IBM buys into cloud market with Red Hat buyout

This week IBM announced a $34 billion purchase of Red Hat, the largest ever acquisition of a business software company, to buy into the lucrative cloud computing market in an attempt to realign itself with the major cloud players; Microsoft, Amazon & Google.

This deal is an all-or-nothing move for IBM and current chair, president, and CEO of IBM, Ginni Rometty. In the Western world, Amazon and Microsoft dominate cloud provision, with Google trailing close behind, and China’s Alibaba being the clear front-runner in the East.

IBM has the resources to build and run the infrastructure required for a major shift to the cloud, but commentators have expressed concerns over their move to being dependent on one single provider, and also their lateness to the game, however, in taking the Red Hat route, IBM will position itself as a middle-man in the cloud wars, becoming an essential provider of the tools used to write cloud computing applications – Red Hat is open source, but has partnerships with the four major cloud services.

The IBM-Red Hat acquisition means it will offer a layer of software that sits atop the big cloud providers’ platforms, working with them all.

Rometty told CNBC last Tuesday that she expects Red Hat will produce 2% of annual growth for the computer company’s top line over the coming years. She said: “It really is a play that helps all of IBM, as well as extends what Red Hat’s done, and then together we make it even better… It runs not only on the IBM cloud – not only on-premise in private clouds – it runs on every other public cloud out there, whether that’s Amazon, Microsoft, Google.”