What Does Microsoft’s $7.5 Billion Acquisition of GitHub Really Mean for Tech?

June 14, 2018 - 10 minutes read

mobile app developersIn a big turn of events, Microsoft, known a few years ago as a strictly proprietary code company, bought open-source code platform, GitHub, for $7.5 billion. GitHub, which has 28 million members, is a cloud-based software development host. GitHub is the Seattle-based tech giant’s third largest acquisition yet, trailing behind Skype and LinkedIn.

Many industry experts believe Microsoft bought GitHub to create a better foothold of cloud computing against its number one competitor, Amazon’s Amazon Web Services platform. And this buy may just push Microsoft ahead of Amazon.

Why Microsoft?

Microsoft’s other cloud computing competitors, such as Google, IBM, and Salesforce, among many others, are in a race with Microsoft and Amazon to get software engineers to use their cloud tools. The idea behind this is simple: the more programmers using a cloud tool, the more likely they are to bring their entire department with them, leading the whole company to enact the cloud services. This attracts even more developers, as competitors of these companies try to match their development environments.

Frank Gens is the chief analyst for research firm IDC. He says, “The strategic battle in the tech world is for developers. For Microsoft, the GitHub deal is about strengthening and widening its relationships with developers.”

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Microsoft CEO Satya Nadella agrees. “Developers are the builders of this new era, writing the world’s code. And GitHub is their home.” Nadella also says the business deal will advance Microsoft’s cloud computing ambitions and bring smarter and better code to every industry, on every device. It will certainly be easier for Microsoft to sell its Azure cloud services to large enterprise clients on GitHub.

GitHub’s Unknown Revenues

Microsoft isn’t buying GitHub for its proven business model; it’s because, as Nadella says, “Microsoft is a developer-first company, and by joining forces with GitHub, we strengthen our commitment to developer freedom, openness, and innovation.”

GitHub hosts over 85 million repositories, which are digital storage spaces for code. Some repositories are private (if you pay for the feature), but many are hosted on free developer accounts as public repositories. Web, blockchain, artificial intelligence, and mobile app developers, among many other programmers, can share their code, make comments, create issues, contribute to others’ code, and buy software tools all from GitHub’s interface.

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GitHub’s exact revenue is unknown, as are its profits, but analysts estimate a ballpark annual revenue of $200 million. Its biggest source of income is corporate projects hosted on its platform for a fee. The enterprise level of membership allows companies to keep code open-source while creating private repositories for more proprietary programming.

The $7.5 billion payday means GitHub’s venture capital investors, including Andreessen Horowitz and Sequoia Capital, will see a huge return on investment this year. Chris Wanstrath, GitHub’s CEO and co-founder, says he could’ve “never imagined” being bought by Microsoft when he created GitHub in 2008. “Git was a powerful but niche tool, clouds were just things in the sky, and Microsoft was a very different company.”

Microsoft’s Shift to Open-Source

Microsoft was an adamant supporter of closed-source proprietary software staying within the company at a time when Google was very publicly open-source and proud of it. In fact, Microsoft’s former CEO, Steven A. Ballmer, once called Linux (an open-source operating system) a “cancer” in tech.

In recent years, however, the company has completely switched philosophies. Microsoft is GitHub’s most active enterprise client, with over two million public contributions to code. The company open-sourced PowerShell configuration management frameworks and .NET development.

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It also developed Azure Sphere, which is a Linux-based operating system geared for Internet of Things devices. Azure Cloud can also now run on Linux, making the transition easier for developers who are used to running Terminal commands in a Linux environment.

Ed Anderson is an analyst at research firm Gartner. He says, “Developers by their nature are often suspicious of corporate ambitions. Microsoft will have to demonstrate its willingness to put the interests of developers ahead of any Microsoft-specific agenda.”

Microsoft Takes A Sure Bet

Experts say to take a holistic look at Microsoft’s acquisitions and current offerings to see how GitHub fits into Microsoft’s big picture. Nat Friedman is corporate vice president for developer services at Microsoft, and he’ll be taking over GitHub as CEO when the deal goes through. Wanstrath will join Microsoft as a technical fellow.

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Friedman says owning GitHub gives Microsoft confidence to “go all-in on GitHub.” He mentions that Microsoft will prove itself to be a reliable owner of GitHub by giving GitHub everything it needs to continue growing. “It’s a matter of building trust with developers. You earn the right to be considered for other things,” says Friedman.

Dissenting Developers’ Opinions

Some developers have a strong opinion on Microsoft’s biggest recent news. In the days after the announcement, Gitlab, one of GitHub’s biggest competitors, says, “We’re seeing 10x the normal daily amount of repositories.”

A Reddit user said this was no surprise, and that GitHub’s “real future is a buggy and monetized site.” A Google+ user wrote, “What does M$ have to gain from this, other than by either shutting it down in the long term, monetizing it further or by data mining folks? In just a matter of hours, they made GitHub a completely toxic entity.”

Many developers are worried about the privacy and copyright implications of the acquisition. Programmer Matt Van Horn asserts, “It’s gonna be so cool that Microsoft will be able to peek into the private repos of people trying to compete with them, won’t it?”

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Embracing Change

But other developers are welcoming the announcement with open arms.

Jon Masters is the chief ARM architect at Red Hat. He says, “If you’re needlessly hating on Microsoft for buying GitHub, I hate to be the one to have to tell you this, but the world changed. It’s time to move forward with life and accept that in 2018, MSFT isn’t the Great Satan out to destroy all Open Source.”

James Bottomley is a Distinguished Engineer at IBM Research, as well as a leading Linux developer. He adds, “Companies with well established open-source business models and motivations that don’t depend on the whims of VCs are much more trustworthy in open source in the long term. Although it’s a fairly recent convert, Microsoft is now among these because it’s clearly visible how its conversion from desktop to cloud both requires open source and requires Microsoft to play nicely with open source.”

And maybe it’s not just about GitHub’s user base. Microsoft developer Miguel de Icaza, has programmed several well-known open-source programs. He says, “Satya looked at Microsoft’s bill from all the code we host on GitHub and figured it would be cheaper to buy the company.”

Far-Reaching Implications

What will be the true implications for tech with Microsoft’s recent announcement? Only time, Microsoft’s actions, and GitHub’s user base data will tell. We hope that GitHub remains the open-source, free, and public code host it is today. Collaboration has accelerated many technologies in recent years, and it would be a shame to see this stifled by this recent acquisition.

One thing’s for sure, though: this deal will go down in history as one of the biggest acquisitions of all time, not just monetarily, but for the tech community at large.

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