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Internally, Amalgam Insights has been discussing why IBM chose to acquire Red Hat for $34 billion dollars fairly intensely. Our key questions included:
- Why would IBM purchase Red Hat when they’re already partners?
- Why purchase Red Hat when the code is Open Source?
- Why did IBM offer a whopping $34 billion, $20 billion more than IBM currently has on hand?
As a starting point, we posit that IBM’s biggest challenge is not an inability to understand its business challenges, but a fundamental consulting mindset that starts with the top on down. By this, we mean that IBM is great at identifying and finding solutions on a project-specific basis. For instance, SoftLayer, Weather Company, Bluewolf, and Promontory Financial are all relatively recent acquisitions that made sense and were mostly applauded at the time. But even as IBM makes smart investments, IBM has either forgotten or not learned the modern rules for how to launch, develop, and maintain software businesses. At a time when software is eating everything, this is a fundamental problem that IBM needs to solve.
The real question for IBM is whether IBM can manage itself as a modern software company.