The long-term strategy behind IBM's Red Hat purchase

IBM's senior veep of software reiterated for Wall Street this week that OpenShift is the linchpin of Big Blue's overall multi-cloud strategy.

Speaking at Morgan Stanley's Technology, Media and Telecom conference, Tom Rosamilia said the OpenShift container management family, developed by Red Hat that IBM bought in 2019, was key to containerizing Big Blue's Cloud Pak software so that it's easier to run wherever customers choose. That could be on or off-premises, or a hybrid of the two.

"By rebasing our Cloud Paks on OpenShift, we've now moved all of our middleware to an environment where I can deploy on AWS, I can deploy it on Azure, I can deploy it on the IBM Cloud, and I can deploy it on prem," Rosamilia said.

This containerization of apps is crucial to IBM's pivot to offering software for hybrid multi-cloud environments. Rosamilia said its applications and services, packaged in Red Hat OpenShift containers, are completely platform-agnostic.

IBM's desire to transform itself into a hybrid cloud-first company has been ongoing for some time. IBM's Z and Cloud modernization center, where Big Blue's customers can go to get help transitioning from on-prem to the cloud, is one example of that strategy, which Rosamilia said has become the norm across industries. 

"Five years ago we were fighting an uphill battle, talking about hybrid cloud as a destination … nowadays we have zero of those conversations," Rosamilia said. Instead, businesses are now trying to figure out how to modernize their hardware for on-prem work and determine what can be shifted to the cloud. And IBM wants to be there to catch them, Red Hats in hand.

Rosamilia reported that Red Hat grew 21 percent in the fourth quarter of 2021, making it a leading part of his promise to investors in October 2021 to get IBM as a whole to mid-single digit revenue growth between 2022 and 2024. 

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Speaking of investors, IBM's finances, losses, and executive pay have made headlines as of late. The IT giant recently moved to appease shareholders upset about a massive payout to former Red Hat CEO Jim Whitehurst by promising them it wouldn't do the same thing again, and in November it spun off its managed infrastructure wing.

IBM's strategy has been one of continued takeovers according to Rosamilia. He noted that the US corp has executed more than 20 tuck-in acquisitions since the beginning of 2020, around half of which were software companies. 

Rosamilia said that many of the acquisitions were in the automation space as well as cybersecurity. IBM even acquired one of McDonald's drive-thru tech companies and a software dashboard outfit, too, the code from which it plans to integrate into its own products. 

IBM's acquisitions and progress on bringing the world over to its flavor of hybrid cloud won't completely erase its problems. The biz still faces blowback from the aforementioned Red Hat exec payout, as well as an ongoing age-discrimination lawsuit that alleges CEO Arvind Krishna was part of an internal drive to replace older workers with younger ones. ®