Just about a week ago I waxed poetically on IBM’s $34 billion purchase of Red Hat and how much fun it was going to be to watch that integration process. I guess I now need to move that thesis to VMware, which just one week after IBM’s multi-billion-dollar splash also increased its displacement in the open source pool. That jump involved its purchase of privately-held Heptio for an undisclosed amount.
My original thesis was that should IBM smoothly pull off the integration process it would emerge as a much more robust competitor to cloud giants like Amazon Web Services (AWS) and Microsoft Azure. And, if it should somehow fail to manage the integration, well, that would just be fun to watch. That prognosis holds true for VMware, too.
While not as splashy, the VMware deal has some serious street level, open source cred. See, Heptio was founded by a couple of guys who were also instrumental in the development of Kubernetes when they were both at Google. And, as we are now aware, Kubernetes is the poster child for open source and a requirement for all press releases.
In moving my thesis forward, I will also maintain that integration will be key to the VMware/Heptio deal. Obviously the financial stakes are much lower, but I would guess the internal stakes at VMware are substantial.
Unlike IBM, which had a long history of working in the open source community, VMware is more of an operational island. Its immense virtual machine (VM) business has been exceedingly profitable for the company, but has begun to look sort of outdated by the expansion of multi-cloud environments and the need for greater “Day 2” support. These items have been a boon for the container environment, which has itself fed into the Kubernetes orchestration wave.
“What this means in practical terms is that VMware’s classic virtualization business had to view containers as a potential disruption at a minimum,” explained Stephen O’Grady, founder of analyst firm RedMonk, in a blog post.
VMware has been moving more aggressively to integrate containers and Kubernetes into its operations. It has also been present in that market through its Pivotal Container Service (PKS) partnership with Pivotal and Google and its hosted on-premises VMware Kubernetes Engine (VKE) software.
But it had to have known that a more formidable push was required, if not just for optics. This deal for Heptio is a perfect fit. While no price was published, it’s assumed it was somewhat reasonable compared to what IBM forked out for what is admittedly a much bigger player in Red Hat. But, with Heptio’s top-heavy leadership, it looks to have been a savvy investment by VMware.
The Clock’s Ticking
This recent rash of deals also highlights a quickening of the merger and acquisition wave that has been building across the open source, container, and Kubernetes space. Some of those highlights include Microsoft’s purchase of Deis last year, its $7.5 billion purchase of GitHub this year, Red Hat’s $250 million acquisition of CoreOS earlier this year, and New Relic’s recent acquisition of CoScale.
Who knew the open source waters were so inviting?
Chip Childers, CTO of Cloud Foundry, told me that these deals show that open source has become a viable business. And he thinks these deals are just the beginning of what will be further consolidation across the open source space. He expects that pace to quicken next year as more large corporations realize that they need to get more serious about open source.
That should prove compelling to those companies – and their investors – that have hooked their wagons to open source platforms, and more specifically those that are deep on container and Kubernetes knowledge. Think players like Rancher Labs, Mesosphere, GitLab, or Docker Inc. Those companies must have burning ears at the moment.
And while Childers said he expects this ramp to begin next year, I say why wait for the calendar to flip. This time of year is typically slow in terms of news, what with everyone taking time off for the holidays. That’s a perfect time to make a big splash. Who’s next to jump in?
