Skip to content

Industry Insight: IBM+Red Hat, The Great Cloud Brokerage Play


It’s official, IBM could now become the biggest hybrid cloud broker play in the ICT universe with its acquisition of Red Hat for a whopping $34 billion in cash. It seems only yesterday that neXt Curve sat down with IBM to discuss the future of cloud and the future is the hybrid cloud. The cloud landscape is poised to change as the emergence of OTT cloud brokerage models inject transparency (market and service quality) and portability of workloads into enterprise cloud strategies. Are the walled public cloud gardens about to come down? 


When Microsoft acquired GitHub, some folks feared that open source software development was under attack. Of course, it has not and will not.  In the same vein, Linux is not dead. No, open source software is not dead. In fact, Linux is alive and well running the vast majority of ISP data centers and some of the largest hyperscale data center globally.

Red Hat is a tools and support services business that makes Linux enterprise-grade. Red Hat is not Linux so there isn’t a real threat to open source software. Red Hat Enterprise Linux (RHEL) is only one of many Linux distributions. Ubuntu, Debian and CentOS and many others will keep the open source flame alive in the greater Linux open source community.

Back in the x86 Saddle Again with a Big Slice of The Public Cloud Pie

The Red Hat acquisition is a huge leap for IBM back into the x86 game without the burden of a low-margin server business, which IBM sold to Lenovo back in 2014. Not only does Red Hat broaden IBM’s footprint in enterprise data centers, it gives IBM instant presence in the hyperscale data centers of many of the leading public cloud service providers. Amazon runs their EC2 services off of servers running Amazon Linux, which is based on Red Hat Enterprise Linux (RHEL).

Become the OTT (Over-The-Top) Player in Cloud

So, what is the killer hybrid multi-cloud play for the combined IBM-Red Hat concern? A game-changing move would be to take on an Over-The-Top (OTT) strategy to address the perceived public cloud threat of AWS, and Azure. You do that with brokering services, which Red Hat does not offer because it is a tools and enterprise-grade support business at its core.  The good news – IBM is pretty good at IT services and just happens to offer a Cloud Brokerage as a Service as a part of its enterprise cloud portfolio of services.

But OTT cloud brokerage is different from the brokering of public cloud services.  The difference is the idea of arbitrage of cloud services public, private and on-prem, which will require broad and comprehensive pricing and cost visibility across an enterprise’s hybrid multi-cloud portfolio. Market transparency and IT financial transparency will help IT organizations optimize the value of their IT by informing sourcing and deployment decisions based on the best price for performance for IT services across an enterprise’s hybrid multi-cloud portfolio.

The benchmarking of performance, quality of service and pricing across geographies will become increasingly important, especially for enterprises with a global digital business and footprint and as the Internet of Things pushes enterprise computing out to the Edge. Most importantly, market visibility and transparency gives the CIO and the cloud broker the leverage they need to “OTT” the public cloud service providers.

Red Hat – Bridging Development with Production in the Hybrid Cloud

The acquisition of Red Hat brings IBM a great opportunity to lead in the creation of a container-based hybrid cloud where cloud-applications can be built, deployed and managed across the hybrid cloud. Red Hat brings open source developer and cloud mindshare and market share to IBM with the Red Hat OpenStack and OpenShift platforms.

As OpenShift continues to evolve into a integrated container-PaaS and DevOps management platform, it will be well positioned to serve as an integration layer between app development processes and the hybrid cloud that will provide development environments that will support the SDLC.

Red Hat’s OpenStack platform and the inevitable extension of the platform to support cloudlet models could position IBM well to modernize and cloud-enable the many data centers running RHEL, while positioning IBM as a key player in Edge Computing as OpenStack extends to support cloudlet models that will push the hybrid cloud to the edge.

Challenges and Opportunities Ahead

IBM’s key challenge in pursuing a OTT cloud brokering strategy will be the development of a viable, OTT-quality cloud brokering platform which does not exist today but could provide IBM with the critical capabilities to enable an OTT service layer that would provide CIOs with the price/cost-to-performance intelligence they need to take advantage of arbitrage opportunities across the public cloud market and the IT portfolio of their enterprise.

The realization of an OTT cloud brokering platform would undoubtedly involve the integration of Red Hat’s cloud-enablement and development toolsets and technologies with IT management and security tools that IBM already has in its IBM Cloud portfolio to deliver the holistic capability to migrate/shift, manage, secure orchestrate, monitor and measure IT services and workloads transparently across an enterprise’s portfolio of private cloud, public cloud and on-premise resources.

Implications for Business Leaders

IBM’s acquisition of Red Hat could not only bring about new hybrid multi-cloud brokerage services and solutions, especially for current IBM customers, the competitive implications of this acquisition will likely spur other vendors to develop OTT cloud brokerage and integration capabilities that would bring about a new competitive dynamic to the IT services market which could change the economics of cloud computing for enterprise end users.

IT leaders and architects should consider the economics of a hybrid multi-cloud strategy versus a single cloud vendor strategy. Price/performance metrics should be incorporated into cloud sourcing decision models in addition to cloud migration assessment criteria in order to optimize value (price/cost performance) across the hybrid cloud continuum.

CIOs should reconsider the role of IT, especially those who are seeing their organizations embattled by shadow IT fostered by public cloud computing. The need for service-orientation is becoming urgent for many IT organizations. Working with emerging hybrid multi-cloud vendors and service providers that can position IT organizations as hybrid cloud brokers for the enterprise could be critical in the reinvention of a CIO’s business of IT.

This material may not be copied, reproduced, or modified in whole or in part for any purpose except with express written permission or license from an authorized representative of neXt Curve. In addition to such written permission or license to copy, reproduce, or modify this document in whole or part, an acknowledgement of the authors of the document and all applicable portions of the copyright notice must be clearly referenced.

If you would like to engage with a neXt Curve analyst on this topic, please:

If you would like to be notified of our latest research by email, please:

Related Content

Subscribe to neXt Curve!

By subscribing to the neXt Curve site you will registered with our reThink research blog and have an opportunity to engage with one of the most vibrant and independent discussions on our digital future. As a subscriber, you will receive newly published research articles and content as well as invitations to exclusive events by mail.

By subscribing you acknowledge and accept the terms of neXt Curves privacy policy.

Request an Inquiry

Send us an email

Request a Briefing