How IBM Is Retooling Itself for Future Cloud Business

By Chris Preimesberger  |  Posted 2014-03-30

How IBM Is Retooling Itself for Future Cloud Business

When IBM realized it needed to go outside to acquire a cloud services-provisioning company a couple of years ago and eventually settled in June 2013 on a lesser-known outfit in Dallas called SoftLayer, the move surprised some IT industry watchers.

After all, multinational IBM was investing a reported $2 billion into a smaller cloud-services provider—whose 28,000 customers, using about 90,000 servers, were mostly midsize companies.

On the surface, this didn't sound like a natural fit into IBM's big-picture enterprise strategy. Did a player such as SoftLayer have the IP, the engineering and the management wherewithal to scale up to the numerous deployments IBM was going to need?  

This move was not unlike a major league baseball club bringing up a young, unknown pitcher from the rookie league and starting him in Game 7 of the World Series. But nearly a year after the acquisition, it's been "so far, so good," because IBM is making inroads in selling to the midmarket—which will continue to be the fastest-growing segment of the IT market for years to come.

IBM found out fast that it is able to sell SoftLayer services more effectively than its previous cloud solution because its interfaces are more user-friendly and because all the necessary functionality needed is under one control panel. It also turns out that most customers prefer not to have consultants run it for them if at all possible.

SmartCloud Seemed Like IT Overkill to Some Customers

IBM's first cloud strategy a few years ago entailed an amalgamation of its own software, hardware and services called Blue Cloud, later changed to SmartCloud Enterprise. When it was selling to potential enterprise customers, IBM had made it clear from the beginning that it strongly preferred users to contract its professional services team to run SmartCloud. But that approach didn't work with a number of midrange companies, which thought it seemed like IT overkill. They needed something much simpler.

SoftLayer, it turns out, is intuitive for line-of-business people to use and faster to set up and deploy. An added bonus: It offers the public cloud option of Amazon Web Services.  

SoftLayer's new-gen, do-it-yourself approach to provisioning and distributing cloud services was so much more appealing to most customers—large and small—that Big Blue shut down new sales of SmartCloud Enterprise on Jan. 31 and offered free migration services through Racemi onto SoftLayer from SmartCloud Enterprise.

The SmartCloud Enterprise managed service is continuing for existing customers, but its future is limited.

There, in microcosm, is the story of IBM itself in 2014. It's a big ship that's changing course much faster in response to customer demand, and it's acquiring the necessary IP from anywhere it exists.

'Massive Pivot' Under Way at IBM

"There's a massive pivot [at IBM] going from the way we were structured in the past to the way we're structuring for the future," Jim Comfort, IBM's general manager for cloud services and the force behind the SoftLayer acquisition, told eWEEK.

"Cloud and cloud services is in the middle of that. Twenty years ago, there were no services; now it's half the company. My role is to transform the techology services piece of the business. The acquisition of SoftLayer, the acquisition that I drove, reports to me and that's the anchor on which a lot of this work in being done.

"We're pivoting the services group; the software middleware group and the software solutions group—and you can put GBS [IBM's Global Business Services] on that, to build up capability on and around SoftLayer."

A 9-year-old baby of a company is helping to lead century-old IBM into the second decade of the new century. SoftLayer enables clients to buy enterprise-class cloud services on dedicated or shared servers, offering clients a choice of where to deploy their applications.

By building out a cloud with IBM and SoftLayer, a client can choose the work that belongs on a dedicated or a shared computing resource, thereby tailoring the privacy, data security and overall computing performance to the client's needs.


How IBM Is Retooling Itself for Future Cloud Business

IBM is expanding SoftLayer's cloud offerings to include OpenStack capabilities, consistent with its entire SmartCloud portfolio and longtime commitment to open standards such as Linux. Given that most companies will mix public and private cloud services, clouds need to interoperate. In this way, firms can better leverage the cloud to run their social, mobile and big data applications.

IBM will also support and enrich the SoftLayer cloud-centric partners and ecosystem as well as its performance capabilities for big data and analytics. IBM will provide go-to-market and customizable resources for its expanding cloud ecosystem.

Comfort offered eWEEK a progress report on IBM's cloud computing business and the sector in general, citing the following data points and trends he's seeing:

--In 2013, IBM delivered $4.4 billion of revenue for cloud-based solutions. That’s up 69
percent year to year. Within that, $1.7 billion was delivered as a service.

--IBM has more than 40,000 cloud experts with deep industry knowledge and skills helping clients transform with cloud and drive growth; 1,560 cloud patents tied to inventions; and will have a total of 40 data centers worldwide up and running by the end of 2014.

--Some of the trends that defined cloud computing in 2013 are accelerating, such as the push for highly complex interoperable clouds, built on open standards; the evolution of delivery models and the adoption of industry-specific clouds. At the same time, we're starting to see new developments take shape, such as increased demand for globally dispersed, decentralized cloud networks that offer users greater control over governance, risk and compliance.

--Cloud Foundry is emerging as the de facto standard for platform-as-a-service in the same way OpenStack did for infrastructure-as-a-service in 2013. The OpenStack foundation launched in September 2012, and by the end of last year, OpenStack had emerged as the de facto industry standard for IaaS, with more than 1,200 individual code contributors supporting the project.

--As PaaS offerings mature and more developers look to build and launch applications in the cloud, the push for similarly ubiquitous open standards is intensifying at the platform level. Thanks in part to endorsements from industry leaders, Cloud Foundry is emerging as the de facto open standard. With open-standards-based PaaS platforms, developers are able to take control away from the vendor by improving their ability to migrate data and applications easier and more efficiently.

--The role of the CIO is going through a fundamental transformation, changing from managing traditional IT systems into brokering cloud infrastructure, applications and information services. As the cloud becomes more pervasive in various lines of business, IT is starting to assume ownership of integration, service levels and governance around cloud services.   

--Industry-specific clouds are driving cloud adoption in finance, health care, telecommunications, retail, energy and utilities, and more. Until recently, most clouds fell into the one-size-fits-all category, with basic cloud features and benefits applied to every organization, regardless of industry. But organizations aren't basic; rather, they belong to an industry with unique needs, challenges and advantages.

--Hybrid cloud deployments are driving cloud adoption by allowing organizations to integrate their public and private cloud services with each other and with their legacy IT environment.


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