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Partners of IBM Competitors Not Sweating The Red Hat Deal

If IBM has a strategy beyond desperation, cloud-focused solution providers are trying to figure out if it's malicious or benign to assess the potential impact on their practices

While IBM says its deal to acquire Red Hat for $34 billion is about nothing short of asserting hybrid cloud dominance, partners of hyper-scale public cloud competitors aren't sweating with worry.

Such cloud-focused solution providers, however, are trying to wrap their heads around the true motivations behind Big Blue's play to fully appreciate the potential impact on their AWS, Microsoft Azure and Google Cloud practices.

"The overarching question, and I don’t know if there's a good answer to it, is what exactly is IBM's strategy here?" said Aater Suleman, CEO of Flux7, an Austin, Tex.-based AWS consultancy that also partners with Red Hat.

Cloud partners have outlined a few possible scenarios to game the competitive threat.

[Related: View From The Trenches: 3 Partners Scrutinize The IBM-Red Hat Deal]

The most-malicious interpretation of the deal, and the one that would most impact a hyper-scale cloud partner, is that IBM aims to harm competitors by pulling support for Red Hat products.

A strategy to slow the migrations enabled by Red Hat's products to AWS and other clouds will backfire, said Ethan Simmons, managing partner of Pinnacle Technology Partners, a Boston-based AWS partner.

"If Red Hat doesn't continue to offer that ability to easily move their Linux workloads to Amazon, if IBM breaks that, [customers] will find some other way to do it. It'll hasten the move away from Red Hat," said Simmons, who ended an IBM partnership roughly two years ago, and one with Red Hat even more recently.

Any effort to obstruct migrations to the public cloud in the long run is futile, he told CRN.

"No one is going to stop what they're doing because IBM won't let them," Simmons said.

But were IBM to follow that aggressive tack, it would almost certainly send shock waves across the AWS ecosystem, Suleman told CRN.

Enterprises are "using Red Hat everywhere in their data centers," Suleman said, and not only Red Hat Enterprise Linux, but often OpenShift and Ansible "under the hood"—DevOps products that empower other cloud providers.

If their challenge becomes "not just migrate to cloud, but to a different operating system, [IBM] can slow down public cloud adoption," Suleman said.

Using Red Hat to deny revenue to leading cloud providers will also undermine Red Hat's business, Suleman said, but it will damage IBM's competitors "equally if not more."

But that "predatory" strategy represents "a worst-case scenario," Suleman said, and "I'm hopeful that that's not what they're planning for."

On the other extreme, IBM could largely leave Red Hat alone, allowing the open source leader to boost its revenue and deliver valuable mind share as an independent division, Suleman said.

With its OpenShift container offering and the Ansible configuration manager, Red Hat is a brand trusted by modern DevOps teams, Suleman said.

IBM stands to gain "builder mind share" from full-stack engineers—an increasingly important asset in a world in which business leaders look to outcomes, not underlying technologies and vendors.

IBM's "not just buying a technology, but buying a community that goes with it," Suleman said, seeing parallels to Microsoft's acquisition of GitHub, which was largely about winning developer mind share.

Between the two extremes is a middle road—one that will impact other cloud providers, but not pose a major threat to any of their partners' practices.

There's "a whole area of gray in between which is likely where we will be," Suleman said.

IBM will likely look to Red Hat to get a "small leg up" for its own infrastructure, while still allowing the technology to play nice with competitors. That entails a tighter integration between Red Hat's portfolio and IBM Cloud, creating an easier migration path for legacy workloads to Big Blue's public and private infrastructure, helping win new customers and retain old ones even more.

Adding to the benefits of a seamless software extension would be customer overlap serving as a vehicle for upsell or cross-sell opportunities, he said.

"That can also impact other cloud providers," Suleman told CRN, but in a more-traditional competitive manner, and not nearly to the extent of the predatory strategy.

That scenario ultimately could even yield a closer relationship between IBM and other cloud leaders, especially considering IBM Cloud Professional Services increasingly does AWS implementation and strategy work for its customers, Suleman said.

IBM might see Red Hat as offering the best platform and toolset to serve its enterprise customers looking to implement a multi-cloud strategy, Simmons told CRN.

"It's either tell their customers, 'no, you're stuck with us,' or give them the option," Simmons said. "Maybe Red Hat is IBM's tool in their quiver to have that conversation. That's probably the best scenario for IBM."

But even as cloud partners scrutinize IBM's rational for agreeing to pay a massive 63 percent premium on Red Hat's market value, they wonder if there's any comprehensive strategy at play beyond desperation.

Tony Safoian, CEO of Microsoft and Google cloud partner SADA Systems, told CRN he doubts there is one.

IBM is probably just trying to remain relevant in the cloud conversation and stem the bleeding of enterprises moving legacy workloads to the three hyper-scale powerhouses, he said.

And while Red Hat is "a great company" that generates cash flow accretive to IBM, that doesn't mean a combined entity will loom larger than the sum of its parts, Safoian said.

"Just because they make these types of acquisitions doesn't mean that translates to an actual market impact, especially in cloud," Safoian said.

IBM might see benefits from the deal with its existing large accounts—places where it already owns most of the IT spend—but "I don’t see how having IBM own Red Hat changes the conversation for a typical customer needing to deploy a cloud strategy," Safoian said.

The deal mostly "speaks to how important cloud is, and probably the fact that IBM feels they're missing the boat, even in spite of the SoftLayer acquisition," he told CRN.

Simmons is also skeptical IBM has any coherent strategy. And he worries the deal will prove a drag on Red Hat.

He expressed that position bluntly on Twitter: "The desperation at IBM is greater than we thought. They will drive Red Hat into the ground. The shift to AWS/Azure/GCP is happening at a pace that these large companies are not able to grasp."

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