How IBM Is Retooling Itself for Future Cloud Business

NEWS ANALYSIS: SoftLayer, acquired in 2013, is the new foundation for IBM's cloud services business. So far, the early returns have been encouraging.

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.

Chris Preimesberger

Chris J. Preimesberger

Chris J. Preimesberger is Editor-in-Chief of eWEEK and responsible for all the publication's coverage. In his 15 years and more than 4,000 articles at eWEEK, he has distinguished himself in reporting...