Microsoft takes aim at AWS with $7.5B GitHub buy

Tech giant takes control of a platform housing more than 28 million developers

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Microsoft has unveiled plans to acquire software development platform, GitHub, in a US$7.5 billion deal designed to create a competitive edge in an expanding cloud market.

The transaction sees the tech giant take control of a platform housing more than 28 million developers, taking direct aim at long-time cloud rival Amazon Web Services (AWS) in the process.

Representing a monumental bet on Microsoft Azure, the deal will see both parties drive development lifecycle improvements, accelerate enterprise use of GitHub and bring the vendor’s developer tools and services to new audiences.

In short, the cloud provider acquires a platform universally known by developers, with GitHub branding itself as the “world’s largest code host”.

“Microsoft is a developer-first company, and by joining forces with GitHub we strengthen our commitment to developer freedom, openness and innovation,” Microsoft CEO, Satya Nadella, said. “We recognise the community responsibility we take on with this agreement and will do our best work to empower every developer to build, innovate and solve the world's most pressing challenges.”

The acquisition follows a round of increased speculation in the technology media space, prompting some users of the platform to raise doubts on social media that GitHub would "eventually favour Microsoft products over competing alternatives”.

But according to Nadella, GitHub will retain its “developer-first ethos” and will “operate independently” to provide an open platform for all developers in all industries.

Furthermore, Nadella said developers will continue to be able to use the programming languages, tools and operating systems of “their choice for their projects”, while maintaining the ability to deploy code to “any operating system, any cloud and any device”.

Terms of the agreement sees Microsoft corporate vice president Nat Friedman, founder of Xamarin and an open source veteran, assume the role of GitHub CEO.

Meanwhile, GitHub's current CEO, Chris Wanstrath, will become a Microsoft technical fellow, reporting to executive vice president Scott Guthrie, to work on strategic software initiatives.

“I’m extremely proud of what GitHub and our community have accomplished over the past decade, and I can't wait to see what lies ahead,” Wanstrath added. “The future of software development is bright, and I'm thrilled to be joining forces with Microsoft to help make it a reality.

“Their focus on developers lines up perfectly with our own, and their scale, tools and global cloud will play a huge role in making GitHub even more valuable for developers everywhere.”

Acquired through Microsoft stock, the deal is expected to close by the end of the calendar year, representing Redmond’s largest purchase since the US$26 billion buyout of LinkedIn in 2016.

Upon closing, the vendor expects GitHub's financials to be reported as part of the Intelligent Cloud segment.

Why GitHub?

Founded in 2008, GitHub is a web-based hosting service for version control using Git, which is a system for tracking changes in computer files and co-ordinating work on those files among multiple people - primarily used for source code management in software development.

Headquartered in San Francisco, GitHub has more than 28 million registered users across the world, hosting more than 85 million repositories as a result.

Currently, 54 per cent of the Fortune 50 use GitHub Enterprise, launched in November 2011 with advanced auditing and monitoring tools, allowing teams to work together on GitHub while meeting requirements in their own, secure environment.

“When GitHub first launched ten years ago, I could have never imagined this headline,” wrote Wanstrath, via an official company blog. “Git was a powerful but niche tool, clouds were just things in the sky, and Microsoft was a very different company.

“Open source and business, people said at the time, mixed as well as oil and water. We disagreed.

“As developers, we knew this was a false dichotomy - we had been using open source software successfully in a business setting for a long time.”

As outlined by Wanstrath, the business required an “easier way” to work with others, irrespective of whether the code was public, private, or something in-between.

“We wanted to do it using Git, we wanted anyone in the world to be able to join in, and we didn’t want it to cost a dime if it was open source,” Wanstrath explained. “So we created GitHub.”

Fast forward to the present day and Wanstrath said Git is “far and away” the most popular version control system, clouds are mostly computers and Microsoft is the most active organisation on GitHub in the world.

“Their VS Code project alone is beloved by millions of developers, entirely open source, and built using GitHub’s Electron platform,” he added. “Beyond that, today major enterprises regularly embrace open source.

“The world has realised how important happy, productive developers really are. And also, people have smartphones now.”

Open source

In addition, the deal reflects Microsoft’s ongoing pivot to open source software and seeks to further broaden the vendor’s large and growing development community, Moody's analyst Richard Lane said.

It's also a smart move by Microsoft, which has seen scorching growth in its cloud business over the past few years - Azure posted a 93 per cent jump in revenue in the third quarter ended 31 March.

Last year, the software giant shut down CodePlex, its own rival for GitHub, saying the latter was the dominant location for open source sharing and that most such projects had already migrated there.

“As we look to the next decade of software development and beyond, we know it’s all about the developer,” Wanstrath wrote. “And as we’ve gotten to know the team at Microsoft over the past few years through collaborating on projects from Git LFS to Electron, we’ve learned that they agree.

“Their work on open source has inspired us, the success of the Minecraft and LinkedIn acquisitions has shown us they are serious about growing new businesses well, and the growth of Azure has proven they are an innovative development platform.”