This morning IBM summed up its achievements of its IBM cloud business and it was worth a new analysis. 

So we dissect the press release (can be found here) in our usual style:
ARMONK, N.Y. - 17 December 2014: IBM (NYSE: IBM) today announced a broad expansion of its global cloudcomputing network to 40 cloud centers with 12 new locations serving a growing roster of enterprise clients looking to move to hybrid cloud computing.


MyPOV – This is a significant expansion to IBM’s original plans of moving to 40 locations as announced in January of 2014 – my analysis is here. And it’s a sign of something working for IBM here – as IBM communicates locations and signs up deals with customers, more locations than the 40 will be in demand. What works well for IBM here is that it has one of the smallest pod footprints in the industry, among the large players. We estimate Amazon AWS being 4-5 times and Microsoft Azure 2-3 times larger than the smallest IBM Cloud / SoftLayer footprint. That certainly helps when putting your flag around locations in the world, as less business needs to be acquired to reach economies of scale for a location.  

IBM will reach customers in 12 new locations including IBM Cloud centers in Frankfurt, Mexico City and Tokyo, and nine more centers through a strategic partnership with Equinix in Australia, France, Japan, Singapore, The Netherlands and the US.  

MyPOV – Germany is a key market in Europe and given Amazon AWS is now open for business here (read my analysis here) it is important for its competitors to be open for business there. Equally it is good to see that IBM (like almost all other players) partner with Equinix or use Equinix facilities.

IBM's agreement with Equinix provides direct access to the full portfolio of SoftLayer cloud services via the Equinix Cloud Exchange™ in nine markets worldwide spanning the Americas, Europe and Asia Pacific, including Amsterdam, Dallas, Chicago, Paris, Silicon Valley, Singapore, Sydney, Tokyo and Washington, D.C.  Through this partnership, SoftLayer provides customers with the ability to easily move production workloads in and out of the cloud, thus better enabling them to fully realize their hybrid cloud strategies.

MyPOV – An important partnership – the question (that likely will never be answered publicly) is what took IBM and Equinix so long to partner.

Hybrid Cloud Growth in Enterprises

Enterprise cloud deployments, specifically hybrid cloud, are growing at a significant rate.  According to leading technology research firm, Gartner, Inc., nearly half of all enterprises will have a hybrid cloud deployed by 2017.  Chief among the driving forces behind the adoption of cloud computing worldwide including hybrid cloud, are requirements for businesses and governments to store certain data locally to comply with data residency regulations, as well as a growing desire for startups to expand their businesses globally.  IBM estimates about 100 nations and territories have adopted laws that dictate how governments and private enterprises handle personal data.

MyPOV – No surprise that IBM caters to the localization / statutory demands that today in most international cloud deployments are violated. We expect that in 2015 the ‘time bomb’ in this regards will likely burst, most likely in a highly PII sensitized market like e.g. Germany or France. We expect legislators giving vendors and enterprises 2-3 years to comply, so an early land grab by any IaaS vendor will draw SaaS vendor attention with IBM. And with that comes load, which is the most important cloud success ingredient that IBM needs to acquire.

The new IBM Cloud centers in Frankfurt, Mexico City and Tokyo are part of IBM's $1.2 billion commitment to grow IBM's Cloud presence around the world to meet these local mandates with performance, security and data controls built in. These centers further expand IBM’s global cloud footprint which includes facilities in Mumbai, London, Amsterdam, Beijing, Hong Kong, Singapore, Melbourne, Toronto, Dallas and Raleigh, N.C., opened this year. This effort includes IBM's business consulting division, which features thousands of cloud experts with deep industry knowledge who are located around the globe to help clients to move to cloud.   IBM consultants are dedicated to working face-to-face with clients to address all of their industry specific needs as they transform to the cloud era.

MyPOV –Again no surprise – IBM using its strong services arm to cater to the local enterprises and their services needs. Similar to the recent deals announced with ABN Amro and Lufthansa, we expect comparable deals being in the pipeline for IBM in the above mentioned locations.

Open 24 hours a day, seven days a week, the new facilities offer an array of solutions including proven cloud resiliency services. These services guarantee customers up times of 99.99 percent across any IT environment, including traditional IT, public, private, or hybrid cloud deployments. In the event of an outage, the centers’ support team can recover data in minutes to ensure that is has little to no impact on business operations while going virtually unseen by customers.

MyPOV – Achieving 4 9s is certainly good enough to local IT leaders to consider the IBM offering. Not mentioned here are the bare metal capabilities of SoftLayer which we know are highly valued by IBM prospects and customers. We expect bare metal capabilities and the ability to ‘touch and see my hardware’ remaining a key trust factor for CIOs to move load to the public cloud for the next 2-3 years to come.

Clients around the world are using IBM cloud centers spread across every major market to help them adopt cloud for growth and innovation.  Since the start of November, IBM has announced more than $4 billion worth of cloud agreements with major enterprises around the world including Lufthansain Germany, ABN AMROin the Netherlands, WPPin the UK, Woox Innovations in Hong Kong, Dow Water and Thomson Reuters.

MyPOV – As mentioned above, all the data center locations have a good looking pipeline at the moment. Let’s keep in mind that IBM is combining its existing legacy pipeline with the SoftLayer pipeline for data center location expansion.

IBM today announced that  global transport operator National Express Group PLC is delivering a data-driven railway to improve both operational performance and customer experience on the IBM Cloud to provide up-to-the-minute train information and allow postcode-to-postcode journey planning – a first in UK rail.

In addition, born-on-the-web innovators are increasingly choosing to build their business on the IBM Cloud. In just the last month, IBM has announced wins with Diabetizer and Preveniomed in Germany,Hancom in South Korea, Musimundoin Argentina and Nubity Mexico. Collectively these wins reflect IBM's unique ability to deliver a full range of services through the cloud in ways that other cloud providers cannot match.

MyPOV – Given the enterprise strengths of IBM these clients are often overseen, so good to see that IBM mentioned them here. And startups with high data residency requirements in sensitive countries like e.g. Diabetizer and Preveniomed are great showcases for the location strategy by IBM.

“IBM recognizes that businesses and governments need the cloud to help them innovate, grow and operate more efficiently in concert with their existing IT investments," said Jim Comfort, General Manager, IBM Cloud Services.   "Everything IBM does is designed to help companies transition to the cloud in a responsible way at a pace that best fits their business model and industry.   Just as we helped major organizations transform in each preceding era of IT, IBM now serves as the cloud platform for the enterprise.”

MyPOV – Always smart for veteran vendors to remind customers and prospects how they have helped them to migrate across previous platform changes in the past. What is not mentioned, but plays an equal important view in my experience is that being closer to the data center location plays a key day to day role in performance. And for the provider in networking cost.

IBM has announced key cloud investments throughout 2014.   In addition to expanding its global cloud footprint and the establishment of the Bluemix PaaS to bring enterprise developers into the hybrid cloud era, IBM also launched a new Cloud marketplace that brings together IBM’s vast portfolio of cloud capabilities and new third-party services in a way that delivers a simple and easy experience for the enterprise. The IBM Cloud marketplace serves as a single online destination serves as the digital front door to cloud innovation bringing together IBM’s capabilities-as-a-service and those of partners and third party vendors with the security and resiliency enterprises expect.

MyPOV – Bluemix is critical for IBM’s success in the cloud, as we see forward looking enterprise that embrace the cloud today also having a need for next generation applications that need to build on the cloud, for the cloud in a PaaS. We lookedat Bluemix earlier this year when it was announced and covered the marketplace announcement here.

IBM Cloud Growth through Strategic Partnerships

Today's announcement with Equinix further extend the reach IBM has achieved through its own cloud portfolio and well as a string of recent cloud partnerships with other notable companies including:

  • SAP selected IBM as a premier strategic provider of Cloud infrastructure services for its business critical applications to accelerate customers’ ability to run core business in the cloud. SAP applications are now available through IBM’s highly scalable, open and secure cloud and enables SAP HANA Enterprise Cloud to major markets with the addition of the IBM cloud data centers.

  • IBM and Microsoft are working together to provide their respective enterprise software on Microsoft Azure and IBM Cloud. This relationship will give clients, partners and developers more choice in the cloud, helping them drive new business opportunities, spur innovation and reduce costs.

  • IBM and Tencent Cloud recently signed a business cooperation memorandum to collaborate on providing public cloud with Software-as-a-Service solutions for industries. The companies will focus on emerging small and medium enterprises in the smarter cities, healthcare industries and other fields to enable these industries to utilize mobile, cloud computing and big data tools to transform internal processes and operations, thus achieving cloud transformation in the era of mobility.

  • AT&T and IBM are collaborating to speed business adoption of cloud services by extending AT&T NetBondSM services to the SoftLayer platform for stronger security and performance. This extension of the IBM and AT&T alliance will allow businesses to easily create hybrid-computing solutions.

  • IBM and Intel worked together to make SoftLayer the first cloud platform to offer its customers bare metal servers powered by Intel® Cloud Technology that provides monitoring and security down to the microchip level. Through this agreement, the Intel® Trusted Execution Technology provides hardware monitoring and security controls that help assure businesses that a workload from a known location on SoftLayer infrastructure is running on trusted hardware.

MyPOV – As mentioned earlier IBM needs to bring load to its cloud to achieve economies of scale. The partnerships with SAP (my take on the partnership here), Microsoft and Tencent go into that direction, though it remains to be seen how much load they will really bring, but certainly a good start. Equally it’s good to see how IBM can forge relationships with key providers for the cloud space with AT&T and IBM (the security announcement analysis is here).

In addition to these partnerships, IBM is also contributing Private Computing services from IBM Cloud OpenStack Services platform to the OpenStack and Cloud Foundry Foundations.  The initial usage of these services will offer expanded capabilities to enable automated integration, reduced cycle time and increased quality for software distribution. This will accelerate time to market for all uses of OpenStack based infrastructure.

MyPOV – IBM made a big decision with moving its PaaS product Bluemix on the CloudFoundry stack, but that seems to be paying off given the traction CloudFoundry and the CloudFoundry Foundation enjoy these days both in then enterprise and the open source community.

By better enabling the open community, partnering with key companies that provide even greater value to the IBM Cloud portfolio and continuing to make financial and technological investments that has helped IBM achieve significant growth in its cloud business:

  • IBM reported cloud revenue of $4.4 billion for 2013 – up 69 percent year-to-year

  • IBM cloud revenue has increased 50 percent through the third quarter 2014 with a $3.1 billion run rate in as-a-service revenue.

  • IBM Cloud supports 47 of the top 50 Fortune 500 companies

  • For two years in a row, IBM has been named a leader in the IDC MarketScape on Cloud Professional Services.  (IDC MarketScape: Worldwide Cloud Professional Services 2014 Vendor Analysis, doc #250238, August 2014)

  • Businesses across the U.S. recently ranked IBM the as the number one cloud computing provider, according to an IDC survey of US market preferences for infrastructure-as-a-service (IaaS). *Source: IDC's U.S Outsourced Cloud Services Survey, 4Q13

  • In addition to overall top ranking, IBM was also rated the leader in six of eight major industries covered in the study including Financial Services, Manufacturing, Healthcare, Professional Services, Wholesale and Retail and Public Sector (government). *Source: IDC's U.S Outsourced Cloud Services Survey, 4Q13

  • IBM also finished in the top three in Transportation and Telecommunications, the only vendor to lead in as many industries and rank no lower than third in any industry. *Source: IDC's U.S Outsourced Cloud Services Survey, 4Q13

  • Synergy Research Group recently ranked IBM among the top three cloud providers and the leader in hybrid and private cloud engagement in a market analysis of public, private and hybrid IaaS and PaaS.

MyPOV – A lot of accolades and achievement and certainly a good start in the first full year that IBM has SoftLayer as an asset inside the company.


Overall MyPOV

A key press release for IBM and its cloud effort summing up well what the vendor has achieved – here are my key takeaways of the press release and the year overall:

  • IBM certainly knows when it needs to invest into something that works. The race to the announced 40 locations of January 2014 – that was not responded for by the usual competitors – has even more accelerated with IBM tracking to 48 locations now.
  • IBM’s reputation to help enterprises in technology transformation times is a well working and resonating messaging with customer and prospects.
  • Bluemix is, remains and will be a critical component of IBM’s cloud success. How well IBM can not only attract the new ‘cloud developer’ but also the existing (Rational) IBM developer will be a key area to watch in 2015 and beyond.
  • The service capabilities of IBM work to its favor with the enterprise need to be advised and often literally ‘taken by the hand’ to move to the public cloud.
  • IBM knows how to partner and will have more partnerships in stock for us to see in 2015.

What remains critical for IBM (as well as all its competitors – except AWS) is to attract load to reach economies of scale for its cloud effort. With an esteemed analyst company estimating that AWS is 4-5 larger than all major competitors combined – every IT executive knows that all competitors cannot get the same attractive conditions from all relevant suppliers like AWS does. IBM (and competitors) know that and are desperately looking for load, across the field IBM has done the best in 2014, but must continue to do so to reach similar cloud load levels Microsoft / Google.

2015 will be critical for IBM, and if we see a similar press release by end of 2015 we know it will have done well. We will be watching throughout the year. 


More on IBM :
  • Event Report - IBM Insight 2014 - Is it all coming together for IBM in 2015? Or not? 
  • First Take - Top 3 Takeaways from IBM Insight Day 1 Keynote - read here
  • IBM and SAP partner for cloud - good move - read here
  • Event Report - IBM Enterprise - A lot of value for existing customers, but can IBM attract net new customers? Read here
  • Progress Report - The Mainframe is alive and kicking - but there is more in IBM STG - read here
  • News Analysis - IBM and Intel partner to make the cloud more secure - read here
  • Progress Report - IBM BigData an Analytics have a lot of potential - time to show it - read here
  • Event Report - What a difference a year makes - and off to a good start - read here
  • First Take - 3 Key Takeaways from IBM's Impact Conference - Day 1 Keynote - read here
  • Another week and another Billion - this week it's a BlueMix Paas - read here
  • First take - IBM makes Connection - introduces the TalentSuite at IBM Connect - read here
  • IBM kicks of cloud data center race in 2014 - read here
  • First Take - IBM Software Group's Analyst Insights - read here
  • Are we witnessing one of the largest cloud moves - so far? Read here
  • Why IBM acquired Softlayer - read here
Find more coverage on the Constellation Research website here.