Microsoft Completes GitHub Acquisition As Partner Shift To IP Accelerates

Microsoft has completed its acquisition of open-source code repository GitHub in a deal valued at $7.5 billion, the companies said Friday.

GitHub is used by more than 28 million developers to share code and work together on open-source projects, and with the acquisition, Microsoft is looking to "bring our tools and services to new audiences while enabling GitHub to grow and retain its developer-first ethos," Microsoft CEO Satya Nadella said during the company's quarterly call with analysts this week.

[Related: Microsoft CEO Nadella: Azure Is 'Only Hyperscale Cloud That Extends To The Edge']

In a blog post Friday, GitHub CEO Nat Friedman reiterated his previous commitments that GitHub will operate independently and maintain its product philosophy.

"GitHub will retain its developer-first values, distinctive spirit, and open extensibility," Friedman said. "We will always support developers in their choice of any language, license, tool, platform or cloud."

In his comments this week, Nadella said that Microsoft is "very excited about GitHub closing."

"Primarily I'm excited because for us, as I've always said, GitHub is not a means to some other end. It's an end unto its own," Nadella said. "We've always cared about [developers] and developer productivity, and especially at a time like this when there are more developers outside of the tech industry as the world goes digital."

At Washington, D.C.-based New Signature, "we're extremely bullish on the acquisition, especially for partners in the channel," said company CTO Reed Wiedower in an email.

"Increasingly, Microsoft is promoting organizations that have in-house development talent (such as New Signature) over ones that are merely building non-custom solutions," Wiedower said. "As the world has shifted to a cloud-first mentality, enterprises of all sizes don't need partners who can only implement Exchange online, or even Microsoft 365 solutions, according to the best practices from Microsoft. That sort of off-the-shelf deployment is increasingly commoditized."

Instead, customers are looking for custom intellectual property tailored to their industry—and increasingly, they’re seeking IP focused on specific roles within the organization, he said.

"Partners that have a strong development team that can build solutions targeting HR roles, or sales roles or even finance roles, are in a stronger position," Wiedower said. "In that context, the marriage of Microsoft and GitHub makes perfect sense because it's the one destination developers of every flavor end up turning to."

During the call with analysts this week, Nadella said that GitHub revenue will be reported in Microsoft's intelligent cloud segment, which also includes Microsoft's fast-growing Azure cloud platform.

GitHub is "perhaps one of the big SaaS opportunities going forward. And so therefore that's why we want to ensure that everything we do, and the No. 1 priority for Nat and team at GitHub, will be all about maintaining that GitHub community—the ethos around developers at the core," Nadella said.

Microsoft already has many open-source projects on GitHub, he added, and the company believes that "we do a good job of earning that developer trust and developer adoption."

"But we are very grounded in the fact that it has to be earned and [is] not something that we will inherit because of being owners of GitHub," Nadella said.