I have certain core IT values. I like customers to buy versus build systems . Have long been a buy cheerleader. But in return, I expect vendors to build not buy. So, I have never been a fan of big acquisitions. Certainly not at massive multiples.
So my initial reaction to IBM’s $ 34 billion play for Red Hat is that of distaste.
But the opinions of bankers and investors matter more than mine so not going to comment more on that front.
Reading the tea leaves, though I wonder if this signals
a) The end of another hype cycle for AI?
I saw a recent Fortune issue which was all about AI and I wondered if that is a signal of the peak of the current AI hype cycle. BTW, we are going through the 4th or 5th hype cycle around AI. They appear and disappear every decade or so. As I wrote in Silicon Collar
“Since the 1950s! That is when Alan Turing defined his famous test to measure a machine's ability to exhibit intelligent behavior equivalent to that of a human. In 1959, we got excited when Allen Newell and his colleagues coded the General Problem Solver. In 1968, Stanley Kubrick sent our minds into overdrive with HAL in his movie, 2001: A Space Odyssey. We applauded when IBM’s Deep Blue supercomputer beat Grandmaster Garry Kasparov at chess in 1997. We were impressed in 2011 when IBM’s Watson beat human champions at Jeopardy! and again in 2016 when Google's AlphaGo showed it had mastered Go, the ancient board game. Currently, we are so excited about Amazon's Echo digital assistant/home automation hub and its ability to recognize the human voice, that we are saying a machine has finally passed the Turing Test. Almost.”
Is IBM’s pivot from the attention it has given Watson the last several years more of a confirmation of the peak?
b) A great disturbance in the Force?
I wrote earlier about The End of Cloud History I concluded
“Yes, we are approaching a pivot in the cloud apps market. This is where the geopolitics were in 1989. The next decade and beyond will be tumultuous – exciting for some, disrupting to others.
It is the end of cloud apps 1.0.”
Last week, Larry Ellison announced a more secure Gen 2 cloud. IBM’s play for Red Hat is about “multi-clouds” and given its traditional hardware and hosting strengths, I read more of a pivot towards private clouds.
My fellow analysts who watch hawk-like for multi-tenant, public cloud architectural purity will be having conniptions with the cloud washing we will see in the next few years.
I have a feeling J.J. Abrams could make a next career cataloging the cloud pure and evil that are about to unfold.
