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IBM has signed a Strategic Collaboration Agreement (SCA) with Amazon Web Services to offer its software catalogue as Software-as-a-Service (SaaS) on AWS. As a result, AWS will now have over 100 resources in IBM Consulting, IBM Software, and Red Hat. “By deepening our collaboration with AWS, we’re taking another major step in giving organisations the ability to choose the hybrid cloud model that works best for their own needs,” said Tom Rosamilia, senior vice president of IBM Software.
Last year, CEO Arvind Krishna said IBM is betting big on hybrid cloud, automation and AI. “IBM is all-in on hybrid cloud and AI, determining years ago that our clients’ only feasible path to rapid digital transformation is through a hybrid cloud strategy. Public cloud is an integral piece of that strategy,” IBM said in a statement.
In the quarter ended March, IBM reported revenues of USD 14.2 billion at 7.7 percent growth. Red Hat’s revenues rose by 18 percent to around USD 1.41 billion, accounting for 1/10 of IBM revenue. In October 2020, IBM announced it would spin off its infrastructure services business unit into a new company- Kyndryl. For the quarter ended March 31, 2022, Kyndryl reported revenues of USD 4.4 billion, a year-over-year decline of 7 percent.
Look back
In November 2013, IBM’s then CEO Ginni Rometty said IBM’s top innovation, Watson, would run on the company’s power chips inside SoftLayer. IBM had then just acquired the cloud-computing division. Amazon and Microsoft had spent a decade building an efficient cloud infrastructure by then. AWS launched the Amazon Elastic Compute Cloud in August 2006, and Microsoft’s Windows Azure became available in early 2010.
In 2013, IBM bought Dallas-based SoftLayer for USD 2 billion. SoftLayer was one of the largest privately-held cloud computing firms. With their support, IBM hoped their cloud services would generate USD 7 billion a year by 2015. On September 30, 2015, IBM’s cloud services revenues reached USD 9.4 billion and SoftLayer’s revenues grew in the double digits.
SoftLayer’s cloud infrastructure was designed for smaller markets that preferred cheaper softwares instead of bigger organisations that focused on the cloud features. For instance, the data centres of SoftLayer (they were already operating 13 data centres in 2013) were designed for off the rack servers. Meanwhile, the likes of Amazon and Microsoft were designing independent servers with enterprise-grade performance and reliability criteria.
IBM soon realised they needed to build a cloud infrastructure to serve clients’ needs. For example, big organisations demanded resiliency features like availability zones and large application deployments from their data centres. AWS could meet such demands, but IBM’s SoftLayer could not. The latter could also not provide the virtual private cloud technology AWS had introduced in 2009.
The company’s executives hired people from Verizon’s cloud services business to rebuild the cloud.
The Big Blue later acquired Verizon. John Considine, Verizon’s then CTO, became the General Manager of Cloud Infrastructure Services at IBM- a position he held till 2019. His job was to replace SoftLayer’s approach and build a new cloud architecture. Considine was working on the project code-named ‘Genesis’- an attempt to build an enterprise-grade cloud system from scratch to accelerate the delivery of products on the web with ‘next-generation infrastructure (NGI)’. IBM envisioned the end product as a fabric computer incorporating 3D Torus and a single large, expensive disk. The company hoped to reduce the latency to less than 20 milliseconds.
Apart from the Genesis project, another group, led by a team from IBM Research, designed a separate infrastructure architecture called GC. The GC hoped to use the original SoftLayer infrastructure design to scale the cloud and make it a virtual private cloud.
In 2017, Genesis was scrapped. Parallel to the GC effort, IBM’s team started working on a new architecture project, the NG. The IBM teams worked on two different cloud infrastructures for two years, leading to internal conflicts and breeding confusion. Both the architectures became available in 2019 and ran for a few years till the GC was scrapped.
By the time IBM’s cloud infrastructures were up in 2019, Amazon, Microsoft, and GCP already cornered the market.
When Arvind Krishna took over IBM Cloud in January 2019, he aimed to end the double-track infrastructure design strategy and focus on a single cloud approach. “My approach is straightforward: I am going to focus on growing the value of the company. This includes better aligning our portfolio around hybrid cloud and AI to meet the evolving needs of the market,” Krishna said during the company’s first quarter 2020 earnings presentation.
State of play
This quarter, IBM’s Cloud Paks, its AI-powered software designed for the hybrid cloud landscape, saw a 100 percent net retention rate. “Today we’re a more focused business, and our results reflect the execution of our strategy,” said Arvind Krishna “We are off to a solid start for the year, and we now see revenue growth for 2022 at the high end of our model.”
At CNBC’s Transform conference, Krishna said he wanted to take advantage of IBM’s Red Hat acquisition and help customers manage a growing hybrid cloud world. The IBM’s 2020 earnings showed the cloud and cognitive software revenues were down 4.5 percent to USD 6.8 billion. In the latest quarterly report, IBM cloud’s revenue stood at USD 5 billion.
