IBM's Red Hat deal targets longer-term federal success

IBM isn't looking for a quick hit from its $34 billion Red Hat deal. But Big Blue is more focused on longer-term capabilities for the federal business.

IBM’s $34 billion acquisition of Red Hat is not aimed at bringing a quick hit to Big Blue in the federal market.

“It isn’t something that will have an impact in six months,” said Greg Souchack, a vice president in IBM's public sector services business.

The acquisition is serious statement from IBM that the long-term play in the market is hybrid cloud and that will be the predominant way government agencies will manage, analyze and leverage their data.

With the acquisition, IBM is saying that it is in the cloud market for the long haul, Souchack told me. “This is a long term play and significantly increases the capabilities we can bring to bear.”

IBM has long been a proponent of the hybrid cloud and critical to that vision is middleware -- the software that manages and directs data between different cloud settings.

IBM already has many of those capabilities, but Red Hat “enhances and extends” those capabilities with its roots in the open source world of the Linux operating system, Souchack said.

When talking about the cloud in the federal market, it is impossible to ignore the Defense Department’s JEDI commercial cloud initiative. But Souchack declined to comment on whether Red Hat will join IBM’s team in pursuit of that $10 billion contract.

In June, Red Hat’s Chief Financial Officer Eric Shander told the Raleigh News & Observer that the company wants to play a role no matter who won the contract.

In addition to IBM, others pursuing the contract include Amazon Web Services, Microsoft and Oracle.

While not referring to JEDI, Souchack said that IBM and Red Hat currently partner on projects as well as compete against each. Those relationships will be worked out, but IBM said in announcing the deal that Red Hat would continue to operate independently and maintain its current partnership.

The deal is expected to close in the second half of next year, at which point Red Hat will become part of IBM’s Hybrid Cloud team.

A big plus for Red Hat is that it will gain access to IBM’s much larger sales team and have a greater reach across the federal market.

But that reach works both ways, Souchack said. IBM will have access to Red Hat’s networks and its network of developers as well.

The result is that IBM can have a very different conversation with customers. “We’ll be able to have more thoughtful conversations about where the cloud is going,” he said.

The conversation won’t be about buying something out of a catalogue or explaining a rate card, Souchack said, “but more about transforming business operations.”

The volume of data that agencies much manage continues to grow and the opportunity for IBM and its competitors is to help agencies tap those vast reserves of data to make better decisions.

“There is so much data that isn’t analyzed, so if you can analyze that data, you can make better decisions and improve the experience of end-users whether it is citizens or warfighters,” Souchack said.

Souchack is responsible for IBM’s cloud and infrastructure services in the public sector, so Red Hat’s acquisition and its cloud-related capabilities will greatly benefit his business.

“This is a significant statement by us that we are in this business for the long term,” he said.

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