GitHub, a 10-year-old start-up that was formed to provide a platform for computer programmers to share, and collaborate in coding, has been purchased by software giant Microsoft. GitHub has been a haven for open source programming where coders create projects and share the code on the platform to allow other programmers to build upon or modify to create further works.
Microsoft, on the other hand, has relied on proprietary technology kept in secret to grow its business and this is precisely why the deal has caused concern among software developers, leading some to delete their GitHub accounts and move to competitors like GitLab.
Speaking on the issue, Microsoft CEO Satya Nadella acknowledged that he would have to earn the trust of GitHub users, however, he reiterated that the company was fully behind the open source movement.
Why buy it?
To understand the value of GitHub to Microsoft, we first have to dive into why some companies are able to sell for billions while others can’t despite making more money. Acquisitions are made for one of two reasons; financial (where a company is attractive because its making money) and strategic, where the ability to make money has no value to the buyer.
In 2015, GitHub was valued at $ 2billion after its last round of funding where it raised $ 250 million from investors. Just three years later, that value has more than tripled with the 7.5 $ acquisition by Microsoft. In 2016 GitHub lost $66 million in nine months and are not yet profitable to date.
These statistics suggest that the main reason for Microsoft’s purchase of GitHub at a high price tag leans more towards strategic reasons than financial reasons. GitHub has 27 million users collaborating on 49 million projects across 200 countries and in 1.5 million organisations.
From a strategic point of view, Microsoft is shifting towards embracing more open source technologies than before. Open source development simply means that whenever someone develops a technology, they share the manual with others, so that they can improve it to benefit more people and that is at the core of GitHub.
Currently, Microsoft is the largest contributor of code to GitHub. Additionally, the platform is also used by other tech giants such as Google and Apple, alongside other organisations who are the main source of revenue for GitHub as they pay to have some of their code kept private.
On the other hand, Microsoft is one of the companies currently in the race to dominate the cloud (use of the internet for computing instead of locally on machines) through its Microsoft Azure suite of applications. To Microsoft, the GitHub deal provides an opportunity to access and entice more programmers to develop for its cloud platform and thus boost its profitability in that area.
Additionally, GitHub provides a great opportunity for Microsoft to collaborate with developers worldwide, observe the trends in software development and stay ahead of the curve. It is interesting to see the changes that the acquisition will bring to GitHub, hopefully, it’s for the better.