IBM's cloud boss reveals the game plan for its $34 billion Red Hat acquisition, and says it'll give it 'massive reach' in a $1.2 trillion cloud market

IBM's cloud boss reveals the game plan for its $34 billion Red Hat acquisition, and says it'll give it 'massive reach' in a $1.2 trillion cloud market

Arvind Krishna, IBM's senior vice president for cloud


IBM Cloud Chief Arvind Krishna

  • IBM unveiled its plans for Red Hat which Arvind Krishna, Big Blue's cloud boss, said will be key in its bid to dominate hybrid cloud - a market it sees as worth $1.2 trillion.
  • Krishna said Red Hat will make IBM Watson, the company's AI offering, more accessible to users.
  • IBM products are already optimized to run on Red Hat's popular OpenShift platform making it easier to use applications in different environments.
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Just three weeks after acquiring Red Hat for $34 billion, IBM has unwrapped its plan for how the controversial purchase - the biggest in its history - is supposed to help the tech giant.

IBM's cloud boss, Arvind Krishna, says it will be a big boost.

Red Hat will essentially be key to IBM's bid to play a major role in hybrid cloud, a market Big Blue expects to be worth $1.2 trillion, said Krishna, IBM senior vice president in charge of cloud and cognitive software. Red Hat will be particularly critical in enhancing IBM's ability to take advantage of Watson, its vaunted AI technology, he added.

"This gives us a massive reach to take AI tools and give them to people wherever they want," he told Business Insider. "That's the 'aha' that comes about."


In buying Red Hat, IBM acquired an open-source cloud software maker whose products are popular among developers, and which could potentially expand the tech giant's reach in enterprise cloud.

Krishna announced that IBM has already optimized 100 of its products to run on Red Hat OpenShift, a popular platform where software applications can be developed so that they're able to operate in different types of computing environments.

Hybrid cloud play

That OpenShift integration is key in hybrid cloud, the computing model that lets businesses store and process data and use applications on a public cloud - like those run by Amazon Web Services, Microsoft and Google - while still maintaining big portions of their network in their own data centers.

IBM is a minor player in the nearly $100 billion public cloud market, which is dominated by Amazon Web Services, Microsoft Azure, and Google Cloud.

But it is aiming to be dominant in the hybrid cloud market, which Krishna says is poised to be bigger. He estimates the hybrid cloud market, in aggregate, to be worth about $1.2 trillion in the future, broken down thusly: $100 billion for hardware and components, $150 billion for cloud infrastructure, $350 billion for software and $550 billion for consulting and management services.


Krishna said Red Hat bolsters IBM's position in a key area of that market: artificial intelligence. If and as customers centralize their IT infrastructure on IBM and Red Hat services, it also puts all of their data in one place - making it easier for AI systems like IBM's own Watson to analyze.

"There is huge value in all of the data that lies inside enterprises," he said. "To unlock that value, you need to collect the data, organize the data, analyze the data and you do AI on it."

This echoes sentiments expressed by IBM chief exec Ginni Rometty, who earlier this year pegged the size of the hybrid cloud market at the slightly lower figure of $1 trillion.

Boosting Watson

IBM highlighted this push earlier this year when it rolled out Watson Anywhere, which made the technology accessible to users on any cloud platform. In fact, Krishna said, Watson Anywhere was a "test balloon" for what IBM eventually hoped to accomplish with Red Hat. With Red Hat, IBM customers will have easier access to Watson.

Analyst Steve Allen of S2C Partners said IBM appears to be making smart use of Red Hat - especially since Big Blue has committed to allowing Red Hat to maintain a neutral stance in the cloud wars, and maintain its compatibility with technology from IBM rivals like Amazon or Microsoft.


"IBM bet the ranch on the Red Hat purchase," he told Business Insider. "It's smart for IBM to support agnostic cloud endeavors, as Microsoft, Google and Amazon are going to spend vast resources pursuing AI."

Analyst Maiara Paula Munoz, senior industry analyst for cloud computing with Frost & Sullivan, also said focusing on Red Hat OpenShift as part of its hybrid strategy is "a wise move" that gives it inroads with existing customers who are already using the software.

She said having the tools "that enable enterprises to run IBM's software in different environments falls right in line with what customers are asking for."

Still, analyst Roger Kay of Endpoint Technologies Associates said it's now becoming clearer that "IBM intends to integrate Red Hat closely rather than treating it as an arm's length acquisition, which is good because synergy is what every company talks about but few actually do."

"The only downside is that some of Red Hat's other partners may cry foul," he told Business Insider. "But this is still the best way to go for IBM and Red Hat."


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