A Closer Look Inside IBM’s Cloud Challenge: IBM is finally moving with real urgency in the cloud computing market. But can IBM win over enough of its mainstream corporate customers?

May 23, 2014 Leave a comment

A Closer Look Inside IBM’s Cloud Challenge

By STEVE LOHR

MAY 12, 2014, 9:00 AM 5 Comments

IBM, after a sluggish start, is moving with real urgency in building up its cloud business, as I noted in a recent article.

“IBM has made big moves and done some really good things,” said Daryl Plummer, an analyst at Gartner. “But the question now is, can it win business and make money in the cloud business?”

IBM is hardly alone in facing the economic challenge of cloud computing, in which companies buy computing delivered, remotely, as a service over the Internet. The more that computing shifts to the cloud, the less that corporate customers will buy conventional software and hardware for their own data centers. All the big incumbents in the enterprise market — Oracle, SAP, Microsoft, Hewlett-Packard and EMC — face the same threat. But as the largest supplier of technology to corporate data centers, IBM has the most to lose — unless it can turn the cloud trend to its advantage.

To succeed, IBM has to convince corporations that its cloud offerings and its understanding of the customer’s business make it the preferred technology partner for migrating to the cloud.

Last month, The Hartford, a major property and casualty insurer, agreed to a $500 million deal with IBM for cloud technology services over six years. “I don’t have to buy hardware,” explained Mark Esposito, chief technology officer of The Hartford. “I buy a service and an outcome.”

Speed is another advantage in his business, Mr. Esposito said. In-house software development projects, he said, can be up and running in a few days instead of a month or two. With an always-ready cloud service, he said, there is no waiting to buy and install new hardware and software for projects.

Mr. Esposito said the cost savings from the cloud initiative would be “significant,” without being more specific. With the cloud model, he added, another benefit is a projected net reduction of more than 30 percent in greenhouse gas emissions, since that much less electricity will be used to handle the company’s computing tasks.

IBM needs more such wins. While IBM may lose some hardware and software sales when a customer moves to the cloud, IBM is far better off providing the cloud service itself than watching business go to rivals.

The biggest competitor, and early leader, in the fast-growing cloud market is Amazon — though it does not break out revenue for its cloud unit, Amazon Web Services.

Ariel Kelman, vice president for worldwide marketing at the Amazon division, said mainstream corporations like Suncorp Group, an Australian financial services company, and News Corporation, the media company, have begun transferring thousands of their software applications to Amazon’s cloud service.

“They’re shutting down entire data centers,” Mr. Kelman said. “That’s the most exciting part of our business.”

 

Filed under TMT Trends

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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