Commentary

Looking To The Cloud As Rainmaker, Microsoft Acquires GitHub

Microsoft is forking over $7.5 billion in its rapidly appreciating stock to acquire GitHub, which bills itself as a platform that “brings together the world's largest community of developers to discover, share and build better software.” It is the anti-Microsoft of yore, with its proprietary operating system and PC-based programs such as Word and Excel.

“GitHub is one of the most popular services used by software developers to build projects based on open-source code. Open source was once anathema to Microsoft when its main economic interest was rooted in keeping customers tied to its own proprietary Windows software,” writes Dan Gallagher for the Wall Street Journal.

“But that is a position the company can no longer afford in a world that has moved far beyond Windows PCs. Under [CEO Satya] Nadella’s leadership, Microsoft has been shifting away from that proprietary approach and emphasizing its role as a provider of tools and cloud-based services for developers on all platforms — even those owned by the company’s rivals.”

Indeed, “as Microsoft built its business on proprietary software … it came to be seen as an antagonist to the open-source philosophy of free software written by a collaborative community of developers. The company has been working for years to shed that reputation, especially after Nadella took over in 2014,” writes the Associated Press’ Matt O’Brien.

“As every industry — from precision medicine to precision agriculture, from personalized education to personalized banking — is being impacted by technology, the developer community will only grow in numbers and importance. Developer workflows will drive and influence business processes and functions across the organization — from marketing, sales and service, to IT and HR,” Nadella says in a blog post about the acquisition.

Under Nadella, Microsoft’s rivals have shifted, too, from the likes of computer manufacturers such as Apple and its competing OS, as well as the smartphone market, where it got crushed even after buying the once-dominant Nokia in 2013.

“It makes perfect sense for Microsoft to buy the startup. If the stars align, and GitHub is integrated intelligently into Microsoft's products, it could give the company a big edge against Amazon Web Services, the leading player in the fast-growing cloud market,” observes Matt Weinberger for Business Insider.

“Amazon is the leader in the cloud market so far, but Microsoft has transformed itself in recent years to become a strong No. 2 as a supplier of cloud computing services. Its vital Office productivity applications and database software are available in cloud versions,” points out Steve Lohr for the New York Times.

“Microsoft also competes with Google, IBM, Salesforce and others in the cloud marketplace. All of them are trying to lure software engineers to use their cloud tools and services. The more programmers on a company’s platform, the more software applications are created, attracting customers and still more developers — a flywheel of growth and profit,” Lohr continues.

GitHub’s executive chairman Chris Wanstrath, 33, co-founded the San Francisco-based company in 2008 along with fellow software developers Tom Preston-Werner, 38, and PJ Hyett, 35, CNBC’s Tom Huddleston Jr. tells us.

“In a decade, the company has grown into the world’s largest host service for software code, from more than 24 million individual users.” Last year it claimed it “was on track for $200 million in annual subscription revenue.”

Huddleston points to a blog post yesterday in which Wanstrath, a college dropout and self-taught programmer, “wrote that he ‘could have never imagined’ the Microsoft acquisition when GitHub launched 10 years ago. ‘[GitHub] was a powerful but niche tool, clouds were just things in the sky, and Microsoft was a very different company.’”

Will Microsoft bring changes to Github? Surely.  And the first should be to “Axe The Stupid Name” reads the hed over Forbes contributor Andrew Cave’s piece. 

“Branding history is littered with stories of companies that unwittingly blundered into product names that become unfortunate or unmentionable when used in certain foreign territories,” he writes. And “nobody seems to have told GitHub exactly what its name means in Britain. … I'm not sure what the exact U.S. comparator is but try working up a company name for a respectable product using slang for contemptible dolt or jerk. Or a noun most commonly used in Britain after the words ‘smarmy,' ‘jammy’ and ‘grumpy.’

The adjective that truly fits GitHub this morning, though, is prescient.

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