Open Source software is free, but it certainly also seems to be worth a lot of money.
Microsoft bought the open source software repository GitHub for $7.5 billion in June. Now IBM has decided to go one better and fork out $34bn to buy another open source stalwart, Red Hat – the biggest deal ever in the open source community. Heavy investments in open source are clearly fashionable, but do they herald the beginning or the end of commercial open source?
Red Hat’s open source Enterprise Linux OS is built around a subscription model targeting businesses that want help to run their own technology systems. A company that subscribes to Red Hat Linux can make the most of software developed by open source programmers, while leaving some of the heavy lifting of implementing the open source software to the specialists. While Linux may be “free”, Red Hat’s model of commercialising Linux is clearly profitable: during the latest quarter, Red Hat had revenues of $823 million, most of which were generated through subscriptions to its enterprise model.
There are clearly plenty of companies who like the concept of having a broad and global community of developers who combine their brain power to constantly improve the software behind much of the world’s cloud computing – not for personal gain, but as an open source project. By 2020, cloud computing is projected to grow annually at around 19 per cent, which bodes well for Red Hat’s revenues – and it’s that promise that IBM has noticed. The company already has its own Hybrid Cloud platform, and its Technology Services and Cloud Platform unit generated $8.43 billion in revenue last year. But IBM’s cloud infrastructure business – which helps to keep parts of the internet online – is still smaller than that of competitors like Amazon Web Services, or Microsoft with its Azure cloud.
IBM’s bet on Red Hat could pay off if the company can successfully broaden its portfolio of applications and cloud services by integrating the open source ecosystem of developers; the big bet on open source certainly may appeal to many businesses. “RedHat has built itself on the premise of selling middleware, support, and other value-added services on top of a special enterprise offering of Linux,” says Neeraj Murarka, the CTO of blockchain startup Bluzelle Networks, and a supporter of both Linux and IBM. “Naysayers might have questioned the whole model of a commercial enterprise making profits on top of open source. This deal puts those doubts to rest.”
If the acquisition is approved by regulators, it will allow IBM to gain an immediate foothold in the Enterprise Linux market by taking ownership of the leader in that industry, he adds. “This is also a big rubber stamp that really affirms IBM’s commitment to open source and Linux. This strategy will probably allow IBM to also focus its efforts better, possibly diverting its existing open source initiatives into its RedHat division.”
Red Hat’s services, therefore, will help IBM gain a richer offering, but what’s in it for the open source platform? Open source developers from Red Hat, says principal analyst at ISG Blair Hanley Frank, can hope for easy access to IBM’s cloud infrastructure, and may expect an easier way of deploying their application at an enterprise scale. “The biggest benefit for Red Hat products from this deal is that they'll now be sold by IBM, which has a significant enterprise sales force and professional services presence,” he says. “This could help more enterprises adopt Red Hat software and services.”
Still, just like when Microsoft bought GitHub, some hardcore open source supporters are worried. CTO of AI software studio Omnijar Phil Laszkowicz, who works both with Red Hat and IBM Open Source to power its main product, a cloud platform, says that while Microsoft’s move was simply a long-term strategy to control the developer tool ecosystem, “whatever our cloud projects are in the future, it’s likely we’ll have to use IBM projects”. Murarka says that if “IBM does not allow Red Hat to operate as it does now and maintain its culture, the values Red Hat brings to the community will deteriorate.”
Some developers worry that the entire identity of open source could be at stake. After all, the community is built around a few key principles: open exchange, collaborative participation, transparency, meritocracy and community.
“Open source software struggles continuously to find a position that is both profitable and self-sustaining, and democratic,” says Laszkowicz. “The open-source community perhaps needs a wake-up call of their own to come to the realisation that they need to find a new model to support.”
Others echo his view. In a Reddit thread on the topic, one user said: “Most who run Linux are very sceptical to big companies, as we see what companies like Microsoft, Oracle, Apple and Google have done to the ecosystem.” There have been plenty of acquisitions in recent open source tech history, and among many programmers this has increased their distrust of distrust traditional software companies.
An early example was the acquisition of Sun Microsystems nearly 10 years ago by its key competitor Oracle. Back then, Sun was a software company developing plenty of open source software. The deal, however, resulted in 2,500 employees being laid off and a wipe out of Sun’s efforts on open source.
No wonder open source folks are worried: Microsoft’s acquisition of GitHub has led to a ten-fold increase in the number of developers moving their projects from GitHub to its rival GitLab. The same could probably happen once RedHat’s acquisition is complete. “The open source community is very much a decentralised space and such acquisitions are not taken very positively due to their centralising effect,” says Murarka.
Unlike Microsoft though, IBM is in the open source community’s good books. It is, after all, a founding member of the OpenStack Foundation, which is a set of open source software tools for building and managing cloud computing platforms. And its official stance claims that it is “a home for open source code, community, and culture.” Still, while IBM has been quite active in the open source Linux community for a long time, it remains a large corporation with all the bureaucracy and protocols that are run counter to the spirit of open source software, says Murarka.
One thing is certain: the trend is growing. For Frank, we are seeing a new crop of open source companies that build on Red Hat's model, offering enterprise features on top of an open core that is available freely. And large software companies are increasingly interested in buying those platforms. It shows that open source is being recognised as a real, viable, commercial space that engenders profits even if much of the underlying software is free. It’s curious to see what tech giant will be next.
Updated 31/10/2018, 12:15: This article has been updated with more details on Phil Laszkowicz's profession.
This article was originally published by WIRED UK
