IBM's cloud business, led by SoftLayer, has been racking up hybrid customer wins that include analytics, services and local data presence.
As a result, IBM appears to be building some momentum in a cloud infrastructure services market that to date has been a three-horse race with Google, Amazon Web Services and Microsoft's Azure.
The main push for IBM revolves around hybrid cloud deployments given few enterprises can throw out trillions of dollars of investment and start over. "Companies are really starting to figure out their cloud strategies and they're really building a hybrid model," said Robert LeBlanc, senior vice president of IBM Cloud.
Here are a few highlights from my chat with LeBlanc, who has been leading IBM's cloud business for about 100 days.
Does IBM need a public cloud? My interview with LeBlanc came a few days after Hewlett-Packard was reportedly dropping out of the public cloud game to focus on enterprise private and hybrid clouds and be an arms dealer to massive compute providers. LeBlanc said the public cloud is critical to IBM's plans because it has to reach everything from startups to midmarket to large enterprises. "We have a broader strategy," said LeBlanc. He noted that large enterprises are going hybrid and some workloads will reside in the public cloud. In fact, systems of engagement will likely be in the public cloud. Meanwhile, SoftLayer gives IBM a digital presence as a public cloud option and a larger footprint of customers for the future. There are also scale benefits from playing in the public cloud market that help IBM's other capabilities for platform- and software-as-a-service.
IBM's recent cloud deals. IBM has recently won large cloud deals with the U.S. Army, Coca-Cola Amatil and The Weather Company. These deals are multi-year, hybrid cloud partnerships for IBM. LeBlanc said that the themes that emerge for customers is that IBM can provide analytics as well as local data centers. "We have smaller cloud data centers outside the U.S. on a private network so companies can control their data," said LeBlanc. Various countries have laws to keep customer data within their borders. In addition, the NSA snooping fiasco has raised awareness about cloud privacy and data protections. "The NSA has certainly raised data location awareness," quipped LeBlanc. More importantly, IBM's local coverage around the world allows it to save money on data transport costs, a huge deal in the cloud model. "We can put data wherever the customer is in most cases," said LeBlanc.
Another key asset winning IBM cloud deals is analytics and the ability to mine data on its cloud platform. The Weather Company deal revolved mostly around enabling weather analytics around the world. Analytics may be the key item that divides cloud providers. It's worth noting that Microsoft has been acquiring analytics companies like Revolution Analytics to add to its Azure cloud platform.
Cost optimization. I asked LeBlanc about the idea of cloud brokers and the need for customers to optimize costs. In the Amazon Web Services ecosystem there are third parties that aim to optimize things like compute and storage as a managed service. LeBlanc said that IBM often winds up selling cloud as a managed service as part of its menu of public and private options. "There's cost of compute and cost of storage, but the cost of moving data back and forth is where it explodes," said LeBlanc. "Compute is a small portion of the total bill. The industry doesn't offer a lot of perspective on the real issues around the total end-to-end cloud costs. Most clients love the flexibility to pay for what they use, but hate when they don't know what they need." Those variables argue for managed services for the cloud. Many IBM customers come around to subscription pricing where they are willing to pay an amount that has a ceiling, he added. "It's a hybrid payment model that makes sense for the client, who wants predictability. Just because you go on the cloud doesn't mean your budget changes," said LeBlanc.
As for cloud brokers, LeBlanc said the concept still has legs, but there can't be too many players since the cost economics are the main selling point. "The cloud can't support too many layers," he said. Cloud brokers or integrators could ultimately step into the cloud cost optimization role, but for now more standards are needed to hop between the various cloud providers. "When an enterprise has 10 different services, 10 clouds and 10 bills, there's an argument for the services industry to come in," said LeBlanc. "The value add from brokering can be substantial because the more you open up the cloud the more complex it can get." LeBlanc, a car buff, likened the cloud to the car industry. In the 1950s, carmakers like General Motors made every part of the car. Now carmakers largely assemble, design and market, but it's hard to argue that the automobile of 2015 is less complex than predecessors.
The importance of OpenStack and standards. LeBlanc said the cloud is in the early days of developing standards. For IBM, hybrid means two things---cloud to infrastructure and cloud to cloud. "It's no different than the early days of the Internet when standards came into play. The Internet exploded because of standards," he said. With OpenStack, enterprises can run workloads on any cloud public or private. "Interoperability is good for the client, who wants an open cloud environment," said LeBlanc, noting Cloud Foundry was also critical to cloud development.
Platform-as-a-service and why it matters. IBM's Bluemix PaaS has been on the market about a year and LeBlanc sees it as a differentiator. Overall, IBM is happy about the momentum the platform has gained out of the gate. "We've been pleased with the uptake," said Leblanc. In many respects, Bluemix is a grassroots effort to build an ecosystem around IBM's cloud, notably SoftLayer. "It's still early days in PaaS," said LeBlanc. The trick for any enterprise PaaS is that it has to play in all the cloud markets---public, private and hybrid---and Bluemix is built to meet multiple needs. "There are a lot of people kicking the tires on Bluemix," said LeBlanc.