Now that IBM has finalized its acquisition of Red Hat, let's evaluate the opportunities for the joint company to impact the modernization of communication service provider (CSP) IT and network operations. With Red Hat, IBM has an impressive list of customers —almost all of the leading CSPs—and a broad range of software and services offerings. IBM will need to move fast and invest resources to capitalize on the large opportunities to sell software and services to CSPs.
IBM in the telecom industry
IBM invested heavily in its telecom business operations in the decades of 1990s and 2000s, and captured a decent share of back office (OSS/BSS) business – including software, services and hardware. It has acquired assets covering system integration, security, network management (such as Micromuse) and analytics software – all useful in telecom networks. Its services organization is involved in many customized operation support systems and business support systems (OSS/BSS) systems, and it has significant outsourcing business with CSPs. For example, IBM recently signed a large cloud partnership with Vodafone. IBM has neglected its telecom business operations over the last 10 years as it has struggled to find relevance in a cloud-centric IT world.
Red Hat in the telecom Industry
Red Hat is a leading supplier of software to the IT and network arms of the CSP industry, including its OpenStack and OpenShift (containers) platforms. Telecom is one of Red Hat’s largest verticals, and it has invested substantial resources to grow its business. Red Hat is heavily involved in CSP efforts to virtualize and containerize its IT and network software. Containers and OpenStack are critical aspects of CSPs’ efforts to virtualize their networks, including 5G and mobile edge computing. Red Hat competes with open source offerings as well as VMware for the CSP business.
How IBM and Red Hat together target CSPs
The combined organization has a wealth of software and services assets to help CSPs improve their IT, back-office and network architectures. In some ways, Red Hat provides the “missing pieces” of the network function virtualization infrastructure (NFVi) architecture that IBM needs to provide a full-stack offering to CSPs. IBM can enable CSPs to migrate to hybrid cloud architectures – either via building private clouds or using IBM’s public cloud services. In addition to the Red Hat offerings, IBM can provide middleware, analytics, blockchain, security, AI, and many other software offerings. IBM can also provide customized services and outsourcing to CSPs of all sizes globally.
IBM is likely to approach its largest CSP customers on a case-by-case basis in regards to modernization of their OSS/BSS systems. CSPs will have the option to stay with legacy IBM-based systems or migrate to Red Hat cloud-ready software (or, of course, select another supplier.) Red Hat CSP sales teams will be able to expose their customers to the breadth of the IBM portfolio. Especially interesting for Red Hat is the ability to offer IBM’s services as part of the deal – services that Red Hat has referred to its system integrator partners is the past.
Conclusions and recommendations for CSPs
Red Hat will continue to invest resources to maintain its position as the leading open source software supplier to CSPs, including OpenStack and OpenShift. It benefits from having a stable owner and from the options to add IBM software and services into its solution offerings to CSPs.
IBM will have to decide how much resources it plans to invest – beyond the obvious porting of its software to Red Hat platforms. For example, providing a full stack NFV offering is something IBM/Red Hat can do, but it will require a large amount of resources to integrate its offerings as well as selling and supporting them.
CSPs have many potential partners in their efforts to enhance/upgrade their IT and network architectures – including HPE, Ericsson, Nokia, Cisco, VMware/Dell, Amdocs, Accenture, and many more. Red Hat continues to be in the top tier of contenders as a leading software supplier to CSPs and it's up to IBM to decide whether it will commit the resources (and execute the integrated offer) to become a leading CSP partner. CSPs should continue to engage with IBM/Red Hat, but may want to assess the depth and success of the integration efforts before committing to large, complex deals involving synergies from the merger.
Lee Doyle is principal analyst at Doyle Research, providing client-focused targeted analysis on the evolution of intelligent networks. He has over 25 years’ experience analyzing the IT, network, and telecom markets. Doyle has written extensively on such topics as SDN, NFV, enterprise adoption of networking technologies, and IT-Telecom convergence. Before founding Doyle Research, he was group VP for network, telecom, and security research at IDC. He holds a B.A. in economics from Williams College. He can be reached at [email protected] and follow him @leedoyle_dc.
Industry Voices are opinion columns written by outside contributors—often industry experts or analysts—who are invited to the conversation by FierceTelecom staff. They do not represent the opinions of FierceTelecom.