IBM in a Pickle With Red Hat, Says Sun COO

by Hinesh Jethwani    Aug 06, 2004

Big Blue’s Linux strategy has trouble written all over it, said Sun Microsystems COO Jonathan Schwartz in his blog, on Sunday.

Attacking IBM’s longstanding relationship with Red Hat, Schwartz said, “With most enterprises having picked Red Hat on IBM’s recommendation, IBM now clumsily realizes it’s invited the fox into the hen house. With Red Hat running on the majority of IBM’s proprietary hardware, Red Hat can now direct those customers to HP and Dell. Even Sun.”

However, Red Hat India prefers to believe that Schwartz’s comments are nothing but speculation. When contacted, Javed Tapia, director, Red Hat India, said, “The relationship between Red Hat and IBM has never been stronger. In fact IBM recently joined us at LinuxWorld in San Francisco to support the launch of Red Hat Application Server. There is a lot of excitement about working together on open source projects.”

In his blog, Schwartz justified the basis of his conclusion, claiming that “IBM has been among the most aggressive (and ironic) in positioning itself against the world of proprietary technology - in stark contrast to its history as the world’s most pernicious patent litigator. It’s against that backdrop that IBM brags about its ’thousands of programmers working on Linux.’ But ISV’s can’t build their business on a social movement - they have to pick a base software distribution and web service stack.”

“IBM has a problem. The problem is called history, and in its current incarnation it’s called Red Hat. The ‘history’ to which I refer is the experience of a former IBM CEO, John Akers. Akers and his staff had the wisdom to enter the PC market in its early days, but the short sightedness to suggest customers source their PC operating system from a little company in the Pacific northwest. The company turned into Microsoft, and they continue to generously return the fruits of their coup to their stockholders,” he added.

“A few years back, IBM and HP both hopped onto the social movement called Linux. It’s a wonderful movement. But the bad news for IBM is that the vast majority of enterprise datacenter deployments are now occurring on Red Hat’s Linux. 100 to 1, depending up on where you look. And with Red Hat increasing price, while adding in an application server that competes with WebSphere, IBM’s finding itself in the uncomfortable position of having lost control of the social movement they were hoping to monetize. They’re beginning to look like the IBM of Mr. Akers’s era - having missed the forest for a tree, and finding themselves without an operating system,” Schwartz continued.

Schwartz implied that IBM has made a big mistake by allowing Red Hat to spearhead its Linux thrust, which could cause a dent to its market share, effectively sidelining its contribution to the Open Source revolution.

Big Blue is fully aware of the implications, and is now in the process of readying a remedy, hinted Schwartz. “Now if you’re an IBM customer, you’ve probably received (or should prepare to receive) the pitch from IBM incenting you to move off Red Hat to SuSe - it’s clear they’re worried that Red Hat’s lock on customers is divorcing IBM from their customer relationships. At this week’s Linux World, I wouldn’t expect to see Red Hat in many of IBM’s press announcements. From my view, that’s a rather tenuous position - as Red Hat garners strength, and locks customers into its Red Hat Enterprise Server offerings, bringing in SuSe at the last minute isn’t having nearly the effect IBM desires - at least from the customers, developers (and press) I speak with. Moving from Red Hat Enterprise Server to SuSe’s Enterprise Linux is very complicated (eg, which application server do you pick?), and with IBM’s consulting bill, very expensive,” he explained.

“IBM is in a real pickle. Red Hat’s dominance leaves IBM almost entirely dependent upon SuSe/Novell. Whoever owns Novell controls the OS on which IBM’s future depends. Now that’s an interesting thought, isn’t it?” questioned Schwartz.

However, the fallout will have some positive implications, as it may work to Sun’s advantage. “But if IBM preemptively acquires Novell/SuSe, the world changes: Linux enters the product portfolio of a patent litigator not known for being a social-movement company. But where else will IBM go? With it’s current market cap, Red Hat seems unacquirable - but absent action, IBM’s core customers will be eroded by Red Hat’s leverage. And Sun’s ability to leverage our open Solaris platform (on industry standard AMD, Intel or SPARC), or Java Enterprise System, even on IBM’s hardware, gives us a significant - and sustainable - competitive advantage. With the demise of AIX, IBM is once again vulnerable.”

Giving his last words of what customers should expect in the future, Schwartz said, “I’d keep a close eye on the Novell/SuSe conversation. If IBM acquires them, the community outrage and customer disaffection is going to be epic. But where else does IBM go?”

Tags: IBM, Sun