IBM Strengthens Hybrid Cloud With Red Hat Acquisition
July 12 2019 - 6:14PM
Dow Jones News
By Angus Loten
International Business Machines Corp.'s $34 billion deal to buy
Red Hat Inc., which closed this week, boosts its standing in the
hybrid cloud market.
Companies use the hybrid cloud to manage software and other
systems across different cloud services and their own data
centers.
The acquisition announced in October also gives IBM some
traction in its effort to gain ground on cloud-market front-runners
Amazon.com Inc. and Microsoft Corp., information-technology
executives and industry analysts said.
Red Hat's open-source software enables IT managers to modernize
older applications and run them both in data centers and across
various cloud providers, among other features.
Despite early predictions that cloud services would take over
every company's IT needs, in-house data centers show no sign of
fading. Research and advisory firm Gartner Inc. this week said
global spending on data-center systems will hit $208 billion by
2020, up 2.8% from 2019.
"Hybrid and multi-cloud is a top-of-mind issue for CIOs across
many organizations," said Chirag Dekate, senior director and
analyst for artificial-intelligence infrastructure and emerging
technologies at Gartner.
Businesses on average use four cloud vendors for software, three
for platforms and two for infrastructure, according to a survey
last year of 550 corporate IT decision makers by data and marketing
company International Data Group Inc. Most of these companies had
shifted only about half of their IT systems and software to the
cloud, continuing to use in-house data centers, IDG found.
IBM's Red Hat deal "speaks to how essential it's become for
organizations deploying a hybrid cloud strategy to coordinate
multiple clouds in use," said Paul Gaynor, a senior technology
analyst at PricewaterhouseCoopers LLP.
Connecting separate cloud services is crucial for letting
organizations put their data to work, he said, enabling them to
sort, group and analyze it quickly and securely.
The deal also puts IBM in a better position to close the gap
with cloud market leaders Amazon and Microsoft, though "it's still
going to be an uphill battle," said Mark Sami, vice president of
delivery management at SPR, an IT-services company.
The two companies were cited as the preferred vendors in over
half of the IT spending intentions of roughly 800 CIOs and other
high-level corporate decision makers in a survey this year by
market-research firm ETR.
Through its acquisition of Red Hat, IBM is likely to benefit as
more businesses are drawn to hybrid cloud strategies that offer
improved flexibility and security in managing workloads -- boosting
IBM's standing in the cloud market, said Tim Beerman, chief
technology officer of IT-services firm Ensono.
Some industry watchers worry about Red Hat's ability to continue
innovating in the open-source space under IBM, though the tech
giant has said it would let Red Hat operate independently.
Write to Angus Loten at angus.loten@wsj.com
(END) Dow Jones Newswires
July 12, 2019 17:59 ET (21:59 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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