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Red Hat: Embracing Change and Transformation

One of my favorite fun facts in discussing change is that due to the lifecycle of cells, your body mostly replaces itself every seven to 15 years. Companies often have significant changes of personnel, products, and missions, yet like how we think about people, those first impressions are tough to change. Red Hat is a 25 year old company that is being acquired by 107 year old IBM, of course the companies have gone through countless changes over the decades. Yesterday I attended Red Hat’s analyst day in Boston. I start with the discussion of change, because open source communities (in case you need a reminder, according to the latest Github numbers, there are currently 96M repositories) undergo insane rates of change. Some examples:

  • Upstream dynamics of Linux: 21.6M lines of code, 4k committers, 230 changes/day. Over the last 2 years, 33% of the code has changed
  • Upstream dynamics of Kubernetes: 1.8M lines of code, 877 committers, 47 changes/day. Over the 3 years and 11 minor releases, 95% of the code has changed.

Red Hat has decades of experience (as Amazon says, there is no compression algorithm for experience) of working in, supporting customers, and undergoing constant transformation inside these communities. Here are some of my key take-aways:

IBM will not blue-wash Red Hat

Paul Cormier and Red Hat have always been very open and clear with communication, so I shouldn’t have been surprised (but was) at how much they discussed the acquisition. It is a point of emphasis that Red Hat will continue to operate as an independent, distinct unit, and preserve the unique culture. From a product standpoint, Red Hat products can not be “sprinkled with blue” (no purple jokes allowed). Red Hat CEO Jim Whitehurst will report to IBM CEO Ginni Rometty (which is a first for an acquisition), and they have been told that there will be no layoffs (not even HR). The structure is reminiscent of how EMC treated VMware after the acquisition. I was at EMC (and had worked closely with VMware) during the acquisition and there are a number of differences. IBM and Red Hat have decades of working together, including many employees who have worked on both sides; EMC (and the industry as a whole) did not understand the full impact that virtualization would have on the marketplace. There are areas where IBM can help Red Hat scale; it helps that the head of Red Hat services has 4 years at Red Hat after 27 at IBM. As for how Red Hat can impact IBM’s culture, the team said that the best way to have further impact is to continue to grow the product line and revenue. If IBM keeps its promises (here’s a good read for Red Hat employees), it should help Red Hat surpass its original goal of $5B by 2021.

Modernizing Apps

Red Hat Framework for Digital Transformation shared at Red Hat 2018 Analyst Day (Boston)

Digital transformation is a big daunting challenge for businesses. As one Red Hat customer told us, most enterprises have “tremendous inertia and lag. It is technically expensive and culturally unpalatable to change”. Red Hat approaches the problem holistically, not only dealing with both developers and operations, but also both the technical and cultural activities. At the center of Red Hat’s framework for transformation is OpenShift. OpenShift, built on the foundation of Red Hat Enterprise Linux (RHEL), provides a common platform with common application services across anywhere (bare metal, virtualization, public and private clouds) that RHEL lives. Through the most recent quarter, Red Hat OpenShift has over 800 customers. OpenShift had been lagging other PaaS platforms, but as containers in general, and Kubernetes specifically took off in the marketplace, Red Hat smartly made OpenShift the leading solution that customers turned to when they wanted to put Kubernetes into production and get the same support that they do for Linux. While there are dozens of Kubernetes in the marketplace, Red Hat has a lead in managing complex, rapidly changing open source projects, providing the reliability and support that enterprises require, and consistency across a broad spectrum of environments. The best statement that I heard during the day was a customer that said:

“Red Hat taught us so that we could take back our technical destiny.”

Multi-cloud Opportunities and Serverless Threats

Red Hat has been the Switzerland of IT. Linux at the core of its business is both its strength, and challenge. While 54% of workloads running in the public clouds are Linux, there are more options than ever (Ubuntu, SUSE, Amazon AMI, etc). While even Microsoft is partnering with Red Hat, every cloud provider, VMware, and others will fight for account control and dollars in the cloud. Looming on the horizon is Serverless. Red Hat has discussed participation in OpenWhisk and Knative projects, but if customers develop solutions on Serverless offerings from AWS, Azure, and Google Cloud, it bypass Red Hat’s participation in the account. That being said, overall there are more tailwinds for Red Hat than headwinds. Red Hat has a strong leadership bench, a broad ecosystem, and have increased their strategic value to users (especially those using Ansible and OpenShift). Everyone agrees that $34B is a very large number, and as such will get the full attention of all involved to leverage the rapid pace of change to create positive transformations for IBM, Red Hat, and their customers.

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