Analysts are paid to have opinions, and Ray Wang (pictured), founder, chairman and principal analyst of Constellation Research Inc., doesn’t pull any punches when it comes to assessing the state of the enterprise tech world today.

Take IBM Corp.’s blockbuster acquisition of Red Hat Inc. in October. The computing giant paid $34 billion to acquire the open-source company, the largest price ever paid by IBM in its 108-year history and the biggest software buyout ever made.

Despite the eye-popping price tag, the deal was greenlighted by shareholders last month and is expected to be finalized in the second half of this year. The question being asked around the tech world is: Did IBM pay too much?

“The Red Hat deal to me was overpaid,” Wang said. “It’s kind of like is this the Hail Mary? Or is this the future strategy? Or is this basically what the new company is? I would have rather taken that money and put it into venture funds to continue what they’re doing with network models.”

Wang spoke with Dave Vellante and Stu Miniman, co-hosts of theCUBE, SiliconANGLE Media’s mobile livestreaming studio, during the IBM Think event in San Francisco. They discussed IBM’s strategic direction and future leadership, signs of progress at the company’s recent conference, developer involvement, a unique skills training approach by Salesforce.com Inc., and growing competition between two major tech giants.

This week, theCUBE features Ray Wang as its Guest of the Week.

IBM’s tough years

The dynamics surrounding the Red Hat acquisition have brought further scrutiny of IBM’s long-term strategic direction, especially where it involves the cloud. The company’s cloud strategy was perceived by many analysts as not a resounding success, and the company’s stock, prior to the Red Hat acquisition, approached a nine-year low. Aside from mainframe sales and services, IBM had ceded its enterprise leadership position to other tech giants, recording 22 straight quarters of declining revenue until last year.

This October will mark the eight-year run of IBM Chief Executive Officer Ginni Rometty, and there has been speculation about both her legacy and the possibility that Red Hat’s CEO — Jim Whitehurst — would succeed her in the leadership spot. In an ironic twist, Rometty could depart after taking over the company when her predecessor failed to heed the public cloud momentum generated by Amazon.com Inc.

“She had a bad hand, but we’ve had over seven years to play this,” Wang said. “It’s now on her. She’s got to turn this around, finish the legacy. You’ve got a great CEO-in-waiting with the Red Hat guy.”

Hope for hybrid

Despite the storm clouds of uncertainty around IBM’s future, Wang and other analysts saw hopeful signs during the company’s recent Think conference that the narrative may be changing for the better. Rometty made it clear that the company was all-in on the hybrid cloud, and a parade of customers and partners joined her and other IBM executives in assessing IBM’s latest moves in that space.

The message from IBM in San Francisco this month was that when it comes to data, artificial intelligence and cloud solutions, it’s open for business.

“We see a flicker of hope here at IBM that they’re turning around,” Wang noted. “They’re not just selling services; they’re not just selling software. They’re actually delivering these business models to executives and companies and the early adopters are getting it.”

Another area of the business that offers cause for optimism at IBM involves developers. The Red Hat acquisition will bring the open-source software company’s 8 million developers into the fold, an attractive boost for IBM’s enterprise development plans.

IBM also rolled out a host of partner program updates this month designed to strengthen its channel ecosystem and appeal to developers. New initiatives include IBM Cloud Paks, container software with support for open standards in multicloud environments, and forthcoming Red Hat training involving mutual offerings, such as IBM Cloud Private on top of OpenShift.

“It’s the partner developers that are coming in,” Wang said. “It’s people that work for large system integrators, large networks, small-to-mid-size value-added resellers. Those are where the developers are coming from.”

Innovative competitors

The challenge for IBM in its game of “catch-up” is that a number of enterprise competitors are so far down the track that they’re either out of sight or creating new communities outside traditional channels.

Salesforce offers a relevant example. The cloud-based software giant’s Trailhead learning system not only provides an instructional onramp into the company’s products, it’s also attracting a new cohort of developers and administrators to its platform.

Participants accumulate Trailhead badges and are recognized at the company’s annual Dreamforce conference as “Trailblazers.”

“They’re building a community and a movement,” Wang said. “There’s a couple million people actually on this thing, all getting badges, all training each other, all doing customer support and experience. This is like learning management meets gamification meets a whole LinkedIn training program on the backend.”

Google vs. Amazon

IBM must also keep a wary eye on the continuing saga of leading public cloud-provider Amazon and Google LLC, two elephants dancing across the competitive landscape while the technology ground shakes. In the cloud market, Google has lost considerable business to Amazon Web Services Inc. through a series of false starts and missteps.

“You had three years and you lost traction in the market?” questioned Wang in assessing Google’s cloud issues. “People need to know they’re buying a relationship. They’ve got to win back the trust of enterprises.”

There is also a school of thought that Google doesn’t really need to build a competitive cloud business because it derives the bulk of its revenues from online advertising, a market it dominates with an 86 percent search engine share.

This translates to a 38 percent share of overall digital ad spending, but even that could soon be under fire. Amazon is mounting an assault on Google’s ad business, and an October report indicated that some advertisers were moving half of their search advertising budgets to the online retailer.

“It’s a full-frontal assault between Amazon and Google,” Wang said.

For more than a century, IBM has built its vast business through a reliance on research and technology. In the blink of an eye, that time-tested approach suddenly got upended. It’s now less about technology and more about how new business models are built around data.

Wang makes exactly this point in his book, “Disrupting Digital Business,” and the technology analyst has a front-row seat to the high entertainment that has become the competitive world of enterprise computing.

“We’ve got a set of data-driven digital business models that are being lit up,” Wang said. “It’s ‘Help me be part of that shift or I may go away.’”

IBM wants to provide that help, and now it’s only a question of how many companies will accept the offer.

Here’s the complete video interview, part of SiliconANGLE’s and theCUBE’s coverage of the IBM Think event:

Photo: SiliconANGLE