IBM takes aim at Amazon Web Services via marketing campaign

IBM takes aim at Amazon Web Services via marketing campaign

Summary: IBM's aggressive anti-AWS marketing may just validate Amazon as a go-to enterprise vendor, but Big Blue argues its SoftLayer acquisition is transformational.

TOPICS: Cloud, Amazon, IBM

IBM has launched a marketing campaign to position itself as a cloud leader and take a few shots at Amazon Web Services. Much of your take on the tale of the tape will depend on your definition of cloud computing.

In print, online and TV ads, IBM plans to tout its $1 billion in third quarter cloud revenue and argue that it is beating Amazon in the federal and enterprise markets with its services.

Moving to IaaS: An overview

Moving to IaaS: An overview

Moving to IaaS: An overview

The move is interesting since Amazon Web Services (AWS) recently won a deal to provide services for the CIA. IBM was against the AWS win. The other item to note is that IBM's aggressive anti-AWS marketing may just validate Amazon as a go-to enterprise vendor.

Of course, AWS is a big dog in the public cloud services market. And its Re:Invent conference next week in Las Vegas is likely to feature a bevy of enterprise customers and testimonials. AWS is also very disruptive to traditional enterprise vendors because Amazon doesn't care all that much about profit margins. As a retailer, Amazon skates by with razor thin margins. Amazon CEO Jeff Bezos would be stoked with profit margins in the high single digits for AWS. The problem is that profit margin is a long way down for enterprise giants.

Related: IBM's Q3 mixed, hardware business thumped | We first failed at cloud because we were closed: IBM | Private cloud is ill-advised and archaic says AWS boss | Value of Amazon's AWS trumps Kindle franchise, says analyst

IBM's talking points go like this in its marketing campaign:

  1. IBM Cloud supports 270,000 more Web sites than Amazon and supports 24 of the top 25 Fortune 500 companies.
  2. Big Blue's cloud services are high value, open and reliable.
  3. SoftLayer gives IBM a big cloud jump-off point.
  4. IBM plans to go after AWS outages in a big way and tout its OpenStack infrastructure. Rackspace has also touted its OpenStack approach.

Now what's tricky here is the definition of cloud when it comes to revenue. Of IBM's $1 billion in third quarter cloud revenue, $460 million was cloud services and the rest was hardware, software and IT services to build cloud infrastructure for customers.

AWS and Google would scoff that hardware would be counted as cloud revenue. Oracle, HP and others wouldn't.

ibm ad vs AWS
A look at IBM's print ad vs. AWS.


Amazon's third quarter "other" revenue, which largely consists of AWS was $960 million in the third quarter. For the nine months ending Sept. 30, "other" revenue was $2.55 billion, up 61 percent from a year ago.

If you go with a cloud services only argument, AWS is twice as large as IBM. If you include hardware in the cloud revenue equation, the two are about equal on revenue give or take a few million.

As for pricing comparison's IBM's SoftLayer has the most AWS-ish pricing schemes. SoftLayer's pricing is transparent. IBM's other cloud calculators take a bit more work. The biggest takeaway is that AWS is on its enterprise rivals radar in a big way.

Topics: Cloud, Amazon, IBM

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  • IBM I just have to laugh

    There is major disconnect between IBM research who has some undoubtedly smart people and the other operating divisions. Kind of like the differences between the Chiefs or Broncos and the Jaguars or Buccaneers.
  • AWS charges for hardware too

    Just because it's billed as fully bundled opex doesn't mean AWS isn't charging you for hardware - they absolutely charge for hardware. IBM is completely right to include hardware costs.
    • IBM isn't including hardware costs...

      they're including hardware sales, as a separate line item.
  • 3 points

    price, stability and performance.
  • Where's the earnings?

    Amazon is losing money. Is the one bid they won going to pay for all the losses their shareholders put up with? I don't think American taxpayers are going to be very happy when they learn that the CIA is spending 58% more to go with AWS than IBM. It's just another example of government over-spending. And any failure in this decision will over-shadow the ten-fold. Of course we may never know because it's the CIA. But one national security failure and Congress will be all over it. Keep in mind that Amazon has never built a private cloud and IBM has by the hundreds. And how much will Amazon spend to achieve this $600M in revenue? Hardware and software isn't free, much less the staff it will take to run this private cloud.
    After months of listening to this one story, I'm quite tired of it, and do not think it will continue to attract new shareholders into a company that continues to lose money. Amazon's core business runs on such thin margins that technology investments are depleting any earnings shareholders could possibly gain. While IBM makes billions of $ every year for their investors, Amazon has never once made a billion $, and since AWS has been nothing but losses. Even "other income" includes advertising and credit card revenue, so shareholders do not even know how much revenue AWS generates. I have sold my Amazon shares, and am adding to my IBM shares, and would advise you to do the same.
    • Just look at the administration...

      how can you question anything that they pay for...
    • profits

      I believe that Amazon's stated strategy is to invest more money in growing market share and capability rather than taking profits. As a stockholder, you may disagree with this strategy and sell your shares, of course. I happen to like seeing a company not manage quarter-to-quarter, if that's what they're actually doing.
  • Not so much of a stretch as you may think ...

    So IBM includes HW and SW sales made to their clients to build private and/or hybrid cloud platforms as "cloud sales" - big deal! You are almost penalizing IBM for having a wider portfolio of services than AWS - which continues to be unidimensional, low-margin, but mesmerizing. And what did you think AWS cloud fees were made up of anyway? Its not all labor! The public cloud offering at IBM has similar pricing as AWS, but it just happens to be one arrow in the quiver of cloud services that IBM uses. Yes, the stretch here that IBM made is that it is bundling all these flavors of cloud services into one generic cloud computing number. That's their differentiation. But you know what, check out their reported earnings and you will see its a profitable and high-margin area for them unlike AWS which does not report cloud revenues and costs separately and bundles them under "other revenues".
  • Forget it IBM

    Amazon has a good service, big selection of products, good prices with very fast shipping in 2 days. I know IBM would never offer these objectives like Amazon does. Besides IBM does not have very many good quality products to offer. But it doesn't matter, we will still be shopping at Amazon.
    • Amazon Is Far More Than A Revenue Cloud

      I know where JM09 is coming from. I now do 90% my shopping on Amazon, including computer hardware. I can find a better deal on computers and related hardware on Amazon than anywhere else - including instant access to obscure cables and connectors and such that you can't elsewhere - and I get most of it in two days with free shipping, or overnight for $2.99. Amazon's cloud server also backs up our website every night for a pittance, much cheaper than other Big Dogs, and also allowed us to crank up a rush contract with thousands of online continuing education registrations in a flash, at a better price than others, with nary a hitch. I know that Amazon's biz strategy is focused upon the long term - building through growth of consumer volume and product diversity - which is hard for some with short-term focus to grasp.
  • Check out insider trades

    Amazon insiders are selling. IBM insiders are buying.
  • Private cloud

    I doubt Amazon would scoff at IBM including hardware because their CIA contract is for private cloud, which surely includes hardware and software
  • broader Cloud Services comparison

    It would be intersting to have a "credible", non-partisan and technologically competent comparison of Cloud Computing Services between the larger Cloud Services providers, including IBM, Amazon, the other larger OpenStack providers, Google Services, Microsoft Cloud Services and Eucalyptus based Cloud Computing services.

    Of two results about which I am in no doubt, based on previous and recent verified reports and expert analysis: Microsoft Cloud Services will be the most with outages per period of time - less reliable, and the least scalabe on an equal comparison basis.

    The analysis should also have no consideration of (give-a-way) pricing in the analysis, which is not a technological issue, only marketing, and for which some companies are better at, able and willing to spend considerable more than others - even up to half $billion or more.
    • re: broader Cloud Services comparison

      Here are a few to consider. The charts are particularly helpful to compare the various offerings. Others have come to the same conclusion as the CIA, which said it chose AWS because of its "superior technical solution".
      Corn Chowder
  • IBM Cloud

    Click on the blue boxes at the top of the screen.
  • Can't compare apples with oranges.

    Either I am stupid, or technologically, this ad campaign is of no value. Comparing "on-premises" datacenters coupled with own software + gargantuan licence fees to keep them running + millions of dollars worth of servers (Capex+Opex) with AWS pay-as-you-go fees on AWS Public cloud IaaS is like comparing "a Maruti 800" with a "Porsche". IBM, HP, Fujitsu and other companies first need to clarify what "Cloud Revenues" stand for.
    Subhasish Ghosh
  • Test

    Bijo Kappen
  • Test

    Bijo Kappen