IBM bets big on Red Hat to drive to its hybrid cloud market in India

IBM is relying on its recent Red Hat acquisition, the faster adoption of cloud technology by mid-size firms and sectors such retail, automobile and government to drive its business in India.

For IBM, cloud business in India is already growing in double digits in the last few quarters. In a conversation with Moneycontrol, Vikas Arora, IBM Cloud & Cognitive Software Leader, IBM India/South Asia, said the company is seeing a triple digital growth in the midsize segment as they are migrating to cloud much faster.

This growth is driven by digital transformation across sectors including banking and financial services, telecommunications and also the government. The company is also seeing traction from the retail, manufacturing and automobile sectors as these enterprises invest in technology to cater to their growing needs. This includes handling the large amount of data being generated and combating cybersecurity breaches.

“In the next two years we are see growth coming from the BFSI, telecommunications and government. In addition, retail, manufacturing and automobiles are promising areas,” he added.

In addition, the acquisition of Red Hat will also open newer avenues of growth for the tech major.

Despite being one of the first movers when it comes to artificial intelligence and machine learning, it is not the leader in the cloud market.

According to a report by platform that tracks cloud space CloudWars, the projected revenues for 2019 for AWS and Microsoft Azure, which are market leaders, stand at $35.2 billion and $44.7 billion respectively. IBM’s revenue from cloud in the last 12 months is at $19.5 billion. Experts believe that it could change with Red Hat.

The acquisition of Red Hat for $34 billion is one of the largest in the history of IBM and also the third largest acquisition in tech space across the world. In a statement issued by the company, the deal was termed the as one that would make IBM leader in the hybrid cloud market.

The deal with Red Hat opens up more opportunities for IBM giving the tech major more room for innovation. Vikas agreed that, “The deal does open up synergistic opportunities for IBM.”

How so? To understand the connection between Red Hat and IBM Cloud business, one needs to look at the mission critical factors that are important for business operations, which are online banking systems, power systems and other computer systems that are necessary for day-to-day running of business.

Majority of these mission critical loads run on Linux, and Red Hat is a market leader in providing products to open-source platform like Linux. Arora said that Red Hat is the largest player in the enterprise platform for Linux, accounting for about 70 percent. Recent times have seen enterprises shifting their mission critical load to cloud.

Ginni Rometty, IBM chairman, president and CEO, said in the statement then that the firms need open, flexible technology to manage these hybrid multi-cloud environments. “They need partners they can trust to manage and secure these systems. IBM and Red Hat are uniquely suited to meet these needs. As the leading hybrid cloud provider, we will help clients forge the technology foundations of their business for decades to come," she added.

“This is why Red Hat acquisition is important,” Arora added. According to him, the acquisition will help customers feel a lot more confident to take their mission critical applications to cloud.