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Big Blue blows big green in SoftLayer public cloud gobble

If you can't beat them, eat them. And make them move to OpenStack

So much for that whole strategy that cloud biz SoftLayer came up with (of building its own cloud controller and basing its server fleet entirely on Super Micro iron): because Big Blue bought SoftLayer today for an undisclosed sum.

Rumors were going around back in March that both IBM and EMC were sniffing around SoftLayer - a privately held company based in Dallas that has around 25,000 customers and a server fleet of over 100,000 machines growing by 20,000 per year. SoftLayer operates 13 data centers, most of them in co-location facilities, and IBM's FAQ on the deal says the unique customer count is more like 21,000 at the company.

IBM did not say how much it offered to pay for SoftLayer in its statement announcing the deal, but the rumors three months ago had the number at north of $2bn. AT&T was also previously interested in acquiring SoftLayer before EMC and IBM showed up, according to various reports at the time. AT&T wants to be a bigger cloud provider like all the big telcos, and EMC may have been interested in a way to get VMware its own public cloud in quick and dirty fashion.

IBM's acquisition of SoftLayer, which is on track to do maybe $400m in revenues in 2013 by El Reg's estimates, is a tacit admission by Big Blue that it cannot reach its goal of hitting $7bn in cloud services revenues by 2015 without buying revenue streams and customer bases. IBM does not provide specific statistics for its SmartCloud public cloud, but it is safe to say that the operation is considerably smaller than the one that SoftLayer started building in 2007.

The combination of SoftLayer and IBM Global Services will do a number of things. Most of SoftLayer's data centers are in the United States, with recent expansion into Amsterdam and Singapore. So now SoftLayer will have a global reach when merged with IBM's SmartCloud operation and other outsourcing facilities that Big Blue runs around the world for customers.

SoftLayer has also created its own bare metal and cloud provisioning tools, and these could be very valuable to IBM as it tries to handle big data, HPC, and other workloads where a virtualization layer is a hindrance rather than a help. IBM could keep this provisioning technology to itself, or contribute it to the open source OpenStack cloud controller effort, which Big Blue has just backed in a big way. IBM promised back in March that it was shifting from its own homegrown SmartCloud controller, which was developed before OpenStack got its start, to OpenStack.

It will be interesting to see what happens to the SoftLayer server strategy of buying machinery exclusively from whitebox king Super Micro. IBM has its own System x server line, of course, but has been trying to unload it for maybe $5bn or $6bn to Chinese PC and server maker Lenovo Group. It would be very interesting indeed if IBM did manage to sell off the System x business to help pay for other cloud acquisitions (Rackspace Hosting is an obvious second move) and shifted to using whitebox machines in its data centers. Or, even more interesting would be a move to Open Compute designs for its cloudy data centers, as Rackspace is doing and SoftLayer was contemplating.

No matter what, this is probably not a good deal for Super Micro.

IBM is also saying that it will bring social, mobile, and big data apps to the SoftLayer cloud for those existing 21,000 customers to consume.

IBM expects to close the SoftLayer deal in the third quarter, and when that is accomplished it will merge its SmartCloud operations with SoftLayer to create a new Cloud Services Division. Erich Clementi, who has run various partner-facing businesses as well as IBM's midrange server and mainframe lines, has been tapped to run this division. Clementi is currently senior vice president of Big Blue's Global Technology Services division, and the cloud business will be tucked in there. ®

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