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Well, remember too that IBM didn't pay $34b for just RHEL - a big part of the purchase was OpenShift which has been coming up in revenue and has RHEL as its und

by jzb 3y ago

Well, remember too that IBM didn't pay $34b for just RHEL - a big part of the purchase was OpenShift which has been coming up in revenue and has RHEL as its underpinning. And I have a lot more to write and say about that in a series for my own blog, but certainly IBM isn't looking for RHEL revenue to go down... And to be very fair to all involved, that's not even remotely unique to IBM. IBM is a public company and the expectation for public companies is that revenue always goes up. Always. Red Hat had to live with that as an independent public company too. If IBM weren't in the picture and Red Hat were reporting poor subscriber numbers for RHEL, investors would be calling for heads because late stage capitalism. There's no more room for long-term thinking if that doesn't involve "numbers go up, every quarter."

geerlingguy 3y ago
Yeah, and regarding OpenShift, I wonder how well that play has been working for IBM. My guess is they were expecting to 10x or 100x OpenShift revenues as giant corporations standardized on containerized infrastructure... ...but then Kubernetes (sans OpenShift) seemed to do the 10x'ing while OpenShift was just what RH customers used if they weren't already exploring Kubernetes through some other cloud provider's offering.
- jzb 3y ago
  "I wonder how well that play has been working for IBM." In January IBM reported that OpenShift is pulling in $1 billion in Annual Recurring Revenue [1]. OpenShift existed as a product before Kubernetes but was rebased on Kubernetes with v3. That was released (I think) in 2016? So that's basically 6 years from $0 Kubernetes revenue to $1 billion. Red Hat numbers overall are sort of blended in with the rest of earnings for their group, I think, so I don't see exactly what Red Hat's numbers are now overall. When I worked for Red Hat they'd break it out internally but I wouldn't be able to share that unless it was reported publicly... It took Red Hat something like 12 years from IPO to $1 billion in ARR, as an entire company. Not sure when RHEL alone became a $1 billion ARR business, but you have to remember that Red Hat's numbers included JBoss and other software too when they hit $1 billion. As far as I know, none of the cloud providers break out Kubernetes numbers alone. I don't know, for example, how much AWS racks up via its Kubernetes. Of course, AWS also gets some of the OpenShift business since some of Red Hat's customers are on AWS, there's ROSA, etc. (Then again, AWS also gets a slice of RHEL too...) Worth noting that Google Cloud posted its first profitable quarter in April of this year. No idea what Google's market share for Kubernetes is, but if I had to guess I'd say that their distribution isn't #1. (If anyone actually can accurately measure this, anyway...) If IBM expected OpenShift to have grown beyond $1bn by January this year, I'd say that was unrealistic. I mean, obviously because it didn't, but also because when IBM acquired Red Hat officially the total Red Hat revenue was about $3.4 billion and if I'm not mistaken "emerging technologies" (including OpenShift) accounted for only $225 million. [2] If OpenShift was, say, $100m of that then they have (in fact) 10x'ed it. And, finally, I don't think OpenShift revenues reflect whatever services IBM has packaged for OpenShift as a standard deployment platform. So - if IBM has made it easier to sell other things because they only have to target OpenShift, and they're successfully pushing OpenShift into major customers, then it's a pretty good deal. But for now they also need to protect their primary Red Hat revenue stream, and that still appears to be RHEL. [1] https://www.ibm.com/investor/att/pdf/IBM-4Q22-Earnings-Prepared-Remarks.pdf https://www.ibm.com/investor/att/pdf/IBM-4Q22-Earnings-Prepa... [2] https://www.theregister.com/2019/03/26/red_hat_2019_results/ https://www.theregister.com/2019/03/26/red_hat_2019_results/
mfuzzey 3y ago
>There's no more room for long-term thinking if that doesn't involve "numbers go up, every quarter." That is obviously unsustainable. I get that they need to make a profit but there's no fundemental reason numbers have to keep going up and at some point they won't be able to go up anymore, even if the business remains profitable.
- freedomben 3y ago
  Yeah it is obviously unsustainable, but nobody knows how long it can last, and they don't really care. Whoever gets to helm the ship when the end starts will get fired by the board, and somebody new will come on board. When they eventually can't grow, they'll start acquiring other companies and using that as their growth. Repeat forever.

by jzb 3y ago

geerlingguy 3y ago

Yeah, and regarding OpenShift, I wonder how well that play has been working for IBM. My guess is they were expecting to 10x or 100x OpenShift revenues as giant corporations standardized on containerized infrastructure... ...but then Kubernetes (sans OpenShift) seemed to do the 10x'ing while OpenShift was just what RH customers used if they weren't already exploring Kubernetes through some other cloud provider's offering.

jzb 3y ago
"I wonder how well that play has been working for IBM." In January IBM reported that OpenShift is pulling in $1 billion in Annual Recurring Revenue [1]. OpenShift existed as a product before Kubernetes but was rebased on Kubernetes with v3. That was released (I think) in 2016? So that's basically 6 years from $0 Kubernetes revenue to $1 billion. Red Hat numbers overall are sort of blended in with the rest of earnings for their group, I think, so I don't see exactly what Red Hat's numbers are now overall. When I worked for Red Hat they'd break it out internally but I wouldn't be able to share that unless it was reported publicly... It took Red Hat something like 12 years from IPO to $1 billion in ARR, as an entire company. Not sure when RHEL alone became a $1 billion ARR business, but you have to remember that Red Hat's numbers included JBoss and other software too when they hit $1 billion. As far as I know, none of the cloud providers break out Kubernetes numbers alone. I don't know, for example, how much AWS racks up via its Kubernetes. Of course, AWS also gets some of the OpenShift business since some of Red Hat's customers are on AWS, there's ROSA, etc. (Then again, AWS also gets a slice of RHEL too...) Worth noting that Google Cloud posted its first profitable quarter in April of this year. No idea what Google's market share for Kubernetes is, but if I had to guess I'd say that their distribution isn't #1. (If anyone actually can accurately measure this, anyway...) If IBM expected OpenShift to have grown beyond $1bn by January this year, I'd say that was unrealistic. I mean, obviously because it didn't, but also because when IBM acquired Red Hat officially the total Red Hat revenue was about $3.4 billion and if I'm not mistaken "emerging technologies" (including OpenShift) accounted for only $225 million. [2] If OpenShift was, say, $100m of that then they have (in fact) 10x'ed it. And, finally, I don't think OpenShift revenues reflect whatever services IBM has packaged for OpenShift as a standard deployment platform. So - if IBM has made it easier to sell other things because they only have to target OpenShift, and they're successfully pushing OpenShift into major customers, then it's a pretty good deal. But for now they also need to protect their primary Red Hat revenue stream, and that still appears to be RHEL. [1] https://www.ibm.com/investor/att/pdf/IBM-4Q22-Earnings-Prepared-Remarks.pdf https://www.ibm.com/investor/att/pdf/IBM-4Q22-Earnings-Prepa... [2] https://www.theregister.com/2019/03/26/red_hat_2019_results/ https://www.theregister.com/2019/03/26/red_hat_2019_results/

mfuzzey 3y ago

>There's no more room for long-term thinking if that doesn't involve "numbers go up, every quarter." That is obviously unsustainable. I get that they need to make a profit but there's no fundemental reason numbers have to keep going up and at some point they won't be able to go up anymore, even if the business remains profitable.

freedomben 3y ago
Yeah it is obviously unsustainable, but nobody knows how long it can last, and they don't really care. Whoever gets to helm the ship when the end starts will get fired by the board, and somebody new will come on board. When they eventually can't grow, they'll start acquiring other companies and using that as their growth. Repeat forever.