How easy will it be for IBM to digest Red Hat?

Imagine our surprise the day before a lunch scheduled with the CTO of Red Hat when IBM announced it was buying his company.

Sometimes the journalism gods, those that are left, smile on even the humblest of hacks and today it was our turn. Lunch with Chris Wright (pictured below, with said hack) had already been arranged with the promise of delivering the kind of light Linux chit-chat over a glass of red that we all secretly crave. But then, out of the blue (pun intended) IBM announced it’s going to buy Red Hat for $34 billion and things suddenly got a bit more spicy.

Now, you don’t get to be the CTO of a major company by speaking injudiciously to the press, so we didn’t expect Wright to have much to say on the relative merits of the acquisition itself. Instead we wanted to know more about what Red Hat brings to the table, such that a venerable tech giant would want to drop such a serious chunk of change on it.

The core of Red Hat’s product strategy for the past few years has been the hybrid cloud. In its simplest terms this refers to the use of both private, on-premise server capacity and the public cloud as found in colossal data centers provided by the likes of AWS, Microsoft and Google. Increasingly this applies to pretty much all larger enterprises so it’s a pretty important place to be if you’re serious about the B2B tech space.

Sharing this writer’s love of a pun, Wright conceded that the cloud is a nebulous term, but that’s why you need companies that have made it their business to get their heads around it, such as Red Hat. IBM is, and always has been, a B2B tech company, so it’s easy to see why it would want to buy a company that specialises in one of the most important and arcane manifestations of that.

Everyone in tech has probably had to puzzle over one of those baffling software architecture slides that attempt to explain how everything fits together via the use of endless rectangles piled on top of each other like some geeky game of Jenga. Throw hundreds of those into a virtualised environment spanning any number of actual physical locations and you get somewhere close to the kind of challenge faced by today’s CTO.

Between the cloud and the cloud user lies an extended value chain of technologies and services dedicated to making that relationship as useful and intuitive as possible. One good example of this is the banking app, through which anyone can now whizz thousands of pounds around the world in an instant. For this to be made possible a hell of a lot of robust technologies have to exist between the bank’s servers and the client device.

According to Wright, Red Hat plays across that whole value chain, so for that reason alone it’s easy to see its appeal to IBM. But Red Hat is also deeply rooted in the Linux, open-source culture, which isn’t necessarily an obvious fit with IBM’s notoriously rigid corporate philosophy. As with so much M&A, how effectively the cultures of the two organisations are reconciled will be the single most important factor in determining whether this deal goes down smoothly or results in corporate indigestion.

Chris Wright Red Hat Telecoms

IBM aims to boost its strategic imperatives with $34 billion acquisition of Red Hat

IBM has announced by far the largest acquisition in its history with the acquisition of cloud and open source software vendor Red Hat.

$34 billion is several times more than IBM has previously spent on an acquisition, which indicates just how important it thinks this is to its future prosperity. Red Hat has expanded from a developer of Linux-based business software to being involved in most places you might find B2B open source software, including the cloud and telecoms.

While most venerable tech companies seem to be in a constant state of so-called transformation, this has especially been the case with IBM as it seeks to replace its declining legacy businesses with shiny new ones. As a consequence it has four clear strategic imperatives in the form of cloud, security, analytics and mobile, revenue from which recently overtook legacy stuff for the first time.

But IBM has apparently decided this organic transformation isn’t happening quickly enough and has decided a nice, juicy bit of M&A is required to hasten the process. Most reports are focusing on how Red Hat will contribute to IBM’s hybrid cloud efforts, and thus give it a boost in competing with the likes of Amazon, but Red Hat’s activities in the telco cloud specifically shouldn’t be underplayed.

“The acquisition of Red Hat is a game-changer,” hyperbolised IBM Dictator (Chairman, President and CEO) Ginni Rometty. “It changes everything about the cloud market. 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.

“Most companies today are only 20 percent along their cloud journey, renting compute power to cut costs,” she said. “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.”

IBM Red Hat Rometty Whitehurst cropped

“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 (pictured, with Rometty). “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.”

Cloud and open source have been major themes in the tech M&A scene recently. Microsoft continued its transition from closed software box-shifter with the recent $7.5 billion acquisition of code sharing platform GitHub. Meanwhile open source big data vendors Cloudera and Hortonworks have decided to merge and earlier this year Salsforce dropped $6.5 billion on MuleSoft to power its Integration Cloud.

In M&A, the party line from the company being acquired is usually something along the lines of it enabling them to take the next step in its evolution thanks to the greater resources of its new parent, and this was no exception. “Powered by IBM, we can dramatically scale and accelerate what we are doing today,” said Whitehurst in his email to staff announcing the deal. “Imagine Red Hat with greater resources to grow into the opportunity ahead of us. Imagine Red Hat with the ability to invest even more and faster to accelerate open source innovation in emerging areas.” And so on.

He went on to explain that, while he will report directly to Rometty, Red Hat will continue to operate as a ‘distinct unit’, whatever that means. Usually this sort of talk is designed to sell the concept that it will remain the same company it was before the acquisition, but with loads more cash to play with. Let’s see.

IBM would be mad to mess around with Red Hat too much as it seems to be doing just fine and reported 14% revenue growth in its last quarterlies. Then again you don’t pay a 60% premium for a company just to accrue its revenue and how IBM integrates Red Hat into the rest of its offerings will be what determines the success of this bold move. There are, sadly, no signs the company plans to change its name to Big Blue Hat, which is a worrying early a missed opportunity.

We’re getting closer to the NFV promised land

Talking with Red Hat and Netscout at MWC 2018 reveals that NFV seems to be finally getting there, and not a moment too soon.

From Red Hat EMEA we met Timo Jokiaho, Principal Technologist for Telco (right, above), and Nik Stankau, Business Development Director for Telco (left). Red Hat makes its money from fine-tuning open source software to make it commercial-grade, so it’s in a good position to comment on the state of the software being developed to make everything work – the plumbing if you like – as we move into the 5G era.

They explained that, within Europe at least, France is setting the pace when it comes to NFV development – especially Orange and SFR. Apparently the arrive of Free Mobile a few years ago, and the resulting trashing of margins, motivated the incumbent operators to look harder for efficiencies and one source of those is expected to be NFV.

The flexibility, scalability and ability to innovate that is promised by NFV will be a big part of this. One more specific subset will be Media Function Virtualization, which will offer flexibility when it comes to the use of resources for video provision. This seems to be a refinement of the network slicing concept that will allow dynamic allocation of network resources at times of peak video usage.

As you might expect from Red Hat, they think a big reason for the progress they observe is the non-proprietary approach that is facilitated by open source. Operators are increasingly taking control of the process away from traditional vendors, especially when it comes to orchestration. They also noted that containers are set to be a major factor in the next phase of development of the telecoms plumbing.

Over at Netscout we met Richard Kenedi, President of the New Markets Business Unit, and Petrit Nahi, Chief RAN Scientist. They explained that business assurance specialist Netscout has been accelerating in the telco direction with the help of acquisitions such as Arbor Networks. Thanks to its network and service assurance work Netscout feels in a good position to comment on the state of the network.

They confirmed that NFV is definitely getting there and that the increased focus we’re seeing as 5G gets nearer is forcing practical action upon the industry. Initially CSPs are likely to focus a lot on capacity, and fixed-wireless access seems to be getting a lot more traction thanks to good R&D on millimetre-wave propagation. Meanwhile the low-latency part of the 5G equation is leading to a lot of talk about mobile-edge computing.

The third pillar is IoT and Netscout confirmed our previous finding that it’s all about NB-IoT now. They confirmed that there is a lot of CSP activity around NB-IoT and that the activity is largely moving from B2C to B2B implementations and business models. They also said network slicing will be a critical factor in taking IoT to the next level. Lastly they confirmed the vibe we got from a lot of other people at the show that the overall market will bottom-out this year and then start to pick up.

As with so much else at MWC 2018 the perspective from a couple of companies involved in the plumbing of the network was a sense of ramping and practical measures being taken in preparation for 5G in 2019 and beyond. Which is just as well as, unless we get that stuff right, all the clever New Radio in the world won’t amount to much.

Elisa is proud of its efficient SON

Finnish operator Elisa is so happy with its self-organising network tech, developed with Red Hat, that it wants the whole world to know about it.

Elisa is quite big on uncapped data tariffs and as a consequence experiences disproportionately high volumes of traffic over its network. This has led it to make a special effort to make its network more efficient, which is where SON comes in. Developed on Red Hat’s OpenShift Container Platform, Elisa SON claims to double the user data throughput on the existing network.

“Our automated network optimization solution offers operators both operating and capital expenditure savings,” said Elisa CTO Kalle Lehtinen. “For example, in Elisa’s own network in Finland, the software actively monitors and tests the network, making more than two million tests and 2,000 changes on daily basis. Less resource-intensive manual work is required and the existing investments can be fully utilized.”

“With Elisa’s approach offering unlimited data plans to subscribers, its networks carry a high volume of mobile data, meaning it has focused on optimising network performance and getting maximum value out of its existing equipment,” said Santiago Madruga, head of Telco and ICT EMEA at Red Hat. “Thanks to this drive, it has developed innovative SON capabilities. We are proud to collaborate closely with Elisa to deliver SON on Red Hat OpenShift Container Platform.”

This is obviously a PR coup for Red Hat too, especially since, in its briefing documents, Elisa speaks about having tried various off-the-shelf vendor SON solutions but couldn’t find anything that did the job well enough. This is also yet another example of operators growing frustrated with the vendor community and taking more ownership of overcoming their technological challenges themselves, and now Elisa has a product it can sell on to other operators too.

Mycom OSI makes telco cloud move with Red Hat collaboration

Network assurance vendor Mycom OSI has moved to improve its cloud credentials through a partnership with Red Hat.

The specific point of the partnership is to offer automated assurance across hybrid NFV networks. In the virtualized telco utopia most of the functions will exist in a massive, fluid cloud but, as we are continually reminded, the road to the promised land is a convoluted one. One of the many complexities to be contended with is how you monitor, maintain and optimize all this.

Red Hat has been heavily invested in the telco cloud from an open source perspective for some time, so it makes sense for Mycom to collaborate with it in order to stay relevant in the cloud era. Mycom’s Experience Assurance and Analytics solution will be deployed on the Red Hat OpenStack Platform and the Red Hat OpenShift Container Platform to make the telco cloud magic happen.

“Telco clouds are a key enabler to unlocking on-demand, real time consumer and enterprise digital services such as SD-WAN and IoT opportunities for CSPs, and our recent innovations in telco cloud assurance have resulted in rapid growth in customer projects,” said Mounir Ladki, President and CTO at Mycom. “Red Hat not only helps us to deliver agility, speed and cost benefits to our customers, but also a rich stream of essential telco cloud data that feeds our analytics engine. We are delighted to have such a strong collaboration with Red Hat.”

“As the telco industry moves towards cloudification of networks to increase innovation, agility and scalability, service quality and performance are top of mind for telco leaders,” said Darrell Jordan-Smith, VP of Global Telecommunications and ICT at Red Hat. “We are pleased to underpin MYCOM OSI’s assurance and analytics solution with Red Hat’s highly scalable hybrid cloud and container-based technologies. Together, we are setting out to help operators better understand and act on the performance of their networks as they deliver on their network virtualization strategies.”

Red Hat has made its name in the telco sphere by tailoring open source software to make it ‘telco grade’ i.e. commercially useful and robust. Network assurance is all about making sure the network is commercially useful and robust so this partnership seems to make sense. Furthermore it might set a precedent for further such collaborations as the telco cloud matures.

Orange and Red Hat push open source NFVi development

At the OpenStack Summit 2017, operator Orange has joined forces with equally colourful open-source software vendor Red Hat to promote NFVi innovation.

Sadly the two companies have missed a trick by declining to name their mutual endeavour Orange Hat, but we mustn’t let that detract from the underlying cleverness. Orange seems to reckon network functions virtualization infrastructure is best done in the open-source environment and Red Hat unsurprisingly agrees.

The result is that they have started a joint engineering programme to support NFV in OpenStack and other open source communities. While the two of them have also, for some reason, chosen not to refer to themselves as Naranja and Sombrero Rojo respectively in Spanish-speaking countries, they have directed to the Openstack BGP VPN project, which has embellished the acronym magnificently in naming its reference implementation BaGPipe.

“We are keen to spearhead development for technology platforms that can power our future networks, like OpenStack, and are teaming closely with Red Hat to drive innovation in open communities to help shape them in line with real-world requirements,” said Christian Gacon, VP of Wireline Networks and Infrastructure at Orange. “Red Hat, as an open source solutions leader, is then able to seek to bring that innovation to production-ready fruition in its Red Hat OpenStack Platform.

“Our joint work on the BGP VPN project is a great example of an important piece of networking technology that we are enhancing for modern communications, as the industry strives towards more dynamic, agile and self-adaptive networks. As we work on an industrial roll out of NFVi, we are confident that standardizing on open source can bring interoperability to the ecosystem for large, scalable cloud environments. We recognize Red Hat as a valuable partner to enable us to onboard VNFs from a variety of different vendors.”

“Orange is embracing a role as a modern open communications provider, not only by deploying a fully open technology platform with Red Hat OpenStack Platform and Red Hat Ceph Storage but also by adding its expertise to community development efforts,” said Darrell Jordan-Smith, VP of Global Information and Communications Technology at Red Hat. “We’re very pleased that our technologies power Orange’s standardized NFVi platform and we’re excited to continue our collaboration in open source initiatives, aimed at delivering new business value to the industry.”

To be honest we’re struggling to add much more colour to the announcement than those quotes so we’ll leave it there, other than to note that this seems to be another example of operators choosing to take virtualization matters into their own hands in the absence of sufficient progress from the traditional networking vendors.