American multinational information technology company IBM has announced a major deal to acquire Red Hat. According to Business Insider, IBM recently acquired the open-source software company for $34 billion in a move that analysts say is good for the cloud market but problematic for software developers.
Red Hat is valued at $190 a share and will be the third-largest tech acquisition in U.S. history. The acquisition is also IBM’s biggest deal since it was founded 107 years ago.
Unfortunately, the acquisition of Red Hat is also one of the largest bets on open source. Open source is where worldwide developers can contribute their expertise to build software projects for anyone to use for free.
Red Hat was one of the first companies to use open source in its business model when it was founded in 1993, just 11 years after the first barcode printer was created, and is still one of the biggest open source players in the industry.
Open source has been a popular thing in the tech industry in 2018. In October, Microsoft acquired the open source coding platform GitHub for $7.5 billion.
Salesforce also acquired MuleSoft earlier this year for $6.5 billion and earlier in October, Cloudera and Hortonworks merged in a $5.2 billion deal.
But many software developers are worried that IBM’s acquisition of Red Hat could mean red flags for open source. Red Hat is one of the largest distributors of Linux, an open-source operating system.
Linux is used to power corporate data centers. For instance, companies often need to integrate their service management system with other software applications such as manufacturing (ERP), sales systems (CRM) and financial accounting.
Although Linux has been around since the 1990s, Red Hat develops a custom version of Linux for businesses such as Red Hat Enterprise Linux (RHEL). RHEL is free, but Red Hat charges for software enhances and technical support.
IBM plans to use Red Hat’s software to create a “hybrid cloud” that bridges Linux-powered corporate data centers with major cloud computing platforms. IBM also plans to maintain Red Hat’s partnerships with cloud providers such as Amazon Web Services and Google Cloud.
IBM also says that it won’t stop Red Hat from contributing to open source projects. Analysts are saying the acquisition is a good thing because gives IBM a way to keep up with key players in the cloud computing market while also keeping the company relevant.
Yet, others aren’t as convinced that the acquisition is a good thing. Many Linux developers claim that IBM’s acquisition is just another example of a tech giant consuming an open source software company.
“I am absolutely shocked by this news,” said one Red Hat employee on Reddit. “[There was] no indication that Red Hat was going to be acquired.”
“Profits were good,” the Red Hat employee said, “open source community was great. Not to mention, IBM is almost anti-Red Hat when it comes to their values.”
Other developers are worried about the effect that the acquisition would have on future products. When paired with U.S. tariffs on steel imports (16% of the world’s steel is used for mechanical equipment like robotics), any pushbacks against open source could have a major impact on the development of tech products.
“IBM has a long track record of acquiring great companies and wreaking havoc on their culture,” said one Reddit user. “Think of it like corporate colonialism. Sometimes it results in an exodus of talent which severely impacts future product updates and support.”