Feeds

Why SoftLayer can't lift IBM into the clouds

Big Blue has a Big Problem that SoftLayer won't solve

Intelligent flash storage arrays

Comment There are only three major cloud companies, and try as it might, IBM isn't going to change that in the near-term with its acquisition of SoftLayer.

This is because the three major public clouds – Amazon Web Services, Windows Azure, and Google Compute Engine – are each supported by a consumer internet giant.

These internet titans have all built their own planet-spanning networks of data centers and edge locations to serve massive (and growing) consumer markets like gaming (Microsoft), advertising (Google), and retail (Amazon), along with a host of other secondary – but still significant – businesses and services.

Unlike SoftLayer, each of these clouds is supported by a vast amount of guaranteed internal IT utilization, along with a customer-first attitude which sees the providers consume their own infrastructure. Each of these cloud companies has a demonstrable internal desire to lower the cost of provisioning and deploying IT resources as much as possible.

Compare this with IBM: Big Blue comes from a world in which the goal is to build highly specialized IT gear for other businesses, then make a ton of money from servicing the gear, such as mainframes in the past, and systems like Jeapordy-beating Watson in the future.

At no point does it become sensible for IBM to indulge in businesses which involve minimizing the cost to the customer, maximizing volume, and giving the punter maximum flexibility for both increasing and decreasing spend.

The only thing IBM has done in this regard is the PureSystem – an integrated appliance-style system that lets the company slam together a bunch of commodity hardware, then put it in a profit-protecting bubble of software that it can then sell for a pretty price.

We'd go so far as to say IBM really dislikes low-end IT gear, given its sell-off of its main PC arm to Lenovo in 2004, along with the more recent rumors of plans for it to get out of the low-margin x86 server business.

Now consider SoftLayer. Though not in the same league as Amazon, Google, or Microsoft, the company has claimed to manage over 100,000 servers across 13 data centers worldwide. It uses low-cost, high-efficiency servers (SuperMicro) and has mulled transitioning to ultra-cheap Open Compute Project gear. It also has its own custom cloud-control system for management, automation, and other infrastructure tasks.

In other words – SoftLayer is a legit, midsize cloud company.

Though not public, it's fair to compare SoftLayer with Rackspace – both companies manage around 100,000 servers, both are running their clouds on more and more commodity hardware, and both have a spread of data centers across the world with a concentration in the US. Rackspace focused on OpenStack, SoftLayer on CloudStack – other than that, quite similar.

Amazon_Google_Microsoft_Rackspace_Capex

All the major clouds are backed by vast amounts of IT gear

The above graph shows the amount of money Rackspace has invested in its data-center gear and faciliies since 2005, compared with Google, Amazon, and Microsoft. Cumulatively, Rackspace has shoved $1.4bn into its facilitiies and IT gear, compared with $20bn from Google and almost $12bn from Amazon. Even if you halve the consumer giants' investment to take account of offices, fibre, fulfillment centers, and so on, they're still outspending Rackspace by a significant amount.

It's safe to assume that SoftLayer's investment would look similar, and even with a variance of 20 per cent, it can't come close to the spending of the cloud giants.

What SoftLayer lacked pre-IBM was a massive user of its own services to assure a demand base to use to lower equipment and facilities costs. Sure, it has 21,000 customers, but it doesn't have a vast internal operation to provide true stability.

Post-IBM, we're afraid that SoftLayer looks much the same. It will be a set of IT gear, now part of IBM, and slowly its software and hardware will likely be shifted over to IBM systems, as IBM has hinted in its official statement on the acquisition.

It may integrate with IBM's (relatively small, we understand) SmartCloud. We imagine SoftLayer services will be touted to government's by IBM's Global Foundation Services and Smart Cities divisions.

What we see no evidence for is a plan by IBM to standardize all of its systems around SoftLayer – or vice versa – and in the cloud, that's what matters. Unless you can use truly massive scale (glance at that chart again), we find it hard to believe you can truly deliver low-cost cloud computing infrastructure.

That's not to say that you can't make some decent cash by offering customers a reliable hosting solution with a bit of scalability, but could you become a home for Netflix as is Amazon? Not likely.

Though IBM is creating a "Cloud Services division", this biz group will sell businesses some compute and storage that will work very, very well with IBM software, but we doubt it will offer them minute-by-minute supercomputing, as Google does, or an ecosystem of cheap software services to use in lieu of trad IT providers, as Amazon does, or even support for a widely deployed piece of software, as Microsoft does with Azure and Windows Server.

The SoftLayer acquisition adds another asset to IBM's war chest, but unless it can turn this bunch of IT gear into a common resource through standardization, it's unlikely IBM can become a major force in the public cloud.

But then again, if you'd promised Wall Street $7bn in cloud revenues by 2015, and could buy a company with 21,000 paying "cloud" customers, what would you do? ®

Choosing a cloud hosting partner with confidence

More from The Register

next story
Cray-cray Met Office spaffs £97m on VERY AVERAGE HPC box
Only 250th most powerful in the world? Bring back Michael Fish
UK.gov pushes for SWIFT ACTION against nuisance calls, threatens £500k fines
DCMS seeks lowering of legal threshold to fight rogue firms
Just don't blame Bono! Apple iTunes music sales PLUMMET
Cupertino revenue hit by cheapo downloads, says report
The DRUGSTORES DON'T WORK, CVS makes IT WORSE ... for Apple Pay
Goog Wallet apparently also spurned in NFC lockdown
Microsoft brings the CLOUD that GOES ON FOREVER
Sky's the limit with unrestricted space in the cloud
'ANYTHING BUT STABLE' Netflix suffers BIG Europe-wide outage
Friday night LIVE? Nope. The only thing streaming are tears down my face
Google roolz! Nest buys Revolv, KILLS new sales of home hub
Take my temperature, I'm feeling a little bit dizzy
prev story

Whitepapers

Why and how to choose the right cloud vendor
The benefits of cloud-based storage in your processes. Eliminate onsite, disk-based backup and archiving in favor of cloud-based data protection.
Forging a new future with identity relationship management
Learn about ForgeRock's next generation IRM platform and how it is designed to empower CEOS's and enterprises to engage with consumers.
Reg Reader Research: SaaS based Email and Office Productivity Tools
Read this Reg reader report which provides advice and guidance for SMBs towards the use of SaaS based email and Office productivity tools.
Saudi Petroleum chooses Tegile storage solution
A storage solution that addresses company growth and performance for business-critical applications of caseware archive and search along with other key operational systems.
Getting ahead of the compliance curve
Learn about new services that make it easy to discover and manage certificates across the enterprise and how to get ahead of the compliance curve.