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Cornell Student Articles on Topical Affairs

Red Hat acquired in cloud computing shake up

The rise of technology and digitalisation – and all that has come with them – has resulted in a global battle among the titans of industry for digital dominance in the modern-day marketplace. The digitally-focused industry is booming, and companies are consistently finding themselves faced with decisions and challenges regarding how to strengthen their presence in an exceedingly competitive market. Ultimately, the action that makes the most sense (and causes the most profit on all ends) is the rise of more mergers than ever. With more tech-driven acquisitions being struck everyday, VPN services are just one of many digitally-driven fields that is more than likely to experience exponential growth over the coming years.

In what must be the biggest tech-merger of the year, IBM has come forward to reveal the acquisition of enterprise open source provider, Red Hat. IBM bought the company for a staggering $34 billion dollars, and the reasons for doing so are obvious – at least, on the part of IBM. The acquisition makes a lot of sense for IBM, but Red Hat’s motivation to join the industry giant has a lot of people a little confused. The deal came as a surprise to some, with the benefits for both parties not immediately clear to many people.

Cloud computing by the year 2020

The move on IBM’s part surprised some, as the company already has multiple open source projects under its wings, but the decision to inject Red Hat into the fold makes more sense the more you think about it. By as soon as the year 2020, it is expected that cloud computing will expand at a yearly rate of 19%, and Red Hat is a company whose revenues will be directly inflated as time goes on. This seemingly solid promise has been noticed by IBM, and they have (quite smartly) acted on it as soon as they possibly could. If the acquisition is approved by regulators, IBM will successfully gain a seemingly immediate foothold into the Enterprise Linux market as a direct result of taking ownership of the leading company in the industry.

On the other hand, the agreement of Red Hat to be acquired by IBM confused most – if not all – people, especially those who are not part of the industry themselves and thus immediately aware of some specific advantages afforded to both parties in the wake of the merger. Red Hat’s open source developers have a high chance of gaining easy access to the cloud infrastructure of IBM and will also have easier access to application deployment on a global enterprise scale. Red Hat products will be sold by IBM, a company that has significantly high enterprise presence and sales strength under its belt. As IBM has a stronger professional services presence, the acquisition means that Red Hat has a higher potential to be adopted by more enterprises.

Together, the companies will effectively merge to become the biggest industry-leading multi-cloud provider in the entire world. Both companies are strong and valuable, but together they weld twice the power. It makes sense, even if the price tag is what some people conceive to be too high a price.


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