Is it time to be afraid of IBM again? – Enterprise Irregulars

On the face of it the question would seem clearly amenable to the adage that for any headline with a question mark in it the answer is no. But a couple of months ago at a conference I was talking to someone steeped in the world of open source standardisation, having been part of the Node.js ecosystem for years and he said:

“For the first time in a long long time I am afraid of IBM.”

For those of you too young to remember the olden days IBM was the Google of its day, the Microsoft of its day, the AWS of its day. As the saying went: “IBM isn’t the competition, it’s the environment in which you compete.” IBM was utterly dominant in data center computing over a *long* period of time, until a combination of antitrust law, industry structural changes, and management mistakes forced the company on to the back foot. The tenure of Louis Gerstner at the helm of IBM was a bit like Satya Nadella’s turn at Microsoft – with a renaissance based on open standards, open source, and being a good community partner. By the time I entered the industry IBM was still a powerful player, but not the monster of old. It still had massive influence over enterprise decision making. If IBM said a technology was ready for the enterprise then by definition it was. IBM made Java an enterprise standard. IBM made Linux an enterprise standard. IBM made open source a sensible enterprise decision. IBM didn’t just encourage customers to adopt these technologies however – it demanded influence, a seat at the standards-setting table, by contributing developer hours, money, and influence. The Apache Software Foundation. The Eclipse Foundation. Latterly the Linux Foundation. IBM did more than anyone to establish open source implementation as the new style of industry standards setting. IBM’s influence remains very significant in all of these open source foundations, putting its weight behind the Linux Foundation’s evolution to also manage the Node.js Foundation and The Cloud Native Computing Foundation.

So here we are in 2019, IBM still has that seat at the table, and now it’s acquiring Red Hat, which also had a sizable footprint in these communities. The deal to buy Red Hat is exactly what made the person above afraid. Java, Linux, Node.js and Kubernetes – IBM has a strong play in all of these communities. While Java and Linux are very much mature commodity technologies, Node is still establishing itself as an industry standard. Enterprise adoption of Kubernetes, and associated software projects such as Prometheus and Grafana, meanwhile, is going to define the industry over the next few years. IBM + Red Hat is an extremely powerful influence bloc.

My own take is that, particularly as many in the commercial open source vendor space fear the role of Web infrastructure companies, notably Amazon Web Services, the influence of IBM should probably be welcomed. Recently at IBM’s Think event my colleague Stephen O’Grady appeared on stage with IBM CEO and Chairman Ginny Rometty talking about the ongoing important of open source to IBM and the industry. The Red Hat deal is career defining for her, and will certainly be massively influential in industry directions for the near future. See the chart above from a post by Tomasz Tunguz at Redpoint Ventures for a sense of the scale of bet being made here. As Tunguz argues:

Red Hat offers three groups of software products: Operating System (Linux and virtualization); Application Development (application server/JBoss); New Infrastructure (OpenShift, OpenStack and Ansible). Revenue contribution across these categories is 64%, 23% and 13%. The core infrastructure (operating system and app development) are certainly great businesses, growing between 10-25% annually. The New Infrastructure is the fastest growing, doubling year over year.

I regard Red Hat’s OpenShift platform as the leader in enterprise platform-as-a-service. OpenShift provides a modern development environment for software engineers. OpenShift simplifies the deployment and management of complex technologies like Kubernetes for large enterprises.

So IBM has a solid defensive/self-cannibalisation opportunity around Websphere, a growth business in Linux, but the real kicker for growth is Red Hat OpenShift, as we move into what I have describe as a secular shift around Kubernetes. Literally every enterprise we talk is looking at Kubernetes as the basis for a major infrastructure overhaul – everyone runs K8s or is going to. Google is still the major contributor to Kubernetes, but Red Hat has done more than anyone else to even the load.

So do folks have reason to worry? I am fairly confident in the leadership of IBM folks like Todd Moore, VP of Open Technology, and their capacity to do the right thing for the industry as a whole, but it was still really interesting to hear someone from the industry say they were now afraid of IBM, because of its dominance in a number of crucial industry standards. It’s been a long time since that was the case.

further reading – my boy Stephen wrote a really great post about the IBM Red Hat consolidation play.

full disclosure: AWS, IBM, Red Hat, Microsoft and Google are all clients.

(Read this and other great posts @ RedMonk)