In one of the biggest tech acquisitions of 2018, software giant IBM has acquired US-based Linux distributor Red Hat. The deal has been struck at a staggering $ 34 billion in an all-cash deal. Until now, Red Hat was an open source software company.
The market value of Red Hat before the acquisition stood at $ 20.5 billion. IBM has acquired it on a premium of 63% over its trade value.
It may be noted that Red Hat forms that backbone of many of India’s critical systems like Bombay Stock Exchange, Aadhaar and GST.
Biggest tech acquisition
As reported by the Economic Times, IBM Chairman, Ginni Rometty on the acquisition said, “IBM will become the world’s #1 hybrid cloud provider, offering companies the only open cloud solution that will unlock the full value of the cloud for their businesses.”
IBM will be paying cash to buy all the shares in Red Hat at the cost of about $190 per share. Before the deal was announced, the closing price for each share was announced to be at $116.68 on October 26, as reported by Money Control.
With this deal, IBM hopes to compete with Amazon Web Services (AWS), Google, Microsoft and VMware and other frontrunners in the hybrid cloud technology providers. It is speculated that the Red Hat purchase will give IBM a much necessary boost in the cloud revenue as well as a suite of proven software products.
Red Hat in India
Several experts have speculated that this merger could have a considerable impact on India. Open Source software services from Red Hat form the foundation over which India’s some of the most important systems run on. This includes BSE, National Stock Exchange (NSE), Aadhaar, GST, Life Insurance Corporation of India (LIC), State Bank of India (SBI), Central Board of Direct Taxes and Employees’ Provident Fund Organisation (EPFO).
As reported by Economic Times, the Indian government has an open source policy which favours the use of free and open software services in most of the government projects, helping the government save a lot of money. Few studies have shown that because of this, the government has managed to save about Rs 8,300 crore on governmental expenditure on education and police services.
From the past experiences, it can be said that Red Hat has helped in revamping many of the projects. For instance, the efficiency of BSE improved significantly after the implementation of Red Hat Enterprise Linux operating system in 2016.
What is an open source software and how does this business model work
Red Hat was founded in 1993. It specializes in Linux operating system which happens to be the most popular type of open source platform. It was developed as an alternative to the license-based software by Microsoft. Red Hat charges a fee for custom features, maintenance and technical support, whereas, software companies like Microsoft charge for obtaining the license, inclusive of all features.
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