Trying to second guess what enterprise IT buyers want from cloud and how best to meet their needs has proven to be a tricky feat for some members of the legacy technology provider community over the course of the past decade or so.
For proof of that, one only has to look at the abortive attempts made by the likes of HPE, Dell and VMware to compete against Amazon Web Services (AWS) in the early days of public cloud, before they beat a hasty retreat once it became apparent what they were up against.
Others, however, opted instead to play up to their strengths and experience by tapping into the enterprise demand for private and hybrid cloud deployments, as IT managers look to combine the legacy investments made in their respective technologies with public cloud.
And, in that respect, IBM – with its longstanding championing of the hybrid cloud deployment model – is no different, Sebastian Krause, general manager for IBM Cloud in Europe, tells Computer Weekly.
“We recognised that enterprises would not want to throw away all the assets they have generated over the decades,” he says. “Their business processes, business logic, data assets and everything that sits behind the firewall consists of years of work.”
“So when there was this big war four or five years ago in the industry, and also between the analysts, where there was two camps [arguing] over whether it was private or public cloud [that enterprises would prefer], we said it is neither nor. The world will be hybrid.”
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Krause claims the company’s support for hybrid cloud began several years ago, and markedly sooner than some of its public cloud competitors, who operate in a market he claims IBM has little interest in participating in.
“Since 2015, for sure, we have said our strategy is about hybrid cloud and serving enterprises. These are our two big fundamentals, but what do we mean by that?” he asks.
“We certainly don’t serve the consumer market, and we don’t want to be in the public cloud space where a number of our competitors are operating because it might be a volume market, but it is not one where the value-add capabilities we’re delivering would necessarily be applicable.”
And it is a strategy that is paying off, according to Krause. “If you take a look at our numbers, we are delivering $18bn of cloud revenue on a 12-month basis, and that is not a small franchise.”
Indeed, its performance is in line with how AWS is faring in the public cloud, given it became a bona fide $20bn run rate business earlier this year, which is also a financial milestone Microsoft’s commercial cloud division hit in October 2017.
Synergy Research’s most recent tracker – which ranks the runners and riders in the infrastructure, software as a service and managed private cloud space – has IBM pegged as a top three provider, with 8% market share. Microsoft is in second place, with just under 20% share, while AWS leads the pack with 34%.
Tapping into cognitive computing
In IBM’s case, its cloud revenue is being generated from enterprises looking to modernise the IT infrastructure running within their own firewalls, so they can tap into the IBM Cloud’s cognitive computing abilities, in the form of IBM Watson, as well as big data analytics and emerging trends like Blockchain, says Krause.
“There are many call centres that are using our Watson capabilities, whether this is to translate speech to text or understand empathy patterns or emotions, because when you are in a support centre, you want to understand the emotional state of the counterpart you are talking to,” he says.
Its cloud business is also being buoyed by the popularity of the IBM Industry Framework offerings, which consist of tailored middleware and IT infrastructure assets that are designed to address industry-specific pain points.
“Specifically, in the enterprise space, we are having requirements from banking and insurance, and other industries that we have been serving for decades that need to have these mission-critical capabilities, while putting a lot of emphasis on security from both a data revelation and infrastructure perspective, which is what they expect from IBM,” he says.
And its decision to provide such customers with industry-specific tools and technologies forms the cornerstone of IBM’s “value-add” proposition.
“I see us playing in the value-add space for enterprise IT for specific technology and industry use cases, [with IBM] giving a flavour of industry context, instead of just being a pure, plain vanilla provider like some of our competitors,” he says.
“If you’re analysing where the revenue and market share is coming from for certain public cloud providers, it is basically the storage space, and not that much is [coming from] frameworks where you are providing a value-add for an industry, business model or value chain, which is where we are playing a major role.”
Crystal ball gazing on cloud
As for how the cloud story for enterprises is likely to play out in the years to come, it is IBM’s view, informed by decades of dealing with enterprise clients, that just a third of enterprise workloads will run in the public cloud in time, but how clean this predicted split will be remains to be seen.
“It is a myth that everything will go to the public cloud over the next 15-20 years, as companies realise it doesn’t make sense to move all their workloads into the public cloud for multiple reasons,” he says.
“A third of workloads (most likely 40% or more) will be on-premise workloads behind the firewall, and then the remaining 20-30% will be a pure hybrid implementation, where you have data and compute sat on different deployment platforms,” he says.
And this is because, in Krause’s view, how enterprises view public cloud has shifted, as organisations prioritise getting the most out of their existing technology assets.
“The fundamental shift we are seeing in Europe is that customers don’t start with thinking [public] cloud first, but what can we do from an existing infrastructure perspective to get to a cloud infrastructure that is private and allows me to seamlessly get into a public cloud if needed,” he says.
“That hype that everything has to be all-in the cloud, first in the cloud and everything has to be public, has gone now.”