Red Hat CEO Hicks Calls AI Costs ‘The Competition’ Over Next Few Years
‘This is a game of pennies and fractions of pennies,’ Red Hat CEO Matt Hicks says at IBM Think 2025.
Red Hat CEO Matt Hicks positioned the vendor’s open-source enterprise technology in combination with parent IBM’s products as a winning recipe for delivering artificial intelligence to customers with lower costs on inferencing and asking AI models questions.
“The cost of that question, it will be the competition for the next few years,” Hicks said. “This is a game of pennies and fractions of pennies … as impactful as training is to show that something can work, the ability to ask those models questions at volume and do that cheaper than your competition–that really, I think, is a core differentiator in technology going forward.”
Hicks (pictured above) shared the observations on stage this week at IBM Think 2025, held this year in Boston. Joining the CEO of Raleigh, N.C.-based Red Hat was Ric Lewis, IBM’s senior vice president of IBM infrastructure.
IBM and Red Hat
Red Hat and IBM are creating standards for enterprises that want to leverage open-source technology in the AI age to move fast and cut down on costs, Hicks said.
In his remarks, Hicks appeared to give a nod to a burst in activity his company has seen from VMware users looking for alternative vendors after VMware’s pricing changes–activity that has often involved Red Hat solution providers.
Red Hat’s OpenShift platform can run traditional applications, AI workloads and virtualization where data lives on existing hardware. “That really for us is the power of a platform and bringing a lot of these integrations together, from hardware up to the applications and the new applications you’re going to build,” Hicks said.
The VMware momentum with Red Hat even received attention from IBM executives on the vendor’s most recent quarterly earnings call.
“Virtualization, already, just the last couple quarters, we’ve already notched in over $200 million of annualized bookings,” IBM CFO Jim Kavanaugh said on the call. “We’ve been building a pipeline that is well north of half a billion dollars worth of virtualization.”
Red Hat grew about 13.5 percent year over year in the quarter and saw its seventh consecutive quarter of high teens annual contract value (ACV) bookings. The virtualization, automation and Linux businesses grew double digits during the quarter.
Although Hicks calls AI “the great equalizer” for enabling organizations to catch up to competitors quickly in skills and knowledge based on internet data, the CEO still sees ways that AI users can differentiate themselves in a market where AI use is mainstream.
“The great part about this is most of your enterprise content, your true differentiator, is not on the internet, it is your IP,” he said. “We talk about the ability to use AI well in those commoditized areas that equalize your space, but then augment it with what makes you unique. That is that critical combination of how we do this well with the data you have as well as the data that’s already going to be out there.”
Lewis told the crowd that the AI market will move from training buzz to inference optimization, a prime area for IBM. He also said that small language models (SLMs) are gaining traction as a better way to bring AI to the enterprise. “It’s not just about models and big models. It’s about having the right model and the right data, your proprietary data that’s adding value to your business,” he said.
IBM Infrastructure Partner Opportunities
In an interview with CRN ahead of IBM Think, Lewis said the advancements in IBM’s infrastructure business promises many opportunities for the Armonk, N.Y.-based vendor’s solution providers.
“In infrastructure, overall, partners are absolutely key,” he said. “The infrastructure business from IBM is on a roll. There’s no doubt about it. … A business that had been kind of flat to declining over time is now a sustained growth story picture.”
IBM and its ecosystem are in the earliest days of the Z mainframe refresh cycle, with June 18 set for z17’s general availability.
The Z platform has seen “a decade of double-digit growth,” with z16 even predating OpenAI’s ChatGPT text-generator with AI technology, Lewis said. IBM’s storage business has grown double digits over the last four years, taking share in hardware and software and involving VARs in all the activity. And IBM’s power portfolio is popular with VARs as well.
“We cover the whole gamut with partners, from, you know, the broad set to the more financial industry-focused set that are really close to us on Z,” Lewis said. “It’s absolutely key to our business, and they love it when we have a new launch, because it gives them something to talk to their clients about as well.”
Lewis touted z17’s advancements in financial transaction fraud detection, enabling code assistants to increase developer productivity. IBM technology is delivering returns on AI investments in cost savings and efficiency, he said.
“We’re actually transacting and delivering ROI to these clients in all of those spaces currently,” he said. “I get the feeling we’re a little bit ahead of the industry in that regard.”
He called the platform “the backbone of the global economy,” noting that 90 percent of credit card transitions at some point touch a Z system. Even in the AI era, customers are seeking hybrid cloud products instead of bringing everything to the cloud.
“AI is the killer app of hybrid cloud,” Lewis said. “It’s all about data. And that data, turns out, not all clients want to move their data to somewhere specific in order to be able to do AI on it and get value out of that data. So that means, if the data is hybrid, their architecture is hybrid.”
On IBM’s latest earnings call, executives said that they took proactive actions to bolster the z17 supply chain to avoid disruption from global tariff negotiations.
IBM CEO Arvind Krishna said on the call that he is optimistic on strong mainframe purchasing through 2025 and into the first half of 2026. Economic uncertainty helps the business “because those who are thinking about capacity expansion at the end of the year are wondering whether it’s more advantageous to them to do it earlier because there is a financial benefit if you have it, as opposed to pay for overages, which is certainly possible,” he said.