IBM Making Cloud Inroads

There is no argument IBM (IBM) is a company in transition. Its traditional revenue streams from hardware, specifically servers, are suffering as the industry moves forward with mobility and services. I’ve beat up on IBM in this space in the past but I also have to give credit where credit is due. There is a silver lining in IBM’s business and that is its emerging cloud offering, pun intended.

In fact, IBM is most likely to be chosen as a cloud hosting partner, according to "Hosting and Cloud Survey 2015," a recent 451 Research study of 2,000 cloud enterprise users and commissioned by Microsoft. Of the respondents: 78 percent said they make IT purchasing recommendations; 77 percent are influential in IT decisions and strategy; 69 percent manage third-party IT providers; and 65 percent said they have significant decision-making authority. A further breakdown of the demographics reveals that 75 percent of survey respondents are in IT operations and administration and 17 percent are in application development.

So these are certainly IT decision makers. And although the field was fairly diverse, IBM did come out on top as to be the most likely chosen cloud hosting partner across many categories—albeit sometimes by a nose.

First, let us set the stage. According to the report, 50 percent of current public cloud users are already shifting workload to private cloud environments, and 52 percent expect to do so in the future.  Further, the primary reason for this shift is not cost, as many like to believe. It is for security and control.

That said, more companies are looking to IBM as a cloud hosting partner. Here are some of the findings to back this up:

• 18 percent cited IBM as the top-mentioned VAR when it comes to which company is most likely to win a cloud hosting project. Microsoft followed with 11 percent, then Amazon at 8 percent and Dell at 7 percent.
• 25 percent cited IBM as the top-mentioned systems integrator when it comes to which company is most likely to win a cloud hosting project. Microsoft followed with 13 percent, and Rockwell Automation, Google, Cisco and Oracle all followed with about 3 percent each.
• 50 percent cited IBM/Softlayer as the top-mentioned hosting provider for cloud services. Rackspace followed with 27 percent and CenturyLink/Savvis at 9 percent.
• 23 percent cited IBM/Softlayer as the top-mentioned cloud provider. Microsoft led this category with 32 percent, while Google was third with 21 percent and Amazon was fourth at 17 percent.

This survey report showed IBM’s inroads as a cloud service provider comes on the heels of its first-quarter report. Its overall financials were actually well-received on Wall Street, even though its revenue declined.

The company reported a 5 percent decline in net income to $2.4 billion but reported a 4 percent increase in operating profits from continuing operations, coming in at $2.9 billion. Revenue for the quarter dropped 12 percent to $19.6 billion. However, the shortfall was almost entirely attributable to a strong dollar and the company’s planned exits from less-profitable businesses.

The company said cloud revenue in the first quarter increased 75 percent, with rolling 12-month cloud revenue now at $7.7 billion.

"In the first quarter we had a strong start to the year. Our strategic imperatives growth rate accelerated, demonstrating the power of our offerings in these new opportunities and contributing to improved revenue performance.  Our focus on higher value through portfolio transformation and investment in key areas of the business drove continued margin expansion,” said Ginni Rometty, IBM chairman, president and chief executive officer, in a prepared statement.

IBM was down, but it was never out. It’s extremely difficult for a company of its size to change as fast as the industry, but changing it is.

Knock 'em alive!