On Sunday, it was announced that IBM will buy open source software company, Red Hat, for $34 billion. This is a landmark deal, as the biggest IBM has made in its more-than-a-hundred year history, and the third largest deal ever for a US tech company. It also moves IBM very quickly into pole position as the largest hybrid cloud provider, ahead of its rivals Amazon and Microsoft. But the most interesting thing about the acquisition is what it suggests about IBM’s future relationship with the open source community.
This is the latest in a string of deals in the open source space that suggests a major shift in the tech industry. In March, Salesforce acquired MuleSoft for $6.4 billion. This was quickly followed Microsoft’s eyebrow-raising $7.5 billion acquisition of open source developer platform, Github, in June – which generated a degree of backlash from the developer community. Since then, Microsoft has joined the Open Invention Network, effectively offering up its entire patent portfolio to the open-source patent consortium’s members, and just this month open source data management platforms Cloudera and Hortonworks merged in a $5.2 billion deal.
This activity marks a change in the perception of open source. Traditionally, the worlds of intellectual property protection and open source were vastly separate. They were seen as completely opposing business strategies, and tech companies favoured one or the other – but the Venn diagram rarely overlapped. Microsoft and IBM were viewed as the epitome of a closed-door approach to protection of intellectual property, and open source was associated with smaller, edgier development teams doing more interesting things. So, to many, this recent activity seems to be completely left field. To some developers, it is even alarming.
However, to those who had been paying attention, these acquisitions are actually a completely logical development in a shifting approach to open source that has been taking place for years. The reality is that the opposition between the protection of intellectual property and the open source ethos has long since passed, and in fact a combination of both approaches is common.
Microsoft, for example, has been deeply involved in the open source development community. In fact, figures show that Microsoft was the number one contributor to GitHub in 2017, so the acquisition should hardly be surprising at all. In the same year Google ranked second, and ranking in third and fourth place? Well Red Hat and IBM, of course.
At the same time, these companies also remain proponents of traditional IP protection strategies. As well as ranking in the top ten as Github contributors in 2017, IBM, Microsoft, Google, and Intel also all rank in the top 10 for US patents granted in 2017. Others, such as Amazon and Facebook aren’t far behind, only losing out to hardware-focused tech companies such as Samsung, Canon and LG (who wouldn’t contribute to an open-source platform for obvious reasons).
The message is that the tech giants haven’t just turned their gaze to open source – they’ve been highly active in these communities for a long time and have no qualms with making open source contributions alongside their traditional IP protection strategies. It’s important to dispel the myth that the two approaches are mutually exclusive because it creates a distorted image of the market.
If SMEs are operating under the impression that open source is a “small-businesses’ game”, they may make the wrong choices. For example, this presumption may lead to the conclusion that by building their own solution from scratch they will be competing with similarly sized open source enterprises – when in fact they are going to be competing with companies with vastly superior resources, and they are almost certainly going to lose out. However, by recognising that the tech giants are active open source contributors, SMEs can identify opportunities in the market to piggyback upon the ready-made solutions that such giants provide, freeing up time and resource to focus on the aspects of their innovation that really set them apart and add value to their business.
That said, SMEs must enter into open source arrangements with their eyes open, particularly regarding ownership of innovation. For example, no start-up wants to discover that they do not own, or cannot license out, key parts of the technology underpinning their value proposition. Careful review of open source license agreements before committing significant resource to a project that makes use of open source technology is therefore essential.
Companies such as IBM and Microsoft buying open source enterprises – and paying over the odds for them – is ultimately good news for the market. It shows that the giants have recognised the value of open source for their own businesses’ future development and, therefore there is opportunity for everyone else. This isn’t going to be the last major open source deal we see. It’s probably not even the last one of this year.
Open source has become a more sophisticated market than people expect. Rather than seeing this as a conflict, SMEs have to accept this reality and use it to their advantage. As these acquisitions have shown, Microsoft, Google and IBM have the potential to be valuable allies for open source companies looking to bring their innovations to the next level.
Matthew Hoyles is senior associate at Gill Jennings & Every