IBM goes big on the cloud. But is it enough?
Faced with falling revenue and some of the worst stock performance in the S&P 500, IBM is looking to cloud and mobility to return to form.
Speaking at this year’s IBM Interconnect conference, Robert Le Blanc, IBM’s new SVP of Cloud gave a very direct and honest perspective on the enterprise tech landscape.
“Everything is changing and if you don’t believe you’re interested in changing then you’d better take a look at what your competitors are doing,” he said to a more than 20,000 strong crowd at the MGM Grand in Las Vegas.
“There are going to be disrupters and the disrupted and you’ve got to be able to understand where you fit.”
Based on recent performance, Le Blanc could easily have been mistaken for talking about his own company, which has been floundering in a digital world that has left many part of its business behind.
In Q4 2014, IBM witnessed its 11th straight quarter without a revenue increase, while revenue for the year declined six per cent to $92.8 billion. The firm’s stock has also suffered, down 20 per cent over the last two years while the S&P 500 has risen 39 per cent.
This performance has seen big blue attempt to reshuffle its units, selling off low performing businesses and laying off thousands of workers in the process.
IBM’s global workforce declined 12 per cent, or 51,600, last year to 379,592, mainly through corporate divestitures, including the sale of its x86 server business to Lenovo for $2.1 billion and paying Global-Foundries $1.5 billion to take its microelectronics unit off its hands. Having been forced to abandon a pledge by her predecessor to deliver $20 earnings per share by the end of 2015, and with IBM not expected to post an overall revenue increase this year, the pressure is now on CEO Ginni Rometty to show that she is turning around the company’s fortunes.
However, her vision of an IBM with increasing emphasis on the ‘nexus of forces’ (cloud, mobile, social and analytics) hasn’t gotten off to an ideal start in some areas, according to one analyst. “IBM has spent way too much time cloud-washing and trying to claim that it was doing cloud-like things that they fell behind on actually delivering any cloud legitimacy or leadership,” says Daryl Plummer, managing VP, fellow and chief of research for cloud computing at Gartner. Plummer says the firm showed little traction in the cloud space until the acquisition of Dallas based cloud
“IBM, if you follow the history of cloud technology, has been doing this for years. It’s just the realisation of the market itself and the kind of coining the term that Amazon did earlier.”
computing infrastructure (Iaas) company SoftLayer in July 2013. That year, competitor Amazon Web Services generated $3 billion in revenue, according to some estimates. Although IBM representatives dispute that the e-commerce giant has enjoyed a head start in the cloud space.
“I think it’s certainly fair to say that Amazon coined the term earlier, that is very accurate, and they’ve spent quite a bit of their efforts in public cloud on premise cloud and trying to attract a particular type of developer community for a certain set of use cases,” says Angel Diaz, IBM’s VP of Cloud Architecture and Technology.
“IBM, if you follow the history of cloud technology, has been doing this for years. It’s just the realisation of the market itself and the kind of coining the term that Amazon did earlier.”
FOCUSING ON THE CLOUD
Last year, IBM continued its cloud momentum, announcing an investment of $1.2 billion to expand its cloud footprint to 40 data centres worldwide.
This was followed by the February announcement of a $1 billion investment in new SoftLayer capabilities including developer platform-as-a-service BlueMix.
Following these moves, the firm’s cloud business grew 60 per cent last year, reaching $7 billion, although still only making up under eight per cent of total revenue.
IBM has since built its offering with a focus on open standards, partnering with OpenStack, Cloud Foundry, Node. js and Docker in an attempt to guarantee interoperability.
Particular attention has been given to hybrid cloud, and providing a bridge between enterprises’ on premise infrastructure and the cloud.
This included the announcement of local versions of OpenStack and CloudFoundry at InterConnect as well as an enterprisegrade version of Docker containers, used to ship distributed applications.
“The arrival of BlueMix and IBM’s commitment to Openstack has certainly brought them into the game but they are not yet leaders in cloud. They claim leadership in Hybrid cloud and IaaS but I cannot verify those claims in the slightest,” says Plummer.
Although he does suggest the company is heading in the right direction, describing BlueMix as a “major opportunity” for IBM to gain market leadership and secure a driving position in cloud “should they do it right”.
“That plus their focus on hybrid cloud, portability, and enhancing the BlueMix proposition are things through which they could gain great traction.”
PARTNERING UP
Among the other ways in which IBM is looking to turn around its fortunes are through a number of interesting partnership deals. In February, IBM teamed up with Juniper Networks to design and deliver high performance network analytics for communications service providers and enterprises.
It also extended its BlueMix PaaS offering to Computer Science