Red Hat Continues To Grow While IBM Remains Stagnant Overall

Red Hat, the leader in open-source software for businesses, has continued its upward trajectory with impressive growth despite the overall struggles of its parent company, IBM. The Big Blue technology company, which purchased Red Hat in 2018 for $34.5 billion, reported less-than-expected third-quarter revenue of $17.62 billion, putting it on track for another lackluster year of sales. The success of Red Hat, however, is a positive sign for the company’s cloud and cognitive software business unit, with its 17% quarterly growth and 40% growth in OpenShift recurring revenue.

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One roadblock for IBM is a volatile labor market that has skilled workers thinking twice before jumping into a new role without significant increases in wages and benefits. Higher acquisition and retention costs may preclude companies like IBM from being able to sufficiently staff departments that require skilled specialists that are suddenly in higher demand. Red Hat, which operates independently as a subsidiary of IBM, is able to offset the costs of its open-source software by selling subscription-based support, training, and integration services. By promoting Red Hat as a neutral provider of solutions, rather than a sales division of Big Blue, IBM could improve its competitive stance in the hybrid cloud market.