Last month IBM announced it would buy Red Hat for $34 billion in what will be the largest software acquisition deal ever.
Today, the deal was the “elephant in the room” during Red Hat’s annual Sydney event, according to Red Hat executives who reaffirmed the open source software firm would operate independently from IBM to protect its culture and partnerships.
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Experts have speculated that for IBM the deal was more about Red Hat’s flagship product — OpenShift — and tapping its cult like culture of openness, more than its revenue, customers or open source software.
Writing for Forbes, IT analyst Jason Bloomberg argued it was a “desperation play” for IBM looking to stay relevant in what appears to be an industry shift towards hybrid IT.
Bloomberg also said the move could help change IBM’s own culture, one currently based on performance and unsuited for a hybrid world where collaboration and innovation is paramount.
“What IBM’s culture lacks, generally speaking, is a focus on anything more important than profits, the way that Red Hat’s culture focuses on openness in its various forms,” Bloomberg wrote earlier this week.
Red Hat’s “open organisation” culture is closely guarded and with good reason, according to Marco Bill-Peter, SVP customer experience and engagement at Red Hat.
“It’s not just open source but it’s also about our transparency, about how we lead the organisation,” said Bill-Peter during today’s main keynote.
According to Bill-Peter, Red Hat received several assurances regarding the IBM takeover including that the new owners are committed to an open source approach and Red Hat will remain independent.
“There is a commitment from them and a commitment from us as well: we stay true to open source. The other one is [Red Hat will] operate as an independent distinct unit and preserve our unique culture.”
Significantly changing its culture could cause many of Red Hat’s 13,000 employees to leave, Bill-Peter said. It could also scare off long time partners like Amazon and Google from collaborating on “the next open hybrid cloud”. But Bill-Peter has little doubt IBM is committed to their independence.
“I know the commitment — if IBM spends a third of their market cap on Red Hat — I know that’s serious.”
Analysts agree that culture will be key to the success of the deal but there could be teething problems.
“There could be some “cultural fit” issues as Red Hat has had a unique open-source developer background, compared with the business-oriented culture of IBM,” Gartner analysts write in a recent report on the acquisition.
“IBM must retain the engineering and open-source expertise of Red Hat; talent loss would significantly reduce the chance of a successful acquisition.”
After addressing the “elephant in the room” Bill-Peter shared some of the cultural and strategic approaches to change that Red Hat employs and advocates for its customers, perhaps uncovering some of the value IBM sees.
He argued the traditional approach to new capabilities and products — plan, prescribe and execute — is dead. That strategy typically requires over a year for IT upgrades, much longer than what is now required and too rigid, Bill-Peter said.
Instead Red Hat suggests a “configure, enable and engage” approach to building capabilities. Such an approach allows organisations to better respond to disruption and even preempt it.
Configure refers to IT architecture and people, both should be developed with a view to be flexible for future changes. Enablement is the agile process, again promoting flexibility. Engage is collaboration, something Red Hat “lives off”.
“As a leader you have to inspire people to collaborate,” Bill-Peter said.
He also suggested organisations empower employees through a top down and bottom up approach, and that any new capability must “go big, but start small”.
However, Bill-Peter noted there is a risk of starting too small, and initiatives must be at least big enough to garner the attention of management.
Of course, there are dangers at the other end of the spectrum too. Bill-Peter said Red Hat had experienced this first hand when a new executive attempted to digitally transform the company upon their arrival.
It was too much too soon. “It didn’t go well. That executive is no longer with Red Hat.”