Welcome!

Cloud Expo Authors: Elizabeth White, Pat Romanski, Trevor Parsons, Lori MacVittie, Cynthia Dunlop

Related Topics: Cloud Expo, Java, Linux, Virtualization, Big Data Journal, SDN Journal

Cloud Expo: Article

SoftLayer – IBM's New Quarterback for the Cloud

SoftLayer has a lot to offer for IBM and IBM seems to appreciate the new capabilities and innovations

What typically happens to smaller firms when they are being eaten up by mega-companies like IBM seems pretty obvious - they go to the dogs. Key executives will leave the team, product roadmaps will lose their binding character and strategy will get fuzzy due to the sheer magnitude of the organization and its inherent complexity. But not so with SoftLayer / IBM.

It has become obvious over the past 6 months that IBM's senior management had more in mind than a pure opportunistic acquisition when they bought hosting firm SoftLayer in the summer of 2013 for 2 billion USD. Eric Clementi who was among the early cloud advocates within IBM has made a strategic bet that will enable IBM to regain its position as one of the key cloud leaders in the market over the next 2-3 years.

SoftLayer - IBM´s New Strategic Asset
IBM has officially dedicated over 1.2 billion USD in additional investments to its new cloud data center infrastructure. That makes roughly 80-100 million USD for each of the 15 newly planned data center locations (15 new DCs adding to 13 SoftLayer and 15 IBM data centers) that will cover all geographic regions. Although IBM has tremendous in-house expertise when it comes to building and operating data center facilities, the new cloud data centers will follow the blueprint of SoftLayer. Why's that?

As a typical hosting provider SoftLayer not only commands a highly scalable data center architecture with over 80,000 running servers, it is foremost a highly cost-efficient data center operations and broad set of services that makes it attractive for IBM to switch platforms from its own IBM SmartCloud to the SoftLayer platform. What SoftLayer also brings to the table is a substantial revenue share. Crisp Research estimates the annual revenue for 2013 to be around 520 million USD. Given the new investments and the IBM brand as a backing for enterprise deals - 2014 revenue can easily be around 600 million up to 1 billion USD.

Within a positive market scenario the new IBM/SoftLayer business unit is likely to surpass 4 billion USD in revenue within the next 5 years and thereby contributing up to 10% of IBM GTS revenue by the end of 2018.

SoftLayer to Become IBM's Prime Cloud Delivery Platform
But this is only possible if IBM will stick to its current roadmap and make SoftLayer the prime cloud delivery platform for its new SaaS and PaaS offerings. As of today IBM plans to make most of its software portfolio accessible as cloud services - within shared, hybrid and private cloud environments. For example, the CloudFoundry-based IBM Bluemix-offerings (PaaS) is already being hosted on the SoftLayer platform. The same will happen to new collaboration services (e.g., Connect), infrastructure management solutions and even "Watson"-based analytics services.

There is even more evidence that IBM is getting down to business with SoftLayer. Relatively unnoticed IBM has migrated hundreds of customers from its SmartCloud to the SoftLayer platform over the past 5 months. It could be said that this was one of the largest cloud migrations (vendor-to-vendor) - by the number of clients - but not in terms of capacity. Most of the workloads were "under the radar" applications.

The IBM SmartCloud has been never been more than a stepchild in IBM's overall strategy. The platform was not capable of handling thousands of agile and scalable web workloads in a competitive operations model. Thereby the IBM senior management team has come to the right decision - let SoftLayer grow - shut SmartCloud down.

Bare Metal Cloud Hosting - The Secret Sauce in the IaaS Market?

Over the past 5 years the cloud market has come a long way in terms of technical maturity and overall adoption. What vendors and CIOs both learned alike is that there is a clear demand for different types of cloud infrastructure services. One-size-fits all virtual machines are not the right solution for all customers. Workloads have highly differentiated characteristics. Especially for advanced workloads "dedicated performance" instead of mellow SLAs can help customers sleep better. Business cases vary in terms of flexibility and cost. As more and more workloads are migrated toward the cloud, "cost prediction" becomes key to numerous CIOs and CTOs. To cover baseline infrastructure capacity, reserved resources (e.g., bare metal or dedicated VMs) help to save budget. These savings can be allocated to innovative projects or to cover "peak" capacity.

The market for infrastructure-as-a-service (IaaS) is still under development and covers a large spectrum of providers and delivery models. It ranges from the large public cloud platform providers AWS, Google and Microsoft Azure, which offer mainly standardized services, to the classical managed service providers with their private cloud offerings. That gap is being bridged by a small number of hosting firms that have transformed their portfolio in the direction of cloud. SoftLayer is among the group of Host Europe Group, OVH, Rackspace, et al, that combines agility, dedicated performance and cost predictability in the right balance with solid support operations. Looking at the growth numbers delivered by this peer group over the last few years we can reason that the "cloud hosting" model has a huge fan base in the market. This is mainly true for SMB customers, eCommerce firms and part of the startup world.

Remaining Questions and Outlook
SoftLayer has a lot to offer for IBM and IBM seems to appreciate the new capabilities and innovations. But some strategic questions are not answered yet. For example: How does the SoftLayer hosting business fits with the IBM high-margin model in the long run? Even when IBM is able to drag enterprise customers (who are willing to pay more for dedicated compute power then for virtual compute power) onto its new platform the IaaS business will not have the same margins like the mainframe business.

One next question relates to IBM´s plan to migrate its entire software portfolio to the cloud ("SaaS First"). The ambitious growth plan for SoftLayer will only pay off if the migration and go-to-market for the different software solutions is successful and well communicated. Currently it is not quite clear which of the hundreds of software solutions are able to run in the cloud and which of them will be migrated first.

But the most important question is: Will IBM stick to its plan? From the perspective of Crisp Research there is no way out. After the current announcements customers are betting on IBM SoftLayer. SmartCloud is not a trusted platform any longer and will go to the dead pool. IBM´s current activities look very promising. But competition is fierce. Rich Miller estimated a whopping 7.3 billion USD that were spend by Google in 2013 to expand its data center and network capacity (up from 3.2 billion USD in 2012).

With SoftLayer as its new cloud quarterback IBM is back in the game. The next 12-18 month will show, if AWS, Microsoft and Google will get serious competition in the cloud capacity game where "economies of scale" dictate the rules.

More Stories By Carlo Velten

Dr. Carlo Velten is founding partner and managing director of ITresearch and advisory firm Crisp Research. As senior analyst Carlo oversees the research and advisory initiatives at Crisp Research. Carlo is a seasoned industry expert with over 15 years of working experience as IT analyst. He helped numerous leading companies to transform their enterprise IT-platforms into agile cloud-based environments. He also advises large tech vendors regarding strategy, business model transformation and marketing excellence.

Before starting Crisp Research he was senior advisor and board member at European IT research firm Experton Group where he co-led the “Cloud Computing & Innovation Practice“. Prior to that he was the senior analyst at German research firm TechConsult. Carlo is a well-known speaker and moderator at industry events and contributing editor at Computerwoche and CIO magazine. He is a judging panel member for the “Best in Cloud Awards” of IDG and long-term research partner of tech association BITKOM.

Carlo holds a M.Sc. and PhD. in venture capital. He was research fellow at San José State University, CA. and partner at transatlantic venture firm GENES Ventures. Carlo serves as board member for the Managerkreis - a well-known think tank of the Friedrich Ebert Foundation based in Berlin.

Comments (0)

Share your thoughts on this story.

Add your comment
You must be signed in to add a comment. Sign-in | Register

In accordance with our Comment Policy, we encourage comments that are on topic, relevant and to-the-point. We will remove comments that include profanity, personal attacks, racial slurs, threats of violence, or other inappropriate material that violates our Terms and Conditions, and will block users who make repeated violations. We ask all readers to expect diversity of opinion and to treat one another with dignity and respect.


@CloudExpo Stories
Can we look to the paradigm of cloud computing from a completely different perspective? In his General Session at 15th Cloud Expo, Gundars Kulups, Sales Director at DEAC, will discuss what we can learn from our dining habits when choosing a cloud solution. Gundars Kulups is Sales Director at DEAC, full service data center operator. An IT expert, he specializes in European countries and has worked in the IT industry since 1992. He graduated from Riga Technical University (RTU) in Latvia and com...
SYS-CON Events announced today that SOA Software, an API management leader, will exhibit at SYS-CON's 15th International Cloud Expo®, which will take place on November 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA. SOA Software is a leading provider of API Management and SOA Governance products that equip business to deliver APIs and SOA together to drive their company to meet its business strategy quickly and effectively. SOA Software’s technology helps businesses to accel...
As cloud gives an opportunity to businesses to buy services externally - how is cloud impacting your customers? In his General Session at 15th Cloud Expo, Fabio Gori, Director of Worldwide Cloud Marketing at Cisco, will provide answers to big questions: Do you see hybrid cloud as where the world is going? What benefits does it bring? And how does Cisco connect all of these clouds? He will also tell us everything about Intercloud and Cisco investment on it.
SYS-CON Events announced today that TMCnet has been named “Media Sponsor” of SYS-CON's 15th International Cloud Expo®, which will take place on November 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA. Technology Marketing Corporation (TMC) is the world's leading business to business and integrated marketing media company, servicing niche markets within the communications and technology industries.
SYS-CON Events announced today that Aria Systems, the recurring revenue expert, has been named "Bronze Sponsor" of SYS-CON's 15th International Cloud Expo®, which will take place on November 4-6, 2014, at the Santa Clara Convention Center in Santa Clara, CA. Aria Systems helps leading businesses connect their customers with the products and services they love. Industry leaders like Pitney Bowes, Experian, AAA NCNU, VMware, HootSuite and many others choose Aria to power their recurring revenue bu...
SYS-CON Events announced today that Parasoft will exhibit at SYS-CON's 15th International Cloud Expo®, which will take place on November 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA. For 27 years, Parasoft has researched and developed software solutions that help organizations deliver defect-free software efficiently. By integrating Development Testing, API/cloud/SOA/composite app testing, and service virtualization, we reduce the time, effort, and cost of delivering secur...
The Internet of Things (IoT) promises to evolve the way the world does business; however, understanding how to apply it to your company can be a mystery. Most people struggle with understanding the potential business uses or tend to get caught up in the technology, resulting in solutions that fail to meet even minimum business goals. In his session at Internet of @ThingsExpo, Jesse Shiah, CEO / President / Co-Founder of AgilePoint Inc., will show what is needed to leverage the IoT to transform...
SYS-CON Events announced today that Utimaco will exhibit at SYS-CON's 15th International Cloud Expo®, which will take place on November 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA. Utimaco is a leading manufacturer of hardware based security solutions that provide the root of trust to keep cryptographic keys safe, secure critical digital infrastructures and protect high value data assets. Only Utimaco delivers a general-purpose hardware security module (HSM) as a customiz...
One of the biggest challenges when developing connected devices is identifying user value and delivering it through successful user experiences. In his session at Internet of @ThingsExpo, Mike Kuniavsky, Principal Scientist, Innovation Services at PARC, will describe an IoT-specific approach to user experience design that combines approaches from interaction design, industrial design and service design to create experiences that go beyond simple connected gadgets to create lasting, multi-devic...
Until recently, many organizations required specialized departments to perform mapping and geospatial analysis, and they used Esri on-premise solutions for that work. In his session at 15th Cloud Expo, Dave Peters, author of the Esri Press book Building a GIS, System Architecture Design Strategies for Managers, will discuss how Esri has successfully included the cloud as a fully integrated SaaS expansion of the ArcGIS mapping platform. Organizations that have incorporated Esri cloud-based appl...
Dyn solutions are at the core of Internet Performance. Through traffic management, message management and performance assurance, Dyn is connecting people through the Internet and ensuring information gets where it needs to go, faster and more reliably than ever before. Founded in 2001 at WPI, Dyn’s global presence services more than four million enterprise, small business and personal customers.
Once the decision has been made to move part or all of a workload to the cloud, a methodology for selecting that workload needs to be established. How do you move to the cloud? What does the discovery, assessment and planning look like? What workloads make sense? Which cloud model makes sense for each workload? What are the considerations for how to select the right cloud model? And how does that fit in with the overall IT tranformation? In his session at 15th Cloud Expo, John Hatem, head of V...
IBM and Tencent Cloud signed a business cooperation memorandum to collaborate on providing public cloud with Software-as-a-Service solutions for industries. Both parties agreed to focus on emerging small and medium enterprises in the smarter cities and smarter healthcare industries as well as other fields. This will enable these industries to utilize mobile, cloud computing and big data tools to transform internal processes and operations, thus achieving cloud transformation in the era of mobili...
SimpleECM is the only platform to offer a powerful combination of enterprise content management (ECM) services, capture solutions, and third-party business services providing simplified integrations and workflow development for solution providers. SimpleECM is opening the market to businesses of all sizes by reinventing the delivery of ECM services. Our APIs make the development of ECM services simple with the use of familiar technologies for a frictionless integration directly into web applicat...
European data center operator DEAC is the largest in the Baltics. The activities are orientated to provide data center services and IT outsourcing on Eurasia and America scale in order to create the primary or backup or additional data center for customer in the EU, to protect its business and, most importantly, reduce costs up to 40% within 3-5 years. DEAC is an IT outsourcing services and solutions company whose highly experienced and qualified employees offer various groups of services and...
The Internet of Things will greatly expand the opportunities for data collection and new business models driven off of that data. In her session at Internet of @ThingsExpo, Esmeralda Swartz, CMO of MetraTech, will discuss how for this to be effective you not only need to have infrastructure and operational models capable of utilizing this new phenomenon, but increasingly service providers will need to convince a skeptical public to participate. Get ready to show them the money! Speaker Bio: ...
Samsung VP Jacopo Lenzi, who headed the company's recent SmartThings acquisition under the auspices of Samsung's Open Innovaction Center (OIC), answered a few questions we had about the deal. This interview was in conjunction with our interview with SmartThings CEO Alex Hawkinson. IoT Journal: SmartThings was developed in an open, standards-agnostic platform, and will now be part of Samsung's Open Innovation Center. Can you elaborate on your commitment to keep the platform open? Jacopo Lenzi: S...
The major cloud platforms defy a simple, side-by-side analysis. Each of the major IaaS public-cloud platforms offers their own unique strengths and functionality. Options for on-site private cloud are diverse as well, and must be designed and deployed while taking existing legacy architecture and infrastructure into account. Then the reality is that most enterprises are embarking on a hybrid cloud strategy and programs. In this Power Panel at 15th Cloud Expo, moderated by Ashar Baig, Research ...
Things are being built upon cloud foundations to transform organizations. This CEO Power Panel at 15th Cloud Expo, moderated by Roger Strukhoff, Cloud Expo and @ThingsExpo conference chair, will address the big issues involving these technologies and, more important, the results they will achieve. How important are public, private, and hybrid cloud to the enterprise? How does one define Big Data? And how is the IoT tying all this together?
When an enterprise builds a hybrid IaaS cloud connecting its data center to one or more public clouds, security is often a major topic along with the other challenges involved. Security is closely intertwined with the networking choices made for the hybrid cloud. Traditional networking approaches for building a hybrid cloud try to kludge together the enterprise infrastructure with the public cloud. Consequently this approach requires risky, deep "surgery" including changes to firewalls, subnets...