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NewsThought Leadership

A Double-Edged Sword: Red Hat Acquired by IBM

By October 31, 2018 No Comments
Red Hat Acquired by IBM in a $34B deal

In 2018 there isn’t a lot of cooperation in the United States between red and blue, but yesterday IBM (Big Blue) announced it was acquiring Open Source giant Red Hat in a deal worth $34B. This acquisition is the largest ever of an Open Source company and a strong endorsement of the Open Source business model, but it isn’t all rainbows and unicorns (or triple decacorns). The acquisition may also signal the end of Red Hat and Fedora as we know them.

First, let’s talk about the good. Since the divestiture of their x86 server business to Lenovo in 2014, IBM has focused on providing services to enterprises. They have clearly been communicating that their core business is helping large corporations to integrate machine learning. But they have also been providing services at every level of the technology stack. This makes Red Hat a great fit. Red Hat’s business model is based primarily on supporting enterprise customers who want to deploy Linux at scale. Marrying these two together will create a services juggernaut capable of supporting enterprise customers at an enormous scale. Congratulations to Red Hat for the largest exit of an Open Source company to date.

This shows the Open Source software market has vast potential. You can take a stake in Mycroft by investing in our Online Public Offering on StartEngine.

Red Hat acquired by IBM may have a darker implication for their open source product

A Dark Potential

There is a dark side to this acquisition though. IBM is a company built not only on services but on proprietary intellectual property. For the past 25 years, IBM has been the patent leader in the United States. Last year alone the company was issued more than 9,000 patents. These patents aren’t being used to protect copyleft software. IBM won more than $83M from Groupon in a fight over e-Commerce patents in July and has prosecuted dozens of other cases over the past two decades. There is no reason to believe that this acquisition will change the company’s attitude about intellectual property. That means we may find ourselves living in a world where one of the largest vendors of Linux services is hostile to the Open Source ethos.

What happens to Red Hat remains to be seen. Though it may end up being a positive, I suspect it will end up looking more like Vyatta, Android, or Java – an industry giant firmly in control and the Open Source community left sitting on the sidelines.

Keep Open, Open

So how could this have been mitigated? If Red Hat was a B-Corporation there would be some other options. Being a B-Corp could make it difficult for the acquiring company to make changes to the way it is operated. It could bind management to business practices that benefit both the community and investors. This is one of the reasons Mycroft has committed to becoming a B-corporation as part of the company’s Series A financing.

With acquisitions this large it is difficult to blame investors for pouring money into Open Source. If you are interested in investing in an Open Source company that is committed to the highest standards of verifiable social and environmental performance, come take a look at Mycroft’s OPO.

Joshua Montgomery
CEO of Mycroft A.I., serial entrepreneur and one of the few entrepreneurs in the United States to build a gigabit fiber network from scratch. Joshua brings more than 15 years of entrepreneurial experience to the Mycroft team.