The cloud native acquisition and consolidation continues. EQT owned SUSE just acquired Rancher Labs for $600M, and although Rancher revenue was not publicly disclosed, this appears to be a purchase at ~30x multiple on revenue.
While EQT and SUSE celebrate the $600 million purchase as the first aggressive step towards hypergrowth via acquisition, enterprises are already sharing with us their private concerns on the future of the Rancher platform. Why is that?
Let’s analyze the likely outcomes of this acquisition and its impact on customers. To deliver the ROI required for the $600M acquisition of Rancher, SUSE will have to make a decision. Beyond accessing the North American market with a Kubernetes management platform, how will SUSE evolve its product and solution messaging? And will it tie the deployment of Rancher to SUSE Enterprise Linux?
What Product Monetization And Community Playbook Will SUSE Run?
Let’s look at past market moves of both SUSE and their nearest competitor, Red Hat. There are several blueprints on how users can be tied to the underlying OS. Red Hat for example integrated important compliance features into commercial RHEL OS to hardwire the use of OpenShift to RHEL. Similarly, SUSE’s CaaS and App platforms run only on SUSE Linux.
It is also important to question where Rancher’s R&D will be invested. Rancher is currently the #201st company in rank order of corporate committers to the upstream Kubernetes project (Rank 201 - as of 2020-07-12). It will be interesting to see if SUSE-owned Rancher will change their direction and start working more with the upstream community to provide more benefits to the whole kubernetes ecosystem or continue working only on their own development.
What Will Be Happening To The Rancher Users?
EQT will require a financial exit for their SUSE investment. EQT’s SUSE will be financially motivated to tie Rancher to SUSE Enterprise Linux and continue its “growth by acquisition” strategy by building out a vertical garden, akin to what Red Hat has done and what SUSE has done previously. We anticipate no immediate major change so as to prevent Rancher upsetting its customers. Running the monetization playbook won’t be done immediately, but over the course of 12-24 months, enterprise customers will find they no longer have OS vendor neutrality and freedom of choice. As a customer of Rancher, watch out for being the proverbial “frog in a pot of cool water” with the water set to heat up to a boil.
If this concerns you, I’d love to discuss with you the productivity benefits of Kubernetes freedom of choice.
Kubermatic as the Top 5 corporate contributor to the Kubernetes Project in 2019 is committed to providing a zero lock-in platform and empowering customer freedom of choice. Kubermatic empowers organizations worldwide to fully automate their Kubernetes and cloud native operations across multi-cloud, edge and on-prem.
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