The open source software company Red Hat, which is perhaps most popular for its line of Linux-compatible products, acquired cloud-based container security startup StackRox in early January. The move is a fitting next step for the company, which is owned by the International Business Machines Corporation (IBM). IBM has been working to increase the strength of its cloud-based offerings, so the acquisition makes perfect sense.
In a November interview with CNBC, IBM Chief Executive Arvind Krishna said that the original purchase of Red Hat was a stepping stone on its gradual mission.
“The Red Hat acquisition gave us the technology base on which to build a hybrid cloud technology platform based on open-source, and based on giving choice to our clients as they embark on this journey,” he said. “With the success of that acquisition now giving us the fuel, we can then take the next step, and the larger step, of taking the managed infrastructure services out. So the rest of the company can be absolutely focused on hybrid cloud and artificial intelligence.”
Red Hat did not disclose the amount paid for the startup, but consolidation in the tech sector more broadly, as well as comments from StackRox CEO Kamal Shah, suggest that the merger was mutually advantageous to the businesses.
Red Hat, as it has become larger since its founding in 1999, has acquired over 20 startups. This most recent purchase has a history of raising large investments — totalling over $65 million, according to corporate data website CrunchBase.
Krishna told CNBC that he wants the world’s largest cloud computing companies like Amazon and Google to engage in a collaborative effort with IBM to strengthen cloud-based software, and he sees Red Hat as a critical part of this.
“I look at both Microsoft and Amazon as likely partners in this journey, not as being the one and two [in market share],” the entrepreneur said. “In the hybrid world the question is where does the client want to decide where the workload runs? They could run it on Amazon. They can run on Microsoft. They can run it on IBM or they can run it on premises.”
Whatever the case, the cloud computing market is growing rapidly, and none of its key players will be moving away from it any time soon. The global market for this technology was worth $371.4 billion in 2020 and is expected to grow to $832.1 billion by 2025, according to Research and Markets. This amounts to a compound annual growth rate of over 17% — a remarkable growth by just about any standard.
While it’s not yet clear what direction this sector will take in the future or whether its largest members will remain so, what is clear is that these companies have a lot to gain. IBM’s acquisition of Red Hat, and Red Hat’s acquisition of StackRox, will place each of these companies in a good position.