Red Hat acquires 3scale, will open source API tech

Red Hat has confirmed it has entered into a definitive agreement to 3scale, a provider of API management technology.

The two companies have been in partnership since early 2015 to create platform for API-based application development, though the acquisition is set to close in June 2016. 3scale currently provides developers with the tools to create, manage and scale APIs, and also recently introduced a containerized version of their API Gateway for Red Hat OpenShift. The tool enabls users to create applications with microservices distributed across diverse, hybrid environments. Upon completion of the transaction, the team commented on its blog it will open source the code almost immediately.

Red Hat claim the API management platform offered by 3scale complements various aspects of its portfolio well, most notably the JBoss Middleware portfolio, and also the elastic cloud environment provided by OpenShift. Although the company has not confirmed whether the 3scale brand will continue in the long-term, it does have a technology roadmap based on current customer requirements and the competitive landscape, which will be honoured.

“3scale complements our existing middleware product portfolio and Red Hat OpenShift by enabling companies to create and publish APIs with tools such as Red Hat JBoss Fuse, and then manage and drive adoption of those APIs once they have been published,” said Craig Muzilla, SVP of Application Platforms Business at Red Hat.

Ret Hat hope the acquisition will prove to be a differentiator in a crowded market, as it believes API management offerings could be the make-or-break factor in a number of new customer acquisitions who are looking at integration solutions. This coupled with API management offerings becoming a more important requirement in cloud application platforms, is the basis of the transaction. Acquiring 3scale enables Red Hat to address these evolving requirements quickly, as it continues the wider industry trend of acquire to innovate over organic growth.

Alongside the acquisition, the team also announced its quarterly results which demonstrated healthy growth. Q1 revenue was reported at $568 million, up 18% year-on-year, with subscription revenues at $502 million, also up 18% year-on-year. Subscription revenue from Application Development-related and other emerging technologies offerings for the quarter was $98 million, an increase of 39%.

“Digital transformation and cloud computing are changing the way companies compete in virtually every industry today,” said Jim Whitehurst, CEO of Red Hat. “Organizations that rapidly embrace agile IT technology are succeeding as industry innovation accelerates around them. Our open source-based technologies are helping customers capture the business benefits associated with this rapid rate of change.”

In terms of the outlook for the remainder of 2016 and beyond, containers were a technology which have been prioritized for the business.

“We actually see containers as a great opportunity for us to continue to differentiate around, a, kernel space and user space being consistent,” said Whitehurst in the company’s earnings call. “So having the same host and technology in the container itself. And then secondly just ability to lifecycle manages against that.

“So containers overall are good for Linux because it helps it grow overall share versus Windows. And then within that we think we have a definitely differentiated position given our position in the OS. So that’s why we can see continue double digit growth in general in the OS category which includes containers.”