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IBM's cloud strategy advances, but more work remains

IBM appears to be on the right track with its cloud computing plans, but bumps in the road remain, especially when it comes to targeting line-of-business users.

IBM is not always the first name that comes to mind for cloud computing prospects. In a fight for broad market recognition, IBM is behind both Amazon Web Services and Microsoft Azure, but, as cloud computing evolves, there are still scenarios where IBM could be a major, even dominant, player. However, when looking at IBM's cloud strategy, there are still questions and gaps to address.

As a market leader in enterprise computing, IBM stands to gain and lose with public cloud services. If the cloud displaces on-premises IT, IBM is likely to suffer a loss in hardware sales. However, if cloud reshapes how we build applications, IBM can profit from selling public cloud services and hybridizing those services with data center technology. That could build a new set of opportunities for IBM, which has seen a decline in revenue in recent years.

A closer look at IBM's cloud strategy

IBM's IT rival Hewlett Packard Enterprise exited the public cloud business, and one likely reason was the difficulty in balancing sales of data center systems with public cloud services that could displace those very systems.

The cornerstone of IBM's cloud strategy is that the cloud is a computing architecture that organizations can exercise both in the data center and through public services. The cloud is a model for building and running applications, and IBM targets all of its cloud offerings not only to the IT professionals that it has historically sold to, but also to line-of-business and operations teams.

To support this approach, IBM has combined cloud-specific professional services with cloud-enabled middleware tools, including those for networking, databases, and security and compliance. The goal is to ensure that prospective buyers don't have to figure out how to integrate cloud with mainstream IT. IBM also offers cloud as a managed service, which can include both private and public cloud services.

The role of SoftLayer/Bluemix

IBM is absorbing its public cloud, SoftLayer, into its Bluemix brand in an effort to integrate its public cloud services further, and more explicitly, with its mainstream software efforts. This decision was apparently in response to opinion that the separate SoftLayer brand diluted the influence of IBM's account team on large enterprises, and complicated messaging. 

Where IBM account teams can drive cloud adoption from the IT side, the IBM cloud portfolio will lead buyers to hybrid deployments based on Bluemix. As IBM's main sales efforts will still be driven by the IT side, this should reduce the cannibalization of the vendor's current data center sales.

Where line departments drive cloud computing adoption, separating Bluemix public cloud from mainstream IBM ensures line buyers don't feel IBM -- a vendor they might try to bypass with shadow IT -- is an agent of their own internal IT footprint.

IBM isn't likely to eliminate the "line departments vs. IT" or "public cloud vs. data center" tensions with this approach. In fact, this tension will manifest in two ways: the web service repertoire of Bluemix public cloud, as compared to Amazon Web Services (AWS) and Azure cloud services, and in cloud marketing.

Marketing, lack of web services pose cloud challenge for IBM

Compared with AWS and Microsoft, IBM's Bluemix has only limited services in the cloud. As of now, there are no functional programming services and no internet of things accommodations. This is partially because IBM has an active reseller program for public cloud and has pinned hopes on partners to not only develop horizontal and vertical application services, but to take them to market.

The problem here is that these specialized cloud web services are the pathway to building true cloud-specific applications and to creating cloud-driven solutions to business problems. If the path to the future of cloud lies in cloud-based, middleware-like services, then both Azure and AWS have a clear lead on IBM.

Marketing is another challenge for IBM's cloud strategy. The company's long-term sales approach has focused on CIOs and larger enterprises, and relied on channel partners to address SMBs. Channel programs are driven largely by leads generated by the vendor's marketing. Over time, as IBM reduced emphasis on products like PCs, its broad marketing strategy and brand recognition suffered. And, since channel partners also support IBM's public cloud, there's a risk that it will suffer from a lack of marketing support. 

Senior news writer Jack Vaughan talks about the unveiling and gives his take on IBM's attempts to commercialize its Watson AI technology.

Line departments are like SMBs; they don't necessarily see IBM as a natural partner. They may, instead, see it as the partner of their company's IT organization, and this could impede IBM's line department-focused cloud plans. For IBM or its partners to engage line departments, those buyers have to be exposed to Bluemix's value proposition, and, today, Bluemix is far less known than AWS or Azure.

IBM's IT rival Hewlett Packard Enterprise exited the public cloud business, and one likely reason was the difficulty in balancing sales of data center systems with public cloud services that could displace those very systems. IBM's cloud strategy could bridge the gap between public cloud and the data center, but its public cloud application tools fall short compared to those from key competitors. That forces IBM to rely on traditional development tools and practices that only data center and development teams can apply, which puts the whole strategy at risk.

There are already rumors that IBM is adding new, cloud-native features to Bluemix to match, or even surpass, AWS and Azure offerings. If that happens, IBM's cloud strategy, focusing on public cloud and hybridization, could be a winner. At the same time, there are rumors that both AWS and Google are looking to offer some form of data center service to create their own hybrid cloud strategy. If that happens before IBM gets its own positioning in order, it could face a tough cloud future.

Next Steps

Look inside IBM's SoftLayer

Is a hybrid cloud approach right for you?

Why IBM is gaining cloud user acceptance

This was last published in October 2016

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