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Scope of Red Hat OpenShift expands, bringing hybrid cloud to new environments and open-source projects

TBR perspective

Based on a foundation in Linux, which enables containerized applications to move across physical and virtual environments, Red Hat maintains a unique market presence with its neutral PaaS solution, Red Hat OpenShift. Red Hat’s vision to extend the applicability of Red Hat OpenShift, which is leveraged by 90% of Fortune 500 companies, to new use cases, consumption models and environments was one of the key takeaways from Red Hat Summit 2021.

As discussed by Paul Cormier, one of the main benefits of an open hybrid cloud approach, which is based on open code, processes and cultures, is the flexibility to run applications across environments with consistency. This approach positions Red Hat and its customers to evolve alongside emerging market trends such as AI, 5G and even quantum computing. As seen in Red Hat’s expanding top line, the company has been successful leading with an architectural approach under core brands such as Red Hat Enterprise Linux (RHEL), OpenShift and Ansible. TBR believes Red Hat will be well positioned to expand its portfolio to new markets and customers and push its open-source expertise beyond the bounds of cloud computing due to continued support from IBM (NYSE: IBM) and an expanding ecosystem of systems integrators (SIs) and ISVs.

Red Hat expands Red Hat OpenShift usage with new managed cloud services

While Red Hat has offered Red Hat OpenShift as a managed service for some time, scaling up managed support is becoming a key initiative for the company, especially as more customers pursue managed offerings to offload operational tasks at both the applications and infrastructure layers. To broaden the applicability of Red Hat OpenShift, at the event, the company unveiled three new cloud managed services supporting customers’ need to build, deploy and integrate modern applications within their existing Red Hat OpenShift environment, either in the cloud or on premises.

At the Red Hat Summit 2021 conference, Red Hat continued to convey to a group of customers, partners and industry analysts the message of open hybrid cloud the company has been leading with for over a decade. Over the course of the three-day event, executives including Red Hat CEO Paul Cormier and Products and Technologies EVP Matt Hicks outlined Red Hat’s evolution from an operating system company to one offering a full suite of self-service software and services for hybrid cloud.

Buoyed by Red Hat profits, IBM’s CEO sees ‘progress’ in shift to cloud and AI

“‘A year into becoming part of IBM, Red Hat has not disappointed and is a major component of the new and diversified life that has been breathed into the IBM portfolio,’ said  said Nicki Catchpole, senior analyst at TBR Cloud and Software.” — WRAL TechWire

Red Hat enables hybrid cloud with a business model focused on open architectures, processes and cultures

With a foundation in open source, Red Hat is poised to deliver to the hybrid-ready enterprise

The open source proposition has been embedded in Red Hat’s roots since the company’s founding in 1993 and has since remained at the core of its guiding principles, with Linux operating system (OS) at the heart of all its innovations. Vendor loyalty and clearly charted paths were the mantras many companies operated on for years, while “digital transformation” was barely on an enterprise’s short-term road map. Then a decade ago, cloud adoption surged, creating the impetus to embrace more agile and flexible development models, and open source technologies emerged. While business models centered on open source software have proved challenging for many, Red Hat’s pre-established culture and leadership around open source communities solidifies the Red Hat brand, paving the way for rapid scale, as the company has captured over 90% of the Fortune 500 as clients and in 2019 became the first open source-defined company to reach $3 billion in annual revenue.

During opening keynotes, Products and Technologies EVP Matt Hicks discussed how Red Hat is leveraging its foundational strengths in an open hybrid cloud approach, which, by virtue of being open, goes beyond technology and extends to processes, cultures and transformation, to further differentiate. Red Hat is releasing new offerings to capture opportunities around hybrid infrastructures, application development and management while rapidly scaling up the integration of technologies such as AI and edge, bolstered by collaborative engines like its Innovation Labs.

Originally scheduled to be hosted in San Francisco, Red Hat Summit 2020 offered participants numerous opportunities to virtually engage in hands-on labs, converse with industry leads and hear from Red Hat customers, and it did so while maintaining the spirit of openness and collaboration for which Red Hat is known. While the topic of COVID-19 did not overtly dominate the discussions or significantly color the overarching Red Hat messaging, it became clear that the ability to pivot rapidly, embrace change and remain flexible will underscore Red Hat’s efforts to successfully promote transformation amid the pandemic. Red Hat’s reputation has historically been predicated on its open and agile approach to development and deployment, long before such attributes were considered valuable, let alone essential.

IBM’s cloud business jumps thanks to Red Hat, but total revenue still down by 3%

“‘Despite the stalling economic downturn over the past month, IBM still operates from a position of growth with a healthy pipeline of services engagements that are augmented by Red Hat’s commitment to automated and open sourced development,’ said Nicki Catchpole, senior analyst at TBR Cloud and Software.” — WRAL TechWire

Get ready for a major culture shift at IBM

“In a blog post, Merrill claimed that while CEOs typically come from a finance or sales and marketing background, the current market climate is one where expertise can help business leaders thrive. In IBM’s case, Krishna was previously the senior vice president of cloud and cognitive software at IBM and Whitehurst was senior vice president of IBM and CEO of Red Hat. ‘Krishna’s presence should assure customers, particularly those with primary concerns around IBM’s product road map and the ways in which IBM will build out the safe, secure and innovative ecosystems components for the new multi-enterprise business networks and company federations,’ Merrill said.” — ARN

IBM’s executive shakeup gets analysts’ stamp of approval

“Analysts have also chimed in with cautious optimism, including Geoff Woollacott, principal analyst and senior strategy consultant with TBR Cloud and Software. ‘The current climate is a different kind of IT landscape. The requirements and demands from enterprises are vastly different, which necessitates a different kind of leader. Arvind Krishna is, therefore, well suited to articulate and assure customers going forward,’ he told WRAL TechWire by email. Elitsa Bakalova, professional services senior analyst at TBR, added that it will bring a ‘fresh perspective.’ ‘Promoting the CEO from within is something that typically inspires employees and will prevent potential challenges related to future strategic direction of the company. The new CEO has a long history with IBM, he is a technologists and an operations expert,’ he said. Catie Merrill, research analyst at TBR, however, maintained a ‘wait-and-see’ approach. ‘IBM, with the help of Red Hat’s platform, is looking to take customers’ mission-critical back-office workloads to the cloud, in what it deems to be ‘Chapter 2 of the cloud’. This is a competency that has yet to be proven but may hold true under new leadership.'” — WRALTechWire

Big Blue turns purple

Rometty steps down, making way for cloud champion Krishna as IBM’s new CEO

At close of business on Jan. 30, IBM unveiled Virginia Rometty was stepping down as CEO. Arvind Krishna, current SVP of Cloud and Cognitive Software at IBM, will take over effective April 6. It was also announced that James Whitehurst, IBM senior vice president and CEO of Red Hat, will become the new IBM president, also effective April 6.

Traditionally, CEOs come from finance or sales and marketing. Finance leaders are tapped when the bottom line is the priority; sales and marketing leaders are selected when the top line is the priority. However, the current market climate presents a different kind of IT landscape. The rapidly shifting requirements and demands from enterprises necessitate a different kind of leader.

Krishna’s presence should assure customers, particularly those with primary concerns around IBM’s product road map and the ways in which IBM will build out the safe, secure and innovative ecosystems components for the new multi-enterprise business networks and company federations. Installing a career technologist at the helm addresses the marketing challenge of countering competitors that rose to prominence in Chapter 1 of cloud computing. Large enterprises seeking to future-proof their investments in Chapter 2 of the cloud, as digital transformation continues to transcend the enterprise, will look to IBM for a well-articulated technology vision.  

While Krishna will message to the market, Whitehurst will work on needed cultural change as IBM president

Much of IBM’s recent struggles have revolved around execution, as the organization’s culture and operating practices were misaligned to the prevailing ways of working and innovative best practices that came from native cloud competitors. IBM historically has deployed ROI business case justifications in silos that worked well for transaction selling. This ROI process has to give way to a companywide viewpoint of overall revenue contribution — or lifetime customer value — regardless of which discrete technology assets receive the recognition in the internal accounting process. The two models are not compatible. In purchasing Red Hat, IBM acquired a company with vastly different operating practices that created a sustainable and consistent revenue model based around a free product. Fourth quarter results showing Red Hat’s sequential growth and the traction IBM gained with its Cloud Pak rollouts are leading indicators of the directional shifts these two executives will steward.

In promoting Whitehurst to the role of president, IBM signals to customers, investors and employees that it will be changing its internal operating models to be more like those of Red Hat. Symbolically, this indicates the acquisition was more a merger of equals and should allay the concerns of the broad Red Hat ecosystem of developers and customers IBM has to retain and expand to realize the value IBM expects to gain from the purchase as it takes aim at becoming a share leader in Chapter 2 of the cloud.

Rometty started to write IBM’s cloud narrative, yet with Red Hat now in the mix, the story is far from finished

In many ways, IBM’s true cloud story began once Rometty stepped in to run Big Blue in 2012. Just over a year after assuming the role, IBM acquired SoftLayer in an attempt to become the leader in cloud computing and catch the leader in public cloud infrastructure, Amazon Web Services (AWS). However, amid heavy competition, SoftLayer quickly fell behind, causing IBM to shed the brand and incorporate the acquired control plane into what became IBM Bluemix — a rebranding effort with inconclusive results as it would ultimately become IBM Cloud. Over the past eight years, Rometty has been ambitious in laying out her goals to capture “the big 3” — AWS, Microsoft and Google — yet the market remained skeptical as IBM consistently failed to deliver on its top line and the ability to catch industry leaders was viewed as a pipe dream. In many ways, this prompted the acquisition of Red Hat — a $34 billion bet IBM officially made in July 2019 to take the 80% of customers still operating on premises to the cloud. Microsoft, with its competitive platform know-how through Azure, successfully captured cloud in its infancy by shifting customers’ front-end applications. However, IBM, with the help of Red Hat’s platform, is looking to take customers’ mission-critical back-office workloads to the cloud, in what it deems Chapter 2 of the cloud. This is a competency that has yet to be proven but may hold true under new leadership. 

Systems Hardware has been on a cloud-centric pivot for a while, and Krishna is likely to reinforce and cement this transition

TBR believes that from a hardware strategy perspective, the CEO shake-up will have little impact. The z14 and z15 refreshes have focused on positioning the venerable mainframe as a critical gateway into the hybrid multicloud world by building in critical firmware and software features to deliver the mainframe capability with public-cloud-like operating characteristics, enterprise-grade security and data management capabilities. TBR does not see this changing anytime soon.

A new CEO brings promise of stabilization to IBM Services, which has performed inconsistently over the past few years

While IBM’s CEO transition is not strictly tied just to IBM Services, it is a positive move for the services business. Over the past six years, IBM Services’ revenue has been uneven, and has largely been in decline during the past five quarters. Filling the role of CEO with an employee who has been with the company since 1990 and has been instrumental to the development of IBM’s cloud business and the acquisition of Red Hat will likely bring a fresh perspective to IBM and IBM Services, which has been struggling to overcome growth pressures in traditional labor-based services, such as in Global Technology Services and Global Process Services. Meanwhile, IBM Services is experiencing growth in cloud-related activities as the company leverages its technology incumbency to advise, migrate, build and manage clients’ hybrid cloud environments. IBM Services will benefit from IBM’s new public cloud offering for financial services clients, the new IBM Cloud Paks portfolio, and synergies from the Red Hat acquisition as well as the related launch of consulting and technology services offerings for Red Hat and multicloud management. However, such offerings have yet to gain scale to offset lingering growth challenges in traditional services segments.

Krishna’s experience and expertise, including around operations, will help IBM Services continue with its technology-led transformation value proposition and also help overcome execution challenges, which were present during 2019 and negatively affected services revenue growth and profitability. The Cloud and Cognitive Software business, which Krishna is currently leading, has been a growing business; sharing knowledge and supporting the ongoing market trend of convergence between services and software will help IBM Services transform into a growing business.  

 What to watch going forward

This is as critical a juncture for IBM as when it installed Lou Gerstner from the outside in 1993. In this transition, IBM is splitting the responsibilities between an IBM insider as chairman and an IBM outsider instrumental in building one of the best technology operating models for the new technology era. From this vantage point, TBR will be evaluating and monitoring the following:

  • Reorganization: IBM has to change how it works internally to align with subscription monetization models. Executive measurements have to shift to align to the best practices Red Hat has deployed building a business around free products. IBM historically has jettisoned business lines that lacked discrete profit metrics as stand-alone products. We will be looking to see which members of the respective teams move into leadership roles under the new stewardship.
  • Developer reactions: It is said the developer is king. TBR would expect the developer community to be heartened by these appointments, and we will be tracking this sentiment in our ongoing cloud research streams.
  • Employee reactions: Will this result in high-profile exits or will this provide middle managers with the air cover necessary to act more like “wild ducks” in IBM internal parlance?
  • Customer reactions: This will flow from the ongoing Wall Street analyst briefings on quarterly results. Rometty was conspicuously absent from many of these calls, and we expect that one or both of these new leaders will be available for the all-important Q&A sessions of these briefings.
  • Competitor reactions: Market share positions in Chapter 2 of the cloud are up for grabs, with many entities, notably Microsoft, AWS and Google aiming to become the de facto hybrid cloud standards. Traditional peers of IBM fared far worse than IBM in Chapter 1 and will struggle to remain relevant as anything more than a derived decision for increasingly commoditized infrastructure. IBM likewise has the installed base advantage for protecting enterprise IP assets. At issue, of course, is whether it can maintain that customer trust by articulating a product road map that resonates, coupled with an organization that can deliver on that vision. Krishna and Whitehurst have clear remits and track records to suggest they can deliver.

Use of container technology solidifies Red Hat’s DevSecOps approach amid intensifying threats toward IT

Through DevSecOps, Red Hat builds in security across the entire stack, preserving its differentiation in the security space

In today’s IT landscape, security is often overlooked in many DevOps and Agile models, yet for some, it is becoming a priority. Put simply, DevSecOps takes DevOps to the next level, tightly integrating security in every stage of the product lifecycle to ensure a secure technology stack. While containers are not imperative for DevSecOps, the technology greatly improves efficiency and aids in implementing the process at scale. Red Hat demonstrates this approach via its hybrid cloud, enterprise Kubernetes platform, OpenShift. Essentially an enterprise version of Kubernetes, Red Hat OpenShift delivers a cloud-like, managed application platform, across on-premises and public cloud environments. Red Hat has taken a holistic approach to DevSecOps, securing every layer of the stack from the OS to microservices. TBR believes this approach has allowed Red Hat to position its security portfolio as one that will encourage adoption of OpenShift and containers in general, as automation tools help customers manage IT with process scalability, system response and compliance:

  • Red Hat Ansible Automation – Ansible is Red Hat’s enterprise automation platform that provides a universal IT automation language that can be used to build and operate automation at scale. Red Hat introduced Ansible integrations with third-party security tools, such as IBM QRadar and Splunk to help security operations centers quickly respond to threats. As such, Ansible users can automate and integrate different security solutions that can respond to threats across the enterprise using a curated collection of Ansible modules, roles and playbooks.
  • Red Hat Satellite – Red Hat Satellite is an infrastructure management product specifically designed to manage Red Hat environments at scale and keep RHEL and other Red Hat infrastructure environments running securely and compliant to both industry and custom security standards.
  • Red Hat Insights – Insights is Red Hat’s SaaS-based predictive analytics engine that analyzes registered Red Hat-based systems across physical and virtual environments. In addition, Insights provides users with Ansible remediation playbooks to fix issues; Insights is included with all RHEL subscriptions.

On Dec. 12, 2019, Red Hat and co-sponsor, Intel, hosted the Red Hat Security Summit in Waltham, MA. Key talks included: Automating security and compliance in the world of containers and hybrid cloud, Security concerns in container runtimes and Simplifying security through Red Hat Satellite and Insights. The event concluded with a hands-on workshop, providing access to Red Hat technologies and products, for discovering the importance of implementing security and compliance automation at scale in a hybrid world.

IBM reports spike in revenue thanks to boost from Red Hat

“Catie Merrill, research analyst at TBR Cloud and Software, said IBM is actively placing OpenShift at the core of its innovations. ‘This growth is reason to be optimistic about the IBM Red Hat relationship going forward and how the two plan to surmount the hybrid cloud opportunity from multiple angles,’ she told WRAL TechWire in an email.”

“Looking ahead, some analysts are predicting  the go-to market plan for integrated offerings will continue to gain traction, while the innovation engine shows no sign of slowing down with investments in augmenting solutions in areas like security, artificial intelligence, and Internet of Things. ‘These developments in combination with a strong suite of services offerings poises IBM to continue its growth trajectory in hybrid cloud and related services,’ Nicki Catchpole, senior analyst at TBR Cloud and Software.”

WRAL TechWire

Red Hat to keep its partner-agnosticism post-acquisition, CSPs moving to less-popular solutions

“According to a report from analyst firm Technology Business Research (TBR), Red Hat executives speaking at their Open Innovation Lab and Executive Briefing Center in Boston claimed that its culture and product development would stay the same after its acquisition by IBM, which was closed in July 2019.

“According to TBR telecom senior analyst Michael Soper, Red Hat’s independence is a core tenent of the company through an ‘open-source approach’ to management, application development and company direction.

“‘The open-source community, to which Red Hat and its employees are major contributors, will remain the primary influence on Red Hat’s product road map,’ Soper said.

“‘This is evident in the company’s open hybrid cloud strategy, whereby Red Hat products support hybrid cloud infrastructure from a host of strategic partners, with Red Hat adhering to a principle of partner agnosticism: No one partner is favoured over another.'” — Channel Asia, IDG Communications

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