IBM's Red Hat Deal Shows Linux's Rise to Business Mainstay
October 30 2018 - 08:29AM
Dow Jones News
By Robert McMillan
International Business Machine Corp.'s $33 billion bet on the
world's biggest Linux company shows how the once-maverick
operating-system software has cemented its place at the heart of
modern business computing.
Born 27 years ago out of an experiment by Finnish software
developer Linus Torvalds, Linux is, technically speaking, the core
operating system component that makes a computer work. Companies
such as Red Hat Inc., which IBM is buying in its biggest
acquisition ever, bundle this software with other free programs for
clients to install on their servers and PCs.
Linux today runs on hundreds of thousands of servers that power
major technology companies such as Facebook Inc., Amazon.com Inc.,
and Alphabet Inc.'s Google. Because it is the core of the widely
used Android mobile operating system, it also runs on more than 40%
of the world's personal computers and smartphones, estimates
Statcounter, an analytics website that tracks internet usage.
Even Microsoft Corp., whose Windows operating system competes
with Linux and whose former chief executive once called Linux a
cancer, has embraced the open-source software in recent years.
Linux now runs on Microsoft's cloud computing platform, for
example, and in 2014 the company's current chief executive, Satya
Nadella, told a crowd in San Francisco that "Microsoft loves
Linux."
IBM has its own Linux rival, an operating system called AIX,
though it also has worked with Linux for nearly two decades, making
it a relatively early adopter. Its deal to pay a 63% premium to
purchase Red Hat will link the tech stalwart's fortunes even more
closely to the operating system.
Before Linux, technology companies closely guarded the source
code of their software and typically sought to maximize licensing
revenues. Linux turned all of that on its head. It is free, and the
source code is available for anyone to tweak. Linux has thrived in
the cloud era, where companies have shifted away from installing
their own computers in data centers. Instead they rent computing
power from servers running in someone else's facility, which thrive
on software that is low-cost and easily modified.
"Linux represents how effective open source is at delivering
software better, faster, and cheaper," said Jim Zemlin, executive
director of the Linux Foundation, the nonprofit organization that
supports Linux and other software projects. The foundation
estimates that Linux runs on 60% of consumer devices that are
powered by computer technology, including everything from GoPro
cameras to smart television sets.
Mr. Torvalds launched Linux in 1991 when he wanted a free clone
of the Unix operating system, then popular for high-power
workstations and servers, that he could run on his low-cost
personal computer powered by Intel Corp. chips. At the time, Unix
typically ran on expensive systems built by companies such as IBM
and Sun Microsystems that used their own microprocessors.
Mr. Torvalds developed the Linux kernel, just as major changes
in the way software was written was taking place. Developers wanted
a range of rapidly evolving, free tools -- eventually called
open-source software -- that would help them build products and
services for the internet age that could be fixed by their users.
That rapid, collaborative development contrasted starkly with how
software was made by the world's large technology companies.
Within two years, companies such as Red Hat popped up to serve
them. They bundled Mr. Torvalds's code into curated packages that
contained his Linux kernel and other tools.
Many technology companies were initially slow to get on board,
largely over concerns that Linux wasn't a professionally developed
product and worries over Linux's software license, which forces
those who modify and distribute it to make their changes publicly
available for all to use.
Eventually the low cost of Linux running on computers with
Intel's chips, along with the quality and flexibility of the
open-source model, won. By 2000, IBM was pledging to invest
billions into Linux, a move that was seen as a threat to Microsoft
and rival Unix companies.
Today, Red Hat is the world's number-two seller of server
software, with 15.3% market share, behind Microsoft, according to
industry research firm Gartner, Inc. Linux also is used in all of
the world's most powerful supercomputers, according to the website
of Top500, a project that ranks such systems.
Once an upstart, Red Hat now has value in part because it gives
IBM new business partnerships. Red Hat's Linux and other software
is widely supported by the major cloud companies, enabling IBM to
sell it to customers who want to use a combination of in-house
systems and cloud service providers, said Jay Lyman, analyst with
451 Research LLC.
The Red Hat deal was "obviously unthinkable back when I
started," Mr. Torvalds said in an email Monday. But, he added, it
is "not like IBM is some newcomer to this."
Write to Robert McMillan at Robert.Mcmillan@wsj.com
(END) Dow Jones Newswires
October 30, 2018 08:14 ET (12:14 GMT)
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