Open Source

IBM's acquisition of Red Hat takes open source's 2018 tally to nearly $55 billion

IBM buying Red Hat is big, and it's part of a larger trend of companies trying to buy into developers.

2018 isn't yet over, but already it's shaping up to be open source's biggest year ever. As open source infrastructure becomes the default for all enterprise computing, the dollars keep getting bigger for companies that play in this space. First, Salesforce forked over $6.5 billion for MuleSoft. Just two months later, Adobe paid $1.6 billion for Magento. By June, Microsoft raised the stakes by buying GitHub for $7.5 billion. Not wanting to be left out, Cloudera and Hortonworks announced a $5.2 billion merger in early October.

And now, we finish October with IBM's $34 billion acquisition of Red Hat. That's nearly $55 billion in one year, all for companies that give software away for free (or, in GitHub's case, enable that gifting of code). Why?

Because developers matter, and developers want open source.

SEE: Software licensing policy (Tech Pro Research)

The new kingmakers

The analyst firm RedMonk has been declaring this for years, but somehow tens of billions of dollars is making the claim more concrete. Software has never been more important, and the developers writing that software have become a precious resource—one that keeps leading to rising salaries and hefty competition for the best developers.

In such a world, making developers productive becomes critical.

SEE: How to build a successful developer career (free PDF) (TechRepublic)

Open source (and its kissing cousin on the hardware side, cloud) makes sense in this world because open source dramatically improves developer productivity. Initially, this was because open source offered a rogue alternative to bureaucratic enterprise purchasing habits, as Forrester analyst Jeffrey Hammond once suggested:

It comes down to barriers of adoption. As a developer you can download a LAMP stack or Spring and Tomcat and start work, or you can wrangle with purchasing for eight weeks and try to get the licenses you need. Developers generally don't like spending time sitting on their hands waiting for purchasing agents to make them jump through hoops; they'd rather write code.

Now open source matters even more to developers because it's where innovation happens. From Kubernetes to Kafka, open source has become the way our industry collaborates on the best code.

It's open source all the way down

Indeed, as Cloudera co-founder Mike Olson declared back in 2013:

[T]here's been a stunning and irreversible trend in enterprise infrastructure. If you're operating a data center, you're almost certainly using an open source operating system, database, middleware and other plumbing. No dominant platform-level software infrastructure has emerged in the last ten years in closed-source, proprietary form.

SEE: Armed with Red Hat, IBM launches a cloud war against Amazon, Microsoft and Google (ZDNet)

Four years later, Forrester Research has noted that just 10 to 20% of new application code within the enterprise is proprietary. The rest? Open source. It has become the foundation for nearly all software today. You might purchase a proprietary application from some vendor, but I'd be willing to bet that the majority of the code within that application is open source.

That's just the way software happens today.

It's hard to imagine a bigger deal than Red Hat going to IBM, given that it's one of the top-three biggest acquisitions in tech history, but the collective focus on open source innovation is only going to increase over time. The more developers matter, the more their currency—open source—will matter. And the more open source innovation grows, the harder it will be to package up that innovation for enterprise consumption, leading to more companies filling that need. In turn, this means more multi-billion dollar acquisitions and, more importantly, a lot more money pouring into writing great open source software.

There has never been a better time to be alive in software because...open source.

Also see

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Image: ZDNet

About Matt Asay

Matt Asay is a veteran technology columnist who has written for CNET, ReadWrite, and other tech media. Asay has also held a variety of executive roles with leading mobile and big data software companies.

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