Can IBM Win Hybrid Cloud In 2015?

IBM has shifted into overdrive for its hybrid cloud assault. This year, its cloud services will be pushed to 40 new cloud data centres to cater for global demand, and just this week IBM sources have been hinting at a complete company overhaul and realignment to cloud.

A deal struck with Equinix at the tail end of last year hammered home IBM’s repositioning. IBM’s relationship with Equinix goes back more than a decade, but the new deal sees IBM committing to its push into cloud services with added capacity to its cloud marketplace.

Hybrid cloud ‘resonates’

The mast to which IBM is really pinning its colours on is hybrid cloud in the enterprise, a move which really kicked off in 2013 with the acquisition of SoftLayer, a managed hosting and cloud company.

Doug Clark, IBM’s Cloud Leader for UK and Ireland, told TechWeekEurope: “One of the things that’s been really evident over the past two years has been this need for a hybrid cloud environment. There are a lot of customers for IBM that still want to have on-premise capability whilst making full use of the cloud.”

Clark says that the firm is seeing its iteration of hybrid cloud really “resonate in the market”. There’s certainly no denying the hotbed of activity surrounding hybrid cloud at the moment. Research from Avanade UK has showed that 69 percent of companies surveyed agreed that implementing a hybrid cloud strategy will be one of their biggest areas of focus in 2015. Avanade’s results back up Gartner’s 2014 cloud survey which found that 72 percent of companies will be pursuing a hybrid cloud strategy by this year.

As companies come to realise the pitfalls of moving everything exclusively to the cloud, the shift to hybrid models suggests the end of the initial buzz and a transformation to realising how cherry picking the right kind of cloud deployments can start to benefit IT infrastructure.

The last few months have seen IBM capitalise on that atmosphere, with the firm picking up outsourcing contracts with customers such as Lufthansa and ABN Amro. “We’re not having to do a lot of pushing,” says Clark. “[Customers] see the writing on the wall.”

“[Hybrid cloud] is resonating in the market because a lot of our enterprise clients are really tuned into that. You would have seen that at the end of last year with ABM Amro and Lufthansa. In total, IBM racked up $3.6bn worth of deals in 2014.

“My expectation for this year is we’re going to see an awful lot more of those really big enterprises, the ones you’d associate with IBM, going all in on cloud,” Clark says.

“They now recognise that there are enough elements of cloud that are mature and proven enough for them to move entire platform over towards cloud.”

“I’m putting my head on the block and saying what we saw at the end of last year, that’s just the start. We’ve experience a lot of clients that have been dabbling in cloud, but I think we’re going see a lot more and get clients saying ‘we’re going all in on cloud’.”

But will IBM really be able to compete in the market? 451 analyst William Fellows tells TechWeekEurope that IBM needs to “double down on SoftLayer and the services opportunity”.

“IBM is a top ten IaaS player in terms of revenue now,” says Fellows. “But only. The problem is, it’s losing wallet share despite its IT spending growth – ie, it’s being disrupted.”

That disruption from non-traditional IT vendors is readily apparent. Amazon Web Services, one of the frontrunners in public cloud, is increasingly targeting the enterprise space and really forcing the legacy players like IBM, VMware and Microsoft Azure. IBM will never be able to compete with AWS on price, but their services are stalking a different prey for now.

Clark says: “There’s a lot of space in the market because it’s going to be huge. But I would never expect IBM to have complete total dominance of the market.”

Instead, IBM is focusing on ‘strategic alliances’, such as those with Equinix, to nurture the roots for its cloud models.

“One of the things we do, we have been working on a lot over the past few years is strategic alliance we’ve built to help us bridge to this massive growth that we’re expecting,” says Clark.

But Fellows says that IBM needs to ‘get game’, an opportunity which is there for the taking with SoftLayer. “It’s as much about Transforming IBM’s own business to a consumption-based model,” he says.

Chris Sharp, VP Cloud Innovation at Equinix, was of course very flattering of IBM. Sharp tells TechWeekEurope: “There is strong demand within our base of customers, as well as the enterprises we are working with to connect to IBM SoftLayer.

“This recent collaboration is building on an established, and strong, foundation. By adding IBM SoftLayer to the existing portfolio of important, enterprise focused cloud service providers we are enabling more provider and use case choice for enterprise. Ultimately we look to this type of partnership to benefit our position with enterprise, but also as a vehicle to strengthen and expand our business dealings with IBM SoftLayer directly.”

It’s still too early to really tell how IBM will fare this year.  Its Q3 results saw sales slip 6 percent year-on-year, and the firm is now looking at being the worst performer in the Dow Jones Industrial Average for the second year in a row. Even offloading chip unit Globalfoundries and dramatically slimlining its workforce (with even UK employees being offered voluntary redundancy) hasn’t improved the outlook. With a tough year ahead, IBM is really banking on its hybrid cloud strategy, so let’s be having it IBM.