Venture: Microsoft's $7.5 Billion Acquisition Of Github

On June 4, 2018, Microsoft had a very historic moment as it had announced that it was going to purchase Github, one of the top Git-based repository service companies, for $7.5 billion. For a company that was established as a startup in 2008 without any middle managers (operating in the sense of “everyone is a manager”), Github had witnessed venture capital firms such as Andreessen Horowitz invested $100 million into the company in 2012 and its services have been regularly used by Microsoft, its new owner.

Github has seen its fair share of successes and setbacks over the past few years, particularly with its founder, Chris Wanstrath, retook his spot of Github’s CEO when the company’s former CEO, Tom Preston-Werner had to resign in 2014 due to a harassment investigation that was conducted on him at the time. However, Chris Wanstrath is still with Github, albeit as a Microsoft technical fellow and that his replacement is now the former CEO of software company Xamarin, Nat Friedman.

Before getting into the details behind Microsoft’s acquisition of Github, here is an explanation on the Git version control system that Github provides for the 57 million code depositories that the company is currently hosting. The Git version control system, which is also free and open source, is used to track changes in computer files and manage the work that are said on those files for multiple users to view and possibly to edit as well.

As the aforementioned investment from Andreessen Horowitz had shown how much money Github had raised during its first few years, the largest host of source code globally had raised $350 billion in funding since its founding over a decade ago. One of the largest investments for Github occurred in 2015 when a series B funding led by Sequoia Capital had raised $250 billion for the company, which later led Github to be valued at $2 billion at the time.

The acquisition, however, did not have everyone approve as developers aren’t fond of working with a Github that is now owned by Microsoft. Alternative products such as Gitlab and Atlasssian’s Bitbucket provide developers a wide variety of code-hosting tools, particularly Gitlab and its recent decision to switch from Microsoft Azure to Google Cloud because the latter is considered to be reliable and there isn’t a lot of technical difficulties for Gitlab while using Google Cloud.

Opponents to Microsoft’s acquisition include Github’s 27 million users who aren’t fond that Github’s unique code-hosting features may have to be adjusted to how Microsoft wants them to be. However, as Microsoft is increasing more fans for Github as a result of the acquisition, it also sought to retain Github’s long-time user base by retaining the features and services that Github are known for such as Github Pages, a web hosting service that contains public repositories that hold small websites, and Github Enterprise, where software development teams hold their repositories behind a corporate firewall.

Another reason for those to oppose Microsoft’s acquisition of Github would be how most of the company’s acquisitions in the past didn’t lead to success. One example is Nokia after it was acquired by Microsoft in 2013 for an estimated $7.4 billion, and two later, Microsoft had spent nearly $8 billion on their failed acquisition, wrote off $7.6 billion of their deal, and had to cut 7,800 jobs from Nokia.

However, not all of Microsoft’s past acquisitions have led to failure and one of its most prominent and successful acquisitions was LinkedIn, which Microsoft had acquired it in late 2016 for $28.1 billion, the company’s largest acquisition to date. After the acquisition, the first quarter of 2017 saw LinkedIn’s sales reached $975 million and gained nearly $1 billion of revenue for Microsoft, 93% of that revenue was gained from Azure, Microsoft’s cloud computing platform.

Before the acquisition was announced, Microsoft had already been supportive of Github’s protocol in creating the best platform for inspiring developers who want to be innovators in the field of code-sharing. Microsoft’s Visual Team Services product at one point was a competitor to Github Enterprise and now, there are people in Microsoft that consider the company to be Github’s biggest contributor now that the acquisition has been official.

When it comes to attaining profit, Github hasn’t always been successful in that subject even though its products remain popular among enterprise users, developers, and open source projects. According to a report on Bloomberg, the first three quarters of 2016 saw Github lose $66 million via paywall even though the company’s revenue continues to steadily grow. Some observers say that Microsoft’s acquisition might have been a miracle for Github on the financial side.

Microsoft CEO Satya Nadella has vowed that the addition of Github into the Microsoft brand will open up new ideas on enhancing cloud infrastructure to help developers easily navigate through Github’s services. In response to Microsoft’s acquisition of Github, Nadella stated,

     Microsoft has heritage here. We were a developer tools company first and now, of course, we are all in on open source, and that's what really brings us together with GitHub. We're going to operate it as an open platform for any language, any framework, any platform.

Before the acquisition, Microsoft had been partnering with Github by allowing the latter’s customers access to Azure DevOps services and last year, Github had also began to adopt Microsoft’s GVFS (Git Virtual File System), which is used to manage large-scale source code repositories. From a technological viewpoint, Microsoft acquiring Github is to show that the software company is making a huge effort to the contribution of new code-hosting technologies for potential developers.

The acquisition of Github can bring a lot of collaboration between members of both Github and Microsoft on developing ideas on how to enhance cloud and software services of both companies. Although Github is now a part of Microsoft, having members from both companies share innovative ideas amongst one another can gain more respect from those in the development industry.