Red Hat’s Acquisition-Fueled Climb to the Cloud

Where might Red Hat be looking next, as it seeks to grow its cloud computing presence, capabilities and community? As has been the case for some time, cloud computing and some adjacent technology trends, such as Big Data, DevOps and storage, are likely to drive Red Hat's next M&A move. A prominent target might be Docker, whose open source containerization technology features prominently in RHEL 7.

Red Hat is famous for its ability to focus squarely on a market and technology and build success from there, as it did with Linux. However, the company increasingly has diverged from its roots and historical laser focus on the enterprise x86 server market with Red Hat Enterprise Linux.

The overarching theme and identity of Red Hat is still open source software, but the main driver for the company clearly is now cloud computing, which is intertwined with open source.

Red Hat continued its climb into cloud computing with its US$95 million cash-and-stock acquisition of eNovance, a French OpenStack consulting shop that bolsters Red Hat's services and support story. During its FY Q1 2015 earnings call -- the same day the eNovance deal was announced -- Red Hat CEO Jim Whitehurst said drivers of the deal were the top needs of Red Hat's OpenStack users and potential customers: installation and management, along with consulting on workflows and process.

Red Hat has not focused its business or most of its acquisitions on service and support, but eNovance highlights how critical consulting is to an OpenStack market that is anything but out-of-the-box for users and customers. This is particularly true for large enterprises and service providers that have legacy infrastructure, processes and people.

The deal for eNovance marks a more aggressive effort by Red Hat to expand its presence in Europe, where it has some traction in the enterprise and public sector markets, but not as much as it has had in North America.

Of course, eNovance isn't the only recent deal for Red Hat. Last month, it acquired open source Ceph storage backer Inktank for $175 million. That deal helped to validate growing interest and use of open source software in enterprise storage, which is one of the few areas of enterprise IT where open source has yet to achieve significant acceptance and penetration.

It also bolstered Red Hat's ascent in enterprise cloud computing and plays a significant role in its strategy on OpenStack, which is helping to fuel community and credibility for Ceph.

Red Hat's 2011 acquisition of Gluster, for $136 million, marked the company's movement into scale-out storage and the cloud, as well as the beginning of its integration and collaboration with OpenStack, which is now among Red Hat's top strategic initiatives.

As evidenced by its recent earnings call, OpenStack represents a small but fast-growing source of revenue for Red Hat. After being positioned against the open source cloud project just a few years ago, it is now all-in on OpenStack.

See more here:
Red Hat's Acquisition-Fueled Climb to the Cloud