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Despite the inroads IBM has made in the cloud infrastructure market, it still struggles to close the gap with industry giant Amazon Web Services. That's because the crux of IBM's cloud strategy isn't -- and shouldn't be -- infrastructure, IT pros say. Instead, it's all about the data.
Many industry experts rank IBM among the top infrastructure as a service (IaaS) providers. IBM was the fourth biggest cloud provider for public IaaS in terms of revenue market share -- until recently, when Alibaba overtook it, said John Dinsdale, chief analyst at Synergy Research, a market research firm in Reno, Nev.
In the first quarter of 2017, Synergy's rankings showed Amazon Web Services (AWS) comfortably in the lead with 44% market share, followed by Microsoft Azure (11%), Google Cloud Platform (6%), Alibaba (5%) and then IBM (4%).
Still, IBM has made progress in the public IaaS market compared to some of its traditional competitors. Hewlett Packard Enterprise, for example, shuttered its Helion public cloud in early 2016.
IBM's 2013 acquisition of SoftLayer was the jumping-off point for its IaaS gains. The company now has more than 50 data centers worldwide, 13 of which came from SoftLayer, Dinsdale said.
"IBM has clearly continued to grow both the number and capacity of its data centers," he said.
A broad global footprint and scale are table stakes in the highly competitive public IaaS market, and IBM's acquisition of SoftLayer's cloud data centers provided a crucial foundation on which to grow, said Cassandra Mooshian, senior analyst at Technology Business Research, an IT research organization in Hampton, N.H.
"Without [SoftLayer], I don't know what they would have done in this market," she said. "That gave IBM access globally, very quickly. I think that was a huge advantage, and they continue to grow on that."
IBM cloud infrastructure revamp in the works
To level the playing field with AWS and Azure, IBM is working on a new cloud architecture -- what it calls "next-generation infrastructure" (NGI) -- that will incorporate new hardware within its cloud data centers to further modernize its SoftLayer infrastructure.
For example, IBM IaaS lacks the virtual networking constructs that are present in AWS and Azure, and NGI is meant to address these differences, said Lydia Leong, an analyst with Gartner.
But when this new cloud architecture will formally be available -- and whether it will win customers from AWS -- remains to be seen.
"The core infrastructure war has been mostly won," Leong said.
In addition to scale, the SoftLayer buy also opened the door for IBM's bare-metal cloud strategy, which continues to be a differentiator for the company.
Bitly, Inc., the company behind the popular link management platform, began to migrate to IBM cloud infrastructure in 2015. The company ran its platform on bare-metal servers in a colocation facility, but as the business expanded, its capacity and scale became difficult to manage, said Rob Platzer, CTO at Bitly, based in New York City.
Rather than move to pure IaaS, which would have required some rearchitecting, Bitly wanted a more cloud-like environment that would still include bare metal, as some of the Bitly platform is optimized for that particular technology, Platzer said.
IBM SoftLayer allowed Bitly to maintain its bare-metal footprint, yet also tap into key benefits of cloud, such as more flexible pricing models and the ability to scale capacity as needed. But it also put Bitly in a position to pursue a hybrid strategy, Platzer said. Eventually, the company plans to use a mix of IBM's bare-metal and virtualized IaaS offerings and is already working toward that goal.
"What we wanted was a low-risk lift-and-shift from bare metal to bare metal, but we wanted the opportunity to have a hybrid environment where we could begin to take advantage of transforming some of our platform to virtualized or pure cloud-based," he said.
But a growing data center footprint and its bare-metal option might not be enough for IBM to dethrone public IaaS leader AWS, Dinsdale suggested. AWS doesn't directly offer bare metal, but it has somewhat comparable services, such as Elastic Compute Cloud Dedicated Hosts, which commit resources on a physical server to a single tenant.
"[IBM bare metal] might offer some level of differentiation, but I doubt that AWS or Microsoft are losing too much sleep over it," Dinsdale said.
Moreover, while IBM has made efforts to evolve SoftLayer infrastructure, its pace of change hasn't kept up with AWS and Azure, Leong said.
"They introduced some storage options in early 2015, and that has been the only major new functionality," she said. "There were other functions offered to some users as one-offs … but it was not at the pace [of] Microsoft or AWS, [which introduce] hundreds of new features a year."
IBM's cloud strategy emphasizes Bluemix, platform services
In the long term -- even after the rollout of its next-generation cloud architecture -- it's not in IBM's best interest to compete in cloud on a pure infrastructure basis, Leong said.
Lydia LeongAnalyst at Gartner
"It would be better for IBM to focus on where it can differentiate with things like Watson rather than trying to compete head-to-head with Amazon and Microsoft in the infrastructure space," she said.
IBM has already started to move in this direction. The company has placed a greater emphasis on its Bluemix portfolio of cloud app development services, as well as its offerings for emerging workloads related to artificial intelligence, big data and the internet of things (IoT).
The SoftLayer acquisition was primarily just a means to an end for IBM -- a set of infrastructure resources on which to host these data services, said Lief Morin, CEO of Key Information Systems, an IT services provider and system integrator based in Agoura Hills, Calif.
"They didn't buy SoftLayer so they could build the world's largest bare-metal provisioning company," said Morin, whose company partners with both IBM and AWS. "But they knew they had to have that platform in order to purvey their [services]."
IBM's growing emphasis on platform as a service, as well as data analytics and cognitive computing, is evidenced by its move in October 2016 to roll the SoftLayer cloud portfolio into the Bluemix brand. IBM also integrated the SoftLayer and Bluemix management portals to provide a single dashboard for users of both IBM cloud infrastructure and platform services.
That model provides a more unified experience for IBM cloud customers and is similar to that of Microsoft Azure, Mooshian said.
"The SoftLayer brand was strong with its own customers; however, I think IBM has done a better job promoting the Bluemix brand," she said. "Bringing SoftLayer underneath Bluemix and kind of unifying the buyer experience will help them going forward."
Another key area of focus for IBM moving forward will be its hybrid story with the Bluemix platform, Mooshian added. Right now, IBM offers Bluemix Local, a private version of the IBM Bluemix public cloud platform that users deploy on their own hardware and within their own data centers. The aim -- much like Microsoft's upcoming Azure Stack -- is to simplify hybrid cloud deployments.
For example, Bluemix Local and Bluemix public cloud share the same underlying infrastructure. This lets developers build apps in-house that can more easily migrate to the public cloud. It also enables IBM cloud admins to manage both their private and public deployments from a common console.
Oracle has a similar offering with its Oracle Cloud Machine. But, otherwise, the market for these types of on-premises hybrid cloud systems is still fairly young -- especially given the delayed release of Microsoft's Azure Stack.
"We have seen a lot of demand on the customer side for a truly hybrid model," Mooshian said. "And right now, only Oracle and IBM have that -- with options to have a public cloud platform, hosted private cloud platform and then an on-premises option."
Moving forward, IBM's cloud success hinges largely on its platform services and hybrid strategy. But how successfully and quickly it builds out those offerings, while maintaining the more traditional parts of its business, such as mainframes, will be the true test.
"They are trying to balance the old and the new," Mooshian said. "They have a different portfolio than any other vendor out there right now because they have so much of both."
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