Monday, April 27, 2015

IBM’s Cloud Business = delivering value to clients!

By Rich Ptak

IBM and its Cloud business attracted some significant commentary recently. First, Cloud received a call out in a front-page Wall Street Journal story as one of IBM CEO ‘Ginni’ Rometty’s successful moves. Unmentioned was the little detail that Cloud’s rolling 12 month revenues exceeded $7.7 billion. Clearly, IBM is at the forefront with its sophisticated offerings of value-adding Cloud services. 

Additionally, IBM’s 2015 First-Quarter Results had Cloud reporting revenue growth in excess of 75%, making it a significant contributor to overall reported revenues exceeding 20% (30%+ if adjusted for currency and divested business). Finally, Cloud services posts a very respectable $3.8 Billion 2015 annual run-rate (versus last year’s $2.3B).

Overlooked is the background to this highly respectable performance. IBM quickly acted on their early recognition as Cloud began developing into two distinctly different market segments. This is a common phenomenon as IT markets mature, but one that started early for Cloud.

One segment provides low-end, commoditized Cloud services; characterized by volume-pricing, infrastructure-as-a-service, basic support, combinations of self- and roll-your-own services and cut-throat competition. The other segment provides sophisticated services aimed at leveraging Cloud for higher-value, higher profit opportunities. The focus is on realizing enterprise value from the proper use of technology. This is the segment IBM pursues.

Examples from IBM’s first quarter deals include ShopDirect[1], one of the largest UK’s retailers, and the Weather Company, that provides weather data to a wide variety of companies and industries to help them better manage their businesses[2].  Both have a low-end Cloud provider satisfy their infrastructure-as-a-service needs.

However, when it came to data gathering and applying analytics to gain insight for their own and customer use in a Cloud environment, they turned to IBM.  

•         ShopDirect is working with IBM to scale their mobile offerings; they add value by identifying and understanding mobile buying patterns to customize marketing offerings.  
•         The Weather Company is working with IBM to analyze and apply weather data collected from millions of sensors to provide unique weather-based insights that serve the business needs of their customers in a variety of industries, e.g. insurance and retail.

This trend is becoming increasingly common across Cloud clients. IBM Cloud first quarter announcements included:

                  Marriott will use IBM Cloud to offer faster digital services to web-savvy guests as well as to acquire insight to improve services to this traveler cohort at over 4,000 properties across the globe.
                  The U.S. Army will integrate the IBM Cloud with other existing Army IT systems to process more than 40 million transactions each day.
                  In a multi-million dollar agreement, Coca-Cola Amatil will move its Asia Pacific customer planning and relationship management systems to the IBM Cloud. Hosting the workloads in IBM’s two Australian SoftLayer centers speeds CCA’s response to customer needs while delivering significant savings.

To accommodate the increased demand, IBM is adding six new date centers (total 45) and expanding capacity in nine locales. In the last quarter, new cloud centers were opened in Sydney and Montreal.  And we are investing more than $1 billion in IBM Bluemix, a cloud development platform, which allows ecosystem partners and clients to develop cloud-based apps, such as analytics apps, and apply those apps in all manner of cloud environments.  

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