Contact: Scott Denne
In paying $7.5bn to own the preeminent repository of open source software code, Microsoft is inviting us to see how much its ideology around free software has changed. After all, the company’s previous CEO called Linux a ‘cancer’ and spent much of the previous decade threatening – and in one instance pursuing – litigation. And although Microsoft’s view of open source software has evolved, the acquisition of GitHub shows that its obsessions have not.
Microsoft has long been a builder and buyer of technology platforms. Although ‘platforms’ is an overused word in tech circles, in this case we mean the software or infrastructure upon which something of value can be built by outside parties. One could argue whether its largest purchase, LinkedIn ($26.2bn), fits such a definition. However, Windows and Azure undoubtedly do, as does Mojang, the developer behind Minecraft that it bought for $2.5bn in late 2014.
As a site that hosts 28 million software developers, the code they write and a marketplace for developer tools, GitHub certainly qualifies. Moreover, it matches another longtime Microsoft pillar: catering to developers. According to 451 Research’s M&A KnowledgeBase, Microsoft has printed 12 developer-related acquisitions in the past three years, although its history as a maker of developer tools extends well before that.
Philosophical alignment makes for copacetic press releases, but doesn’t motivate any company to hand out $7.5bn of its stock. In owning GitHub, Microsoft plans tighter integrations between the site’s workflow tools and its own Visual Studio development environment. And Microsoft should be able to get its other offerings – particularly Azure – in front of a new audience of developers.
Although the buyer plans to continue to enable GitHub customers to write code into any cloud offering, its own Azure is in need of a larger developer audience. Despite Microsoft’s roots as a developer-focused company – its first product in 1975 was a BASIC interpreter – its IaaS offering has fallen behind others in maintaining that group’s loyalty. According to 451 Research’s Voice of the Enterprise: Hosting and Cloud Managed Services, only 9.4% of Azure customers use the service’s development tools, compared with 12% of AWS customers.
For more real-time information on tech M&A, follow us on Twitter @451TechMnA.