IBM’s cloud computing strategy: Flying blind?

IBM seems like a natural to lead in the cloud computing market, but instead the industry pioneer struggles to redefine itself in a fast-changing services world.

Although IBM boasts an impressive portfolio of products, technologies and services, the computing giant risks squandering its IT leadership position by lacking a clear strategy in this new era of cloud computing.

Analysts and customers say the company’s vast array of products is often a hindrance to its ability to focus on simple, useful cloud offerings.

If you just look at our [cloud] output, it's like trying to read tea leaves.

David Parker, vice president of cloud marketing at IBM

IBM’s product portfolio includes everything from WebSphere available on Amazon Web Services (AWS); CloudBurst, a private cloud appliance; the IBM Smart Business Test and Development service that runs on IBM Cloud; LotusLive and Software as a Service integration tools like Cast Iron; IBM Application Development Services for Cloud; Rational and Tivoli software for cloud; IBM implementation services for cloud; IBM Federal Community Cloud; IBM Smart Analytics Cloud and IBM Cloud Labs, to cite many examples. Many of these are premium priced when compared with the competition.

Even IBM, which recently reorganized its staff to get a better grip on cloud computing, acknowledges that honing a clear message is a challenge.

”It’s a two-edged sword; the more we push individual products, the more we get away from the idea of cloud,” said David Parker, vice president of cloud marketing at IBM. Regarding the company’s cloud strategy, he said, “If you just look at our output, it’s like trying to read tea leaves.”

This is not to say that IBM is the only large company with a confusing cloud strategy. Others do as well, but IBM’s problem is magnified because it plays in so many markets, said Drue Reeves, an analyst at Gartner.

“[IBM has] an opportunity to demonstrate a cohesive strategy for all your cloud computing needs,” Reeves said, “but instead [it is] saying, ‘we’ve got a little bit here and a little bit there,’ and this approach does not position them as a leader.” This scattershot approach to cloud computing could scare away customers.

IBM invites shops to help cook
Timothy Happychuk, regional IT director for Sun Media Corp., a division of Quebecor Inc. in Montreal, Canada is exploring cloud options to cut costs. His company also finds it hard to retain talented IT staff in-house, so the idea of turning over the firm’s infrastructure to external IT specialists is appealing.

“If you tally up [what] we spend in maintaining our IT staff internally, we could write someone else a check and let them deal with the headache,” Happychuk said. His firm will phase in some cloud services -- email is top of the list -- and as a large IBM shop, Lotus Live would have been an easy choice.

But Happychuk said when he requested specific security or performance parameters, IBM told him that Sun Media Corp was better off hosting the architecture itself…and IBM would sell him the gear to do just that.

“It’s like going to a fine restaurant where you expect the chef to prepare you an amazing meal and wait staff to serve it to you, but instead you are invited into the kitchen to help cook and then the bill is the same,” he said.

His company doesn’t want to spend more money on infrastructure and will look for providers that help him outsource to reduce IT costs.

Cloud computing requires a new approach
The more aggressive IT shops pushing toward cloud infrastructures realize that the old-fashioned, monolithic hardware and software approach is not the way to go.

Thus IBM’s attempt to push its huge software portfolio in a cloud engagement falls on deaf ears, said Randy Bias, CEO of cloud consulting firm Cloudscaling. For instance, IBM Tivoli sells an inventory management software product to manage complex, heterogeneous environments.

But designed correctly, he said, every rack in a cloud system looks exactly the same. A proper cloud environment has few vendors and standard systems. Why should a modern IT shop need a heavy duty inventory management system for a cloud infrastructure if the components are the same?

Yet Bias has seen IBM CloudBurst proposals that include this product and many more pieces of Tivoli software. “They are trying to move sunk costs in enterprise software to the cloud, but it won’t work, ” Bias said.

Meanwhile, IBM’s Parker said the company recognized early that data center IT executives would prefer private cloud options because it feared the public cloud would not meet their data security needs nor address their compliance requirements. To that end, IBM launched a cloud-in-a-box offering called CloudBurst in June 2009.

CloudBurst is a preconfigured IBM BladeCenter running Tivoli management software and VMware's ESXi 4.1 embedded hypervisor on each blade inside a standard 42 U rack. Customers roll it into a data center, plug in and fire up a self-service portal for access. CloudBurst starts at a cool $250,000.

It competes with the VBlock VCE product from EMC, VMware and Cisco and Exalogic from Oracle. These technologies are commonly referred to as a vertically integrated stack, or private cloud. All of them can cost hundreds of thousands of dollars when loaded up with software, with variation depending on the configuration.

Cloudscaling’s Bias said he’s heard of companies choosing CloudBurst and ultimately spending more money than if they’d simply upgraded their existing IT systems, even though the point of cloud computing is to reduce costs. He said cloud-in-a-box systems are many orders of magnitude the cost of building a commodity cloud like AWS.

IBM Smart Business Development and Test Cloud and IaaS
IBM is not oblivious to the expense of running an enterprise infrastructure. The company recognizes that one of the highest costs for IT departments is to set up development and test environments. These often take a long time to create and are often underutilized.

With great fanfare, IBM launched a development and test service on its Infrastructure as a Service (IaaS) cloud in June 2009. The service, touted as an alternative to buying hardware, offered a self-service portal and catalog with a menu of tools for developers and supports automatic provisioning and de-provisioning of capacity.

"Dev and test is one of the most obvious applications for cloud services and they saw that," said Gartner’s Reeves. He expressed disappointment, however, at IBM’s slow pace in bringing the technology to market. “[IBM] only recommends Infrastructure as a Service for dev and test; why not other applications?” he said. “Is it not ready?”

IBM’s Parker said its IaaS is growing at a healthy clip and the company is in the process of moving some customers to production. While IaaS is only available for development and testing today, Parker said the company plans to expand the offering but declined to give more information on its timing.

Parker added that there are a huge number of independent software vendors (ISVs) out there interested in becoming cloud providers. “We’re going to give these people an avenue [to cloud] instead of building out Infrastructure as a Service themselves,” he said.

WebSphere and Platform as a Service
Even with its vast expanse of products, IBM still has gaps in its portfolio. One missing component is in the Platform as a Service (PaaS) market. Competition here is fierce and the players include Microsoft with Azure, VMware with VMForce; Google App Engine (GAE); and Salesforce.com with Force.com and Heroku.

Then there are dozens of smaller PaaS providers -- LongJump, EngineYard, WaveMaker, PHP Fog and CloudBees -- among others. Analysts expect that eventually all new applications will be developed in the cloud on one or more of these platforms. Meanwhile, IBM’s PaaS offering is WebSphere on AWS.

“This meets the minimum requirements of PaaS, but it’s not a competitive offering with true PaaS,” Gartner’s Reeves said. “It needs development to bring it up to enterprise standards.”

WebSphere today is missing a fabric layer that lets developers write applications without worrying about the underlying infrastructure. WebSphere runs on an Amazon Machine Image on AWS. The developer must spin it up and down as needed in managing all the infrastructure elements associated with each individual machine.

Vimal Goel, CTO of Hiptide LLC, an organ transplantation software company, used Force.com to design its software. “No modern company would use WebSphere on Amazon ,” Goel said. “Even the idea of WebSphere turns me off; it’s monolithic software that is not designed for the cloud,” he said.

No modern company would use WebSphere on Amazon.

Vimal Goel, CTO of Hiptide, LLC

Goel added that PaaS providers, including VMware, Google and Microsoft, let developers get started for free, which is crucial and not the case with IBM. It costs an arm and a leg to get started with WebSphere on AWS. IBM’s licensing for Amazon cloud services is based on processor value units (PVUs), which vary according to the type (or size) of the Amazon EC2 instance and the number of virtual cores used to install the software.

For example, an Extra Large Instance using four virtual cores requires 200 PVUs. At $46.25 per PVU, license fees for WebSphere on this AWS configuration would be $8,450. And that’s before maintenance charges, which are usually an additional 20% of the list price, plus all Amazon’s charges on top.

Change could come soon, however. Jerry Cuomo, CTO of WebSphere and an IBM Fellow, said the company is working on a new PaaS offering. It will be Java-centered and support multiple run time selections, along with multiple dialects of Java and APIs around Java. The company has yet to divulge details.

IBM’s lumbering advances into cloud computing have frustrated many who look to the company for leadership. Despite its awkward start, there is little doubt that IBM’s sheer size and footprint in corporate data centers will make it an unquestioned force in cloud computing. The 451 Group, a technology research firm, said IBM is second only to Amazon in terms of revenue generated from IaaS. The 451 Group estimates Big Blue earned $30 million in revenue in 2010 from IaaS. Amazon Web Services, meanwhile, is estimated to be pulling in $500 million annually selling IaaS.

“Whatever IBM ends up doing, they are starting from such strength, they will get business,” said John Abbott, founder and chief analyst at The 451 Group.

Jo Maitland is the Senior Executive Editor of SearchCloudComputing.com. Contact her at jmaitland@techtarget.com.

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