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Part 4: Can Raleigh’s Red Hat remain a rebel under the banner of IBM?

The (Raleigh) News & Observer 4/28/2023 Brian Gordon, The News & Observer (Raleigh)

On Monday morning, April 24, 2023, Red Hat employees woke up to unwelcome news.

In an all-staff email, Red Hat CEO Matt Hicks announced the company would reduce its total workforce by close to 4% over the next few months.

“This decision is now appropriate to ensure Red Hat’s ability to compete in a new environment,” he said.

Online, many reacted by blaming a company. Not Red Hat, exactly, but IBM.

“It was inevitable that IBM would eventually turn Red Hat blue,” a commenter said on Facebook. “Welcome to IBM!” another posted underneath The News & Observer article on the layoffs.

In July 2019, the multinational corporation nicknamed “Big Blue” acquired Red Hat for a landmark sum of $34 billion, among the largest software acquisitions in history. At the time, Red Hat had 13,360 employees and offices in 40 countries. It had built a distinct brand adhering to open-source orthodoxy, keeping its information accessible and contributing code back to strengthen Linux.

Yes, Red Hat was a corporation, and corporations aren’t typically “cool.” According to financial records, its revenue the year before being bought topped $3.3 billion.

Yet, a hip aura still surrounded Red Hat, a reputation it picked up playing the thorn in Microsoft’s heel 20 years earlier. It actually got rich exposing an open-source ideology, a journey technologists worldwide admired.

Many are curious to see if this identity will continue.

“I do think the real question for people that are there now is, What has the IBM merger done to the culture?” said Joanne Rohde, the chief operating officer at Red Hat from 2004 to 2009.

“I’m extremely curious,” said Red Hat co-founder Bob Young. “How much does IBM change Red Hat and how much does Red Hat change IBM?”

Some feel IBM’s presence in Red Hat work

Headquartered in Westchester, New York, IBM was a magnitude larger than Red Hat when it purchased the Raleigh company four years ago. Its Triangle area headcount alone is about three times higher than Red Hat’s.

And next to Red Hat, IBM was seen to have a drier corporate culture.

“We had IBM refugees all the time,” said former Red Hat chief technology officer Michael Tiemann, who would meet with new hires during orientation. “I remember meeting with one of those people (after 2019) who was just so mad because they felt like they had escaped a bad situation and come to Red Hat.”

In the deal, IBM committed to respect Red Hat’s neutrality by not interfering with its open-source model and to allow Red Hat to sell services to IBM’s competitors, like Lenovo, Dell and Hewlett-Packard. IBM also pledged to keep Red Hat’s platforms transparent and free.

“What we all worry about is that IBM might attempt to apply proprietary licenses to what Red Hat’s doing,” Young said.

Some Red Hat employees say there has been a subtle culture shift under IBM.

“Sure, the acquisition has led to Red Hat being a lot more, say, corporate-centric, but then again, it’s something a big company has to do to make sure they survive and they prosper,” said Akashdeep Dhar, a software engineer based at Red Hat’s office in Pune, India.

IBM, he said, has been “calculated about the investments both in time, money, as well as the human resources, and understanding that has an outcome attached to it.”

But overall, Dhar said, IBM has largely left Red Hat alone.

“We still are free to make choices of our own, and they have been very supportive of the choices we make,” he said.

The fastest-growing part of IBM

Dhar is also a community lead for the Fedora Council, an independent Red Hat-backed initiative that coordinates employees and volunteers to improve Linux. Contributing back into Linux, the operating system that’s made Red Hat (and now IBM) millions of dollars, has been important to many Red Hatters over the years.

“We don’t own it,” Michael Ferris, Red Hat’s vice president of corporate development and strategy, said of Linux.

Dhar said IBM has respected Red Hat’s position on transparency.

He also pointed out that IBM has invested heavily in Red Hat platforms like OpenShift, extending its reach to new sectors. Developed in 2011, OpenShift is a hybrid cloud platform that allows customers to create, use and manage applications. According to IBM, it today generates $1 billion in annual recurring revenue.

Much of Red Hat, in fact, has performed sterling for Big Blue. It is the fastest growing part of the parent corporation. As IBM’s overall growth has stalled or decreased in recent quarters, Red Hat’s revenue has jumped by at least 10% every fiscal quarter since the acquisition.

Open-source believers are cautious about IBM tinkering. But in the minds of many, IBM won’t mess up Red Hat because it knows Red Hat customers won’t stick around with a diminished product.

In June of 1998, when Red Hat was just beginning to draw widespread attention, The News & Observer noted that “the way Red Hat got to this point is as much about a software phenomenon as it is about any single company.”

That phenomenon was open source, and it’s helped define the Triangle for the past 30 years. Today, the Triangle is one of the fastest growing areas in the country, with tech giants like Google expanding and Apple on the way.

Local startups like SAS, Pendo and Epic Games have seen their valuations top $1 billion and Raleigh and Durham regularly demand recognition among the nation’s hottest tech hubs.

The Triangle will go on just fine if Red Hat ever loses its shine. Open source will too.

But neither the movement nor the region would be the same.

This story was produced with financial support from a coalition of partners led by Innovate Raleigh as part of an independent journalism fellowship program. The N&O maintains full editorial control of the work.

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