-20 people.
Combined, IBM (380,000 employees) and Red Hat (12,600 employees) will have about 400,000 employees.
Even with an optimal 13 employees to every single manager you still need a minimum of five levels to organize and manage those numbers. In parties it usually is more like ten per manager on average leading to at least six if not seven levels of management.
Forcing 3-4 levels of management will lead to an average of 24 employees or more per manager resulting in chaos and lack of any management.
[…] Source: LXer […]
If people will actually read the press release. Red Hat will be an independent business unit. Nothing is going to change after the acquisition completes. The idea is very similar to how Microsoft has handled the GitHub and LinkedIn acquisition. The management and company cultures appear to have remained in tact. If IBM will truly keep to that this is going to work out.
“wholesale migration to Ubuntu and CentOS”?
Probably not.
CentOS salaries are paid by RedHat, so if anyone gets pink slips, the no-revenue teams will be first. CentOS may die if it can’t go back to its roots of cloning and handing off tickets for Blue Hat. And even that depends on BHAT not finding a way to prevent that (it had enough lawyers before).
Ubuntu represents a product that may be used in the Enterprise, but isn’t an Enterprise product. The distinction will push people more to SuSE, Photon (or Alpine) than to Ubuntu. Photon has accidentally the saturation it needs to emerge from its own shell and offer an actual platform; and its separate, minimal base image and compatibility with EL gives it a leg up that CentOS and its derivative Oracle don’t have.
We’re looking at all of those, except for Oracle.
@Chris: This idea: “…source is taken offline (it only has to be offered with binaries, which only go to paying customers” doesn’t sound right to me. I think the GPL says “If you distribute”, not “If you sell”.
RedHat will do OK, the NSA has their back. But they’ll eventually fall behind. Lennart Poettering is 38, his “best years” are behind him, I hope. If Suse & Ubuntu get bought out, same thing. It’s too easy (from the corporate point of view) for nerds to fork around them, hence Devuan. There are some nice Slackware derivs out there too. No SystemD!
I hear the echo of two garbage trucks crashing. Remember the merger of HP and Compaq ? Gave new meaning to the word “synergy”. Meaning was a suicide pact.
I am a former IBM customer, and a current RedHat (fedora) user. I wish you were right, but my cynicism prevents me from believing.
There’s something missing from this column, especially this many posts in. I kind of like it.
What about the Fedora Project? I currently use Fedora 28/29; I worry that IBM could either make it disappear, or make sure no one wants to use it….
So IBM will do to Redhat what your kickstarter did to the funders?
I couldn’t care less for Cringelly’s analysis. It’s nothing more than a wild handwave run around all the bullet points to make him sound relevant and cover his ass and give him something to brag about if the dice roll in his favour.
The only thing I care about is paying escort clients. Until I begin experiencing a different market flow for the quality and earnings off escort clients it’s not happening. Managers and accountants in the UK killed discretionary spending stone dead. There are a lot of market pressures and it’s taking a long time for the market to recover. I don’t read anything in Cringely’s analysis which address this. His analysis goes out of the way to miss the point. The space industry has more of a buzz about it than the IBM/RedHat deal. VCs have also switched from funding sure things to funding an ecosystem. This is the complete opposite strategy of what Cringely is applauding.
As an escort clients visit me for one of two reasons. A.) To celebrate their status. B.) Because they feel like shit and need a boost. Money is a means to an end. Clients have money? They fuck me. The sex they have with me is also a way to enhance and confirm their economic potential which is a win for the business as clients often perform and continue to perform better at work.
I will have to wait and see whether there is a variation in admin based or engineering based escort clients. I personally prefer engineers as they are less prone to be jerks. Ex military are very good clients too which was unexpected. They are usually very fit and have no problem getting it up not to mention having less bullshit. Ex journalists take note, mentioning no names…
@Markus McLaughlin
Do not worry about Fedora. Worst case scenario it will become another community project same as Mageia rose from the ashes of Mandriva.
@Markus McLaughlin
Red Hat will keep Fedora alive because Fedora is consumer product and RHEL is enterprise product and they use Fedora to test new features some of which will be incorporated later into RHEL.
If they by some chance decide to kill it developers can use same source code to start new distro.
IBM is going to axe all the red hat staff and replace then with Indians offshore.
They might replace aix with red hat as the primary offering
They will destroy both red hat and open shift with their horrifyingly unqualified staff
They will likely raise support prices and tie then to them to IBM offshore staff levels and costing structures
They may also eventually use it as a way to put system z hardware as mandatory to use redhat.
RIP red hat, was fun while it lasted.
This is nothing like to and comcast. It is similar to emc and pivotal. Dell bought emc and then spun pivotal.back out. Red hat could be similar. since both pivotal and red hat are growing quickly they could become the largest divisions. Depends how IBM divides up the other parts of the company.
Cringely is probably right.about the layoffs. IBM still.has some older baby boomers including the ceo. Once she goes the rest will see their time is.up. But half their American employees are probably foreign. Red hat doesn’t have this. Many predict the Americans will.lose their jobs but IBM did place.a bet on America. They CEO did meet with trump.
As former IBM employee I think they will kill redhat. Everyone in redhat becomes manager and they stop working. They hire freshers and sooner or later they outsource work to companies like Persistent or HCL etc..
[…] "Jumping the gun a bit, I have to say the bigger question is really which company’s culture will ultimately dominate? I’m hoping it’s Red Hat." https://www.cringely.com/2018/10/29/red-hat-takes-over-ibm/ […]
[…] will hate this deal. Amazon will, too." https://www.cringely.com/2018/10/29/red-hat-takes-over-ibm/ second good analysis I see of #redhat and #ibm The first one was from @sjvn This one actually […]
I fear that, unless IBM will let RedHat live its own usual life, the thing is doomed to fail.
It’s not my forecast. It’s the past history repeating.
@Roland: I didn’t mean to imply that you only have to give the source to people you sell the software to. What I mean is that you are only required to give the source to people you provide with binaries. And Red Hat only provides binaries to people who are paying subscribers under contract.
Ipso facto, if they decide to take the source code offline (at IBM), communities like CentOS and Scientific Linux will no longer be able to get access to the source code without someone being in breach of contract (and thus a target for IBM’s legal department).
@Markus McLaughlin: Fedora is upstream of RHEL. Killing Fedora would kill RHEL. It’s up in the air what happens to CentOS, though. RHEL is CentOS’s upstream. IBM could choose to dry up that river.
IBMers outnumber RedHatters 30:1, in a StarTrek scenario that’s a fighting chance.
I wish them best of luck!
“…run out and buy SUSE, Ubuntu, Apache, etc? ”
Apache does not really belong in the sentence
I’m surprised by your comment about IBM Distinguished Engineers. I know and work with several, and they are all very good, highly technical people who drive real, useful projects.
@Brandon
” Red Hat will be an independent business unit.”
So was Lotus. BuhBye, It was great knowing ya.
Rometty is not a genius I’m afraid, and this is highly unlikely to be successful. If Red Hat does indeed drive IBM then there might be some hope on the horizon. If not, IBM is on the same trajectory towards death.
What they have bought is a company that builds a Linux distribution. No more, no less. In order to compete with AWS and alike they need to build cloud infrastructure and get themselves some solid technical direction. From the CEO on down they have consistently proven that they cannot do that.
For those who thinks IBM will axe all Red Hat employees:
You have misunderstood what Red Hat. It’s a company that does not own anything, it’s all open source. It only has it’s employees and nothing more. Pay $34 billion for people and then fire them? Makes no sense.
Since when did anything IBM did make sense when it came to their acquisitions?
Red Hat’s logo will change.
Don’t get me wrong, it will still be a Red Hat.
It will change from a FEDORA to a DERBY.
IBM retro-marketing. (If you’re still lost, think Charlie Chaplin.)
Managers tend not to change their behaviour patterns after decades. I worked for a company of 100 that was acquired by a company of 10000. Our dev processes were far better than their’s, we shipped product with a very low defect rate, and had good customer support. All that changed and 80% were laid off within a year.
This Blue-washing will take time.But IBM will crush the life out of it and make you wish someone killed it. IBM simply needs to go away.
[…] Red Hat takes over IBM … at least that’s what Bob Cringely is predicting … including Jim Whitehurst becoming IBM’s CEO within 6 months. […]
Insightful, unique breakdown and predictions. Thanks for writing this.
Brilliantly thought-through, brilliantly explained. Thanks so much!!
CE
BTW Ginny Rometti grew up in a poor single-famille household eldest of six kids, even though she was poor she was president of Kappa Kappa Gamma. Part of her grad school (engineering) was paid for via a General Motors fellowship. she has brass balls, nerves of steel, and willpower. She’s also not stupid. Don’t count her out.
[…] Red Hat takes over IBM […]
Hmmm… Maybe IBM will buy Mineserver… Couldn’t do any worse with it than Crookely.
.
On the other hand, Crookely did promise that every backer would get their Mineserver by the end of the year (see https://www.cringely.com/2018/05/21/cloud-computing-may-finally-end-the-productivity-paradox/ — comment dated May 21, 2018) so maybe he’s getting a cut of that $34 billion?
Btw, we just passed three (3) years since the project (“If we had cases we could start shipping tomorrow.”) was funded and are coming up on two (2) years since the last update on Kickstarter.
.
http://www.sinasohn.net/Mineserver/
[…] via I, Cringely Red Hat takes over IBM – I, Cringely […]
I don’t care if you’re right or wrong on this. This was a very good article. Thank you. Hearkens back to the infoweek era.
P.S., I think it is going to be SPSS–IBM bought Red hat simple because the name implied was blood to suck out of it.
It’s a wonder IBM is open during sunlight.
Talk about wishful thinking.
This is like that Tesla post on steroids.
I read somewhere it was supossed to remain two separate companies per the agreement to sell/buy. Be interesting to see how long that lasts but once IBM takes control, blue hat is toast.
IBM paid a 64% premium for Red Hat. That is about the same amount that IBM is still over-valued by.
We might see the rise of Microsoft Linux. And what’s going to happen to Amazon Linux which is also based on Centos/Redhat. I think Microsoft and maybe Suse could be the real winners. If I were Google I would buy Ubuntu, quick.
The space on the Earth is limited, the market too because of it. Only way to prevail to these greed monsters is to eat each other. They are not smart enough to find another way, or too greedy to see it.
WSO2 would be a similar gem in anybody’s crown.
Think Lotus, Tivoli and NetCool… Get your resumes warmed up Red Hatters!
WSO2……….. That made me laugh.
Those poor Red Hatter having to migrate from GMAIL to Lotus Notes is going to be comedy especially with their DL’s & communities.
Hopefully the T&E policy will suck less at RHT now.
Jim Whitehurst can finally go buy an island and get that creepy smile off his face with a Phil Mickelson style face lift.
For the love of god, people Fedora is upstream & CentOS is downstream / if you have never had to deal with subscription-manager then you just do not understand.
At the end of the day, is the server licensed for VMW, RHT, MSFT?
Anyone from ManageIQ or that wrote a book on CloudForms should get their resume ready because RHT has a lot of competition (from Amazon) in the single pane of glass agent/agentless space.
Bet Randy Bias is happy he left!
I love being able to constantly recycle this old Lotus joke…
Q: What do you get when you combine Red Hat and IBM?
A: IBM.
Dear Bob, Like Anibal above I am very happy that you are back and feeling better. I’ve missed you, many of us have missed you … as to whether people agree or disagree with you…. you always make us THINK. I don’t care for the personal snarky comments .. but that is just me. I pray Ginni goes now.. she is 61 which is young… but ironically she is older as is Diane Gherson and Michelle Browdy and and John Kelley and Ray Day and Jim Kavanaugh and on and on and on and on and on They are older than the IBMers they are targeting for layoffs at 40 or God Forbid 50 kicked to the curb with nothing some after decades no pension no medical no dental no 401 K match while Ginni and the IBM Executive Team get obscene compensation huge salary obscene bonuses stock options golden parachutes lifetime medical and dental for driving this great company IBM into the grave ……The only one that I can see that is not older than the IBMers that are being targeted is Michelle Pelosi she has been here 5 minutes and is 12 . The Board of Directors are also in their 60s I believe ….Well now I digress………is damn good to have you back Bob, and I do hope the Red Hat culture prevails and Jim Whitehurst becomes CEO but that is just me, Respectfully Deb Kelly WATCHING IBM
I was working at IBM when it consumed a small software company. The Blue Washing gutted the product and removed many of it’s features. One of the customers commented that the only thing worse than being acquired by IBM was being acquired by Computer Associates.
Buying IBM with IBM’s own money! Genius!
I worked with IBM as vendor and Redhat as an employee. So I am qualified to speak on work culture of both the company. There is huge difference. I have seen many incompetent people in IBM. They are just not suitable for the job and still are in position to make decisions. That is the main reason why IBM is going down.
Redhat is completely different. It’s work culture thrives on openness and collaboration. There is sense of doing something good for community and customers.
I hope what is written here comes true with Jim becoming CEO for IBM and change the entire culture of IBM. Because that’s the only way Redhat and IBM can survive. However that looks like a huge optimism. How can 12000 change work habits of 380000.
If Jim doesn’t become CEO of IBM, the only way Redhat can remain what it is today is to function independently. Again this is optimism. How come IBM will not interfere in company they paid $34 billions for.
“With Whitehurst at the top of IBM, …, IBM will have a technical leader finally running the show”
The article illustrates a lack of awareness of Red Hat’s internal culture and how things are run, the statement above is an obvious example. Jim W is not the technical leader running Red Hat, he’s more of the external figurehead. Internally it’s a very open source centric culture over which Jim has (by design) minimal oversight.
What’s your favorite color?
Red! No blue! AAAAAAAAAGGHHHHH!!
You seem to seriously not understand the IBM business model or its position in the world of IT. Yes, this is a big deal, no it is by no means IBM’s last option to survive. It is much more interesting for other similar ubiquitous tech companies. No one is “buying” Apache anytime soon, since there’s nothing to buy in an open source project, or anyone to buy it from since it is already GPL 3 compatible.
https://www.linkedin.com/pulse/ibm-red-hat-dell-corporate-wars-john-mcdowell/
As a former IBM employee, only two things make this work. Retire Ginny ASAP and walk all executive managers at IBM off a cliff. Unless you have worked at IBM US as a Senior level developer, the extreme level of ineptitude in IBM management is staggering.
The clown show that is IBM management is pervasive within the company and a change only at the top won’t affect a thing. I watched company after company getting purchased, the “new” employees brought in and shown “The IBM way of doing things” and then all the talent leave in droves, voluntarily or by layoffs.
Schedules, content, technical decisions made by whim, work moved overseas then, brought back, then sent back overseas, then brought back yet again.
Developers informed that their work was being sent offshore, given more work to complete while being told they are still responsible for the offshore work getting completed on time.
My 4th level manager was originally from India and he made sure his “boys” in IBM India got plenty of work, it didn’t matter if they were incompetent and wrote garbage code or were always blowing the schedule, the IBM US employees were expected to pick up the slack. Once enough US employees were fired, no one existed to pick up the slack and you see where IBM is now.
When I left after working there for 30 years, it was one of the happiest days of my life. You won’t talk to a single former IBM employee that misses working there, not one. Morale for people still working at IBM is in the toilet, no one there believes they have any strategy or direction.
RedHat is a dead company walking now. If I worked there I’d be updating my resume.
The way I see it, IBM is paying the 34 billion to catch up for all of the investment they should have been doing for the last 7 years. I recall this week about quotes from former IBM CEO Palmisano back in 2010 where he said the cloud can’t do what IBM can do and therefore did not invest in the cloud. IBM continued with reduced R&D and cost-cutting until 2013 when they acquired Softlayer and realized they needed to get more serious about the clould. However, as we know over the last 5 years, IBM has continued its cost-cutting and reduced R&D investments. So for the last 8 years, IBM has not been investing enough R&D spending to compete in the cloud. So 34 billion divided by 8 years is about 4 billion dollars per year that they should have been spending extra for R&D. In reality, given that Red Hat market cap was 20 billion at the time of the acquisition announcement, it is 20 billion divided by 8 years equals about 3 billion per year they should have spent. This mistake is costing them an extra 14 billion dollars to play catch-up.
Like many of you, I have a long time reader (though I rarely comment). I just wanted to point out that I find it strange how Bob has 20+ poorly reviewed articles (based on reading collective comments) and he posts ONE article you like and people claim “Bob is BACK!!”
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Like that’s great if he is, I would love this, but even a broken clock is right twice a day and one good post does not a pattern make. Maybe wait a bit before stopping the presses and shouting from the rooftops that the lord is risen to confirm whether he truly is. I, for one, am not convinced [yet], but I would love to be wrong…
@Jeremy – not sure if I would agree that Mark is as accurate as a broken clock, He success rate these days is more like a “blind squirrel hunting acorns.”
Whitehurst was previously a BCG quant and Chief Operating Officer for Delta Airlines. He wasn’t brought to RedHat to grow, or to innovate. He was brought to optimize, and to streamline, and to manage cost controls. And maybe, just maybe, TO SHOP THE COMPANY AROUND FOR EVENTUAL ACQUISITION. This doesn’t mean the guy can’t “lead,” but calling him “a technical leader” is just plain misinformed.
[…] Cringely, Robert X. 2018. “Red Hat Takes over IBM.” I, Cringely. October 29, 2018. https://www.cringely.com/2018/10/29/red-hat-takes-over-ibm/. […]
Move all the work to India, they screw it up, move it back to US, need to cut expenses ,move to Philipines, they screw it up ,m ove back to US, it’s the IBM circle jerk.
IBM is too proud, it will not happen as you have described it, they will fail.
But this bit is so true 🙂 (I am a former IBMer)
“IBM’s Distinguished Engineer Program and other paperwork-centric design engineering will soon be gone. Training will go from collecting badges on “mentoring, training, IBM processes” to “do you know how to do something technical?” Really technical like Red Hat, Cisco, Cloud, not paperwork processing or feel-good.”
Imagine if IBM had invested that same amount in R and D, its people and their ideas. They would have gotten something money can’t buy. Innovation. IBM invented the cell phone. Does anybody have one in their pocket today?
Re: The Cell Phone: Bell Labs invented it in 1967.
“In December 1947, Douglas H. Ring and W. Rae Young, Bell Labs engineers, proposed hexagonal cells for mobile phones in vehicles. At this stage, the technology to implement these ideas did not exist, nor had the frequencies been allocated. Two decades would pass before Richard H. Frenkiel, Joel S. Engel and Philip T. Porter of Bell Labs expanded the early proposals into a much more detailed system plan. It was Porter who first proposed that the cell towers use the now-familiar directional antennas to reduce interference and increase channel reuse. Porter also invented the dial-then-send method used by all cell phones to reduce wasted channel time.”
https://en.wikipedia.org/wiki/History_of_mobile_phones#The_cellular_concept
@Nemo, @PLH – I’ve been through three acquisitions. Once bought and twice sold. My experiences and observations matches yours. The best that could be said in all cases is the acquiring company bought the customer lists.
Seems you missed the point, as often happens in this forum. A more thorough perusal of Wikipedia would have revealed this
https://en.wikipedia.org/wiki/IBM_Simon
To restate the real point – if IBM had invested in R and D, its people and their ideas, instead of putting the money into share buybacks or acquisitions, the ROI would have been something money can’t buy. Innovation.
This story has no buzz.
@Ghost of TJW: I’m still not getting your point. How many people bought the IBM Simon? Yes, it was an innovative product, but it wasn’t a win for IBM. If anything, it was a win for other companies that took the idea and ran with it. The same was the case for the original IBM PC: It was an important product in its time, but it was almost immediately cloned and imitated by “PC-compatible” manufacturers. The majority of computers used today are STILL based on the IBM PC standard, and yet IBM sees zero return on this, because those computers are cloned to the point that IBM got out of the market, seeing it as unprofitable, and sold their PC division to Lenovo. In both cases, IBM sunk a ton of money into research and development, only to end up priming the market for imitators who made the big profit. “Innovation” might be good for humanity at large, but it’s often not very profitable for the company doing the innovating. How many times does one company need to make the same mistake before they learn from their past mistakes?
“Younger IBM management and younger IBMers will change the culture dramatically, making it more competitive. No, make that finally competitive.”
Age discrimination much?
Though you say you don’t get the point. you are actually amplifying and extending it. What was also happening in the early 90s? Hint: they called it the near death experience. TFL was brought in, preaching the gospel of financial engineering, and said we don’t need no stinking vision. At the risk of repeating what has been abundantly documented elsewhere, IBM bet the farm on the 360. When what were then called microcomputers came on the scene, the suits thought they’d sell maybe a quarter million.PCs, which by the way were put very far away from Armonk in Boca. And the OS was literally farmed out to a guy no one ever heard of named Gates, who had stolen the kernel from another guy(or so they say). In what Jobs would probably have seen as the biggest of last laughs, several years ago, IBM was issuing Macs to the rank and file. Bringing it back into this context, Wikipedia defines cloud computing as follows: “Cloud computing is shared pools of configurable computer system resources and higher-level services that can be rapidly provisioned with minimal management effort, often over the Internet. Cloud computing relies on sharing of resources to achieve coherence and economies of scale, similar to a public utility”. Not exactly a new idea is it? So here’s a what if – what if, instead of share buybacks and acquisitions, IBM had invested back then in putting the presentation layer on a PC, networked to MVS/VM on the back end? That was then, this is now – What if, instead of financial engineering, the focus was on actual engineering? What if, instead of playing with a toy version in a lab near Ossining, IBM bet the farm on quantum computing?
My next booked client is a youngish man who likes mature. Sometimes age works in your favour! He was so excited when booking and sayign every which wayhe was gaggign for it. I like taking time for a quality and fulfilling experience. Other times you just have to go with the flow. Young men have so much undirected energy and often want the whole chocolate box in one go. A little reassurance and a deft touch to let them know they are getting it without overstimulating can often work wonders. It must be those years of potty training and being programmed to wash behind their ears. As for innovation I’m sure something will spring to mind. It usually does and is quite hard to miss. Dig for victory!
“The same was the case for the original IBM PC:,,,IBM sunk a ton of money into research and development, only to end up priming the market for imitators who made the big profit.”
@Adam Luoranen, It’s quite a stretch to liken the PC to the Simon because it’s undeniable that IBM was making huge profits on the former before it had to start sharing the market with the clone manufacturers and it didn’t sell its PC division to Lenovo until 2005, a mere 24 years after the PC was introduced.
@M Ridgley I’m an IBM rehire. I loved my time at IBM, left for a time to pursue other technologies and came back because I felt at home here. Please do not speak for me, or any of my colleagues. Thx
@Ghost of TJW: Now you’re asking some pretty broad what-if questions that are impossible to answer. Sure, if IBM had invested in those things, it’s possible they would have hit a breakthrough and been on the cutting edge of the next new wave of computing technologies, but it’s just as possible that the money would have disappeared into non-productive research. That’s the nature of research: Sometimes you come up with something great, but sometimes you just waste a lot of time and money without getting results. There is a prevalent assumption in our risk-glorifying culture that more money invested in R&D automatically equates to bigger breakthroughs. It ain’t necessarily so: Often, R&D money just gets wasted.
@trashtalk: There are millions of people around the world trying to brainstorm “the next big thing”. Good, marketable ideas which someone else hasn’t already come up with are hard to find.
@Jason Kankiewicz: Okay, I will admit that you can’t really compare the Simon with the PC in terms of sales… The Simon was an abysmal failure while the PC actually made IBM some money for a while, but the real winners of the IBM PC were not IBM themselves, but the clone manufacturers like Compaq, and later other OEMs like Dell, Gateway 2000, etc. My point is that R&D presents a sort of free-rider problem: It often happens that one company ponies up the big money necessary to research or develop something big, and then when the breakthrough comes, a lot of me-too companies show up and try to capitalize on the other company’s work. Of course, being first to market has its advantages, but history is littered with instances where some company sunk an enormous amount of time and resources into a research project that they didn’t know how to turn into a marketable product, resulting in other people profiting off their research. The biggest example might be the Xerox Alto, but there are plenty of others. I’m just saying that after spending a lot of money looking into things which didn’t yield a lot of profit, IBM might be interested in actually making some money for a while.
When is Nerd 3.0 coming to PBS!
Nerd 3.0? You mean Triumph of the Nerds 3? I’m still waiting for NerdTV 2.0. Actually, the only reason I’ve been following Cringely’s blog for the past 12 years is because I still want to know who the “super secret guest” for season 2 of NerdTV is. I have a feeling the chances are excellent that we will never find out.
Thank god I’m not the only one 😛 All you have to do is blog the name, Bob! Please? :\
@Adam Luoranen – It’s obvious that the “super secret guest” will be whoever is responsible for shipping Mineservers and Duke Nukem Forever (at 15 years late, it is still ahead of anything that Mark can accomplish).
Red Hat’s sales figures for 2017: https://www.redhat.com/en/about/press-releases/red-hat-reports-fourth-quarter-and-fiscal-year-2018-results
“Revenue is expected to be approximately $3.425 billion to $3.460 billion in USD.”
I obviously have no understanding of high finance at all, but even assuming Red Hat’s sales remained steady, that’s ten years before IBM could break even. Bearing in mind they could run CentOS for free… WTF?
I’ve occasionally wondered who was buying Red Hat licenses and support contracts. I’ve been in and out of IT since the early ’90s, and I’ve set businesses up with Linux servers myself… but the only Red Hat installation I ever saw was before the Fedora fork.
I’m sure the answer is going to be “enterprise customers bigger than you ever got a chance to invoice”, but I’d still be interested in *who*.
Bob you are like the Musk of IT. Your daring and authoritative narrative of the future excites people even those who disagree with you.
On RH I think you are wrong; in five years it will look more like a suicide merger. This merger will certainly accelerate RH but at the expense of the larger IBM. IBM middleware will not be put into a dive from a moderate decline. IBM workload now on either IBM managed prem or IBM cloud will be containerized and ported off IBM to the other leading cloud providers. Even the workload IBM maintains will be reduced to low margin as competitors accelerate past them ever faster.
And the bluewashing of RH is more like being submerged in Blue Honey that slows you down to a crawl and causes a run for the doors of those in the know leaving a survival crew of conformists to continue to swim in the blue gooze.like being in the abysmal plain of the deep ocean as 12k headcount are pecked to death by the other 370k in measurements alone as each silo wants to know more.
This all is clearly a catch up play for all the R&D not spent on product but wasted in financial engineering and thinking all you do is buy innovation but you are really buying people of a winner culture who will leave in IBM loser’s culture.
No this is IBM’s last attempt to pull itself out of the consolidation that cloud causes for enterprise computing but it will fail as the contraction continues and they turn their backs on the consumer sector with billions of people walking around with mainframes in their pockets and wrists.
$190 for a company that closed at $116 the day before? I realize you pay a premium when buying a company, but $150 would be a premium. There needs to be an investigation into how much Red Hat stock Ginni and other top execs, along with their friends and families, purchased in the past few months.
What makes you think that the Powers that Be at IBM will sacrifice themselves for this Brave New Order? Do you picture them falling on their swords by the thousands for the betterment of mankind and the company? No WAY! They will destroy anyone and anything that buys them one more year in their ivory tower because they know they can’t survive out in the marketplace.
IBM will flood Red Hat with Blue Hats who will “optimize” their operations and drive off the existing middle management. Those roles will be filled by the same automatons that have been wrecking IBM for the last two decades.
Lather. Rinse. Repeat until they money stops.
We’ve now passed the 2 year mark since the last update on the Mineserver Kickstarter page.
Mind you, Crookely did say, back in May, that “every supporter will get their Mineserver before the end of this year.” So I’m sure I’ll be getting a package in the mail any day now.
Third from the bottom in a race with 19 candidates. Pretty pathetic showing Roger:
https://ballotpedia.org/Roger_Sinasohn
Oh well, now you’ll have more time to on your hands to play with children’s toys. . .
@sj1 Everyone’s life is made up of failures, what’s your point other than to try to belittle him like a bully? We all have missteps in life, so calling out someone’s just to attack them makes you look like an asshole, not him.
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You want to know the difference between Roger and Bob? Roger admits his failures and tries to learn from them. Bob tries to act like they never happened while his flock attack the backers because we are a “nuisance” or worse. Bob continues to make empty promises.
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No one cares that we haven’t received a product, the project failed, *WE* get that because we followed Bob here (against everyone’s wishes). Meanwhile Bob has not had the common decency to take 5 minutes out of 2 years of his life to communicate any of this to the 380+ other people who still comment on the KickStarter site wondering whether the project is dead/where their money went.
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No, instead Bob continues to make empty promises and deadlines that he never meets while you all support him as though he can do no wrong. Sorry, friend, but in this fight, you’re supporting injustice. GL with that, because we’re not going anywhere until Bob tells us the project is dead. If you have a problem with that, take it up with your leader.
SJ1, did you happen to check out Roger’s website? He acknowledged he lost and congratulated the other candidates on a job well done. https://elect.sinasohn.com/congratulations-we-all-won/
I don’t care for all of the kickstarter drama and come here to read Bob’s articles/the comments, but I would like to think Bob wouldn’t support bashing others who try new things and fail. In fact I’m pretty sure this is the premise behind what his kids and him were trying to do with their kickstarter campaign, which most are calling a failure.
I know two others already called out SJ1, but I think they have an important message and I don’t want them to feel/seem like the minority (not that me joining in makes it a majority opinion). I was going to politely nod from my desk and go on my merry way, but having watched this feud for what feels like FOREVER at this point, I would agree that Roger has been pretty even keeled about most of this and, while he has retaliated at times, usually it is only after being provoked which one could argue is self-defense.
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Point being, SJ1, your comment was completely uncalled for. As previously said, if you’ve never has a misstep in your life, consider yourself an island of one and bask in your greatness, because failure truly is part of life. What does NOT need to be part of life is trying to tear others down when they DO fail. You are 100% being a bully in this instance and I have trouble standing idly by while that sort of stuff takes place. The world needs more of us to stand up for those who are attacked and your comment was out of place and unnecessary.
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I will agree that Roger has attacked Bob as well, and I don’t condone that either, but I will also say that Bob has seemingly shown little care/interest in putting this feud to rest. We know he reads the comments, he’s commented and shown as much. He knows just as well as all of us that he could have ended this war long ago (and still can) if he just post(ed/s) on the Kickstarter site. We’re all fooling ourselves if we think Bob doesn’t love every minute of this. His comments are alive with debate and he is the one profiting with more foot traffic and engagement.
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So while I enjoy reading Bob’s articles and the comments, I do not personally show any adoration towards the man; The way he’s handling this at OUR expense is a callous move. His inaction with a hint at a resolution every few months just to stir the pot is not how any sane person would respond to this situation, especially a journalist. I’m not really surprised that similarly-minded people come to support him, but we should be standing together to build one another up rather than tearing each other down.
Ah, SJ1…
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Yes, third from the bottom in a race with some very well-funded, high-profile candidates, where I was also (iirc) third from the bottom in spending [1]. You see, I have a full-time job, three very active kids, and other responsibilities so I had neither the time nor the money, it turns out, to mount a winning campaign. I did pretty well for what I was able to do and I have no regrets and feel no shame about this election.
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But none of that is at all relevant, making your comment nothing more than an ad hominem [2] attack. Do you have a valid point to make?
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Bob has spent two years in complete radio silence. Imagine if you’re at home and your spouse said they were going to run out to the car for a minute. If they didn’t return in a reasonable amount of time, would you continue to sit around wondering where they were or would you go outside to see where they went and what happened?
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Bob hasn’t posted anything on his Kickstarter, so his backers, rather than sitting around doing nothing, came over here to see what’s up. As has been said, time and time again, all Bob has to do is post an update (or two?) on his Kickstarter project and all the Mineserver stuff would disappear from the comments here.
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But Bob refuses to do that. He occasionally brings it up, here, in a comment or as an afterthought in a post, but he never visits Kickstarter. Why do you think that is? As Stephen mentioned, it’s because it generates comments and traffic here.
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[1] https://public.netfile.com/pub2/?aid=sfo
[2] https://yourlogicalfallacyis.com/ad-hominem
One more note, SJ1 — There were actually 18 candidates; one withdrew from the race but did so after the deadline to have her name removed from the ballot. Also, those vote counts are rather out-of-date, although the percentages and ranking will probably match the final numbers pretty closely. If you’re really interested in this election (because it really was an odd one in many ways), you might check out the Wikipedia page instead: https://en.wikipedia.org/wiki/San_Francisco_Board_of_Education#November_6,_2018_election
[…] Red Hat 被併購後會「反噬」IBM，取代 IBM 文化。許多人傳言 Red Hat 執行長將會接替現任 IBM […]
Perhaps IBM and Red Hat can combine their talents and expertise to do the impossible–make a Minecraft server.
Hy there, Good news ! a goodoffer
Are you in?
https://drive.google.com/file/d/10hnLNptmuLUmW9MHKq0w-1c-5svaYNUs/preview
I finally had to lookup what MIneCraft is. All this noise about some faggoty game? Are you frickin kidding me? In my day we use to kick the ass of you fagotty dungeon and dragons types…cripes what a bunch of jerk-offs. Cripes I thought this was over something materially important. Unbelievable: a video game.
Note, mineserver.com is no longer working. A few months ago, it was still taking orders.
Maybe Redhat will to IBM what McDonald Douglas did to Boeing and reshape it’s corporate culture.
@Gerry. It’s not about a game, it’s about Bob’s credibility.
@Everyone – R.I.P. Bill Godbout, 79
http://vcfed.org/wp/2018/11/13/r-i-p-bill-godbout-79/
A true pioneer and a wonderful person. Tragic victim of the NoCal fire.
Hy there, What we have here is , an interestingoffering
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@Gerry – You are an ignorant human being.
IBM does massive furloughs with their contractor employees. When they have to furlough someone earring $22 an hour doing deskside support to make their “numbers” , they are in deep shit.
Feel sorry for the Red Hat employees.
It’s my opinion IBM stock will drop more than half soon. IBM should have done many things two decades ago but their management continues to act like Corporate Raiders. IBM reminds me of the movie ‘The Big Short’ based on the crash in 2008. I recently worked on an India IBM project in Tallahassee for a large FL State agency. I was told IBM was awarded the initial bid by adding state employees to their payroll. After my Database skillsets won IBM an FIVE year contract with the FL government agency IBM let me go. I later learned, by my next employer, IBM told the FBI I was let go for ‘Mismatched skillsets’ . Yes, a storm is brewing and about to hit IBM soon. I sure we all have learned lately that lying to the FBI is a felony and time behind bars.
This is a tremendous opportunity for Larry Ellison to hire the nucleus of the Red Hat Linux team and take control of the Linux market! If I were Larry, I would seize the opportunity and onboard those folks post haste and go after their existing customer-base!
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Microsoft will hate this deal
Hey, being indian is a skill nowadays. It’s the easiest way to bypass a technical interview and get hired because the interviewers are also indian or can “kind of understand you.” Who needs results when you can just create makework projects as charity to a recently industrialized economy.
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I think Red Hat will do something for ibm, he is very fast, I hope he will give ibm a new breakthrough
Test unordered list.
onetwothree
https://en.wikipedia.org/wiki/IBM
Ah, ha ha ha ha. It hurts so bad all I can do is laugh. Are you serious? I sure hope not … I’m hoping you do indeed have a sarcastic sense of humor. As a “user” of IBM’s bloated, clunky, antique software … dating back to the computer dark ages … I can’t see anything positive coming out of IBM’s acquisition of Red Hat.
IBM is doing what any other investor owned corporation does when desperation strikes: exercise their trump card. If you can’t beat ’em, buy ’em. IF … I “needed” IBM … I WOULD ALREADY BE USING THEM.
But I don’t.
I trust, however, in the flexibility and adaptability of technologists to recognize when the train is about to run off the tracks and bail out, fast.
I fully expect this to morph out from underneath IBM and show up as (yet another) pesky competitor.
“As a “user” of IBM’s bloated, clunky, antique software…” How much are you being paid to use it? Whose paying you to use it? Why don’t you tell the person paying their bill to find different software?