IBM Leads In Hybrid Cloud Infrastructure

February 11, 2015 Timothy Prickett Morgan

IBM is crowing like a chanticleer about its recent ranking as the top provider worldwide for both hybrid and private cloud infrastructure for 2014. The latest research shows that Big Blue is growing more or less at the same pace as the overall cloud, but it is a distant third behind the industry juggernaut, Amazon Web Services, and is growing at half the rate of the industry upstart, Microsoft Azure.

IBM has staked a big part of its future on the cloud and ponied up $1.2 billion last year to build out existing datacenters operated by its Global Services group and its acquired SoftLayer cloud division. SoftLayer now operates 40 datacenters worldwide, all of them located near big metropolitan centers and therefore the densest populations of enterprises and consumers. IBM has many more datacenters than its rivals, although AWS and Microsoft do have an extensive network of content-caching locations to help reduce latencies for applications running on their respective clouds. IBM is also bragging about the fact that it has invested more than $1 billion in its BlueMix platform cloud software, a packaging of the open source Cloud Foundry platform formerly controlled by VMwareand a bit of code that IBM thinks can make it as much money as WebSphere, a much-glorified and enhanced Web application server based on the open source Apache Web server, has done for the past fifteen years. IBM is also reminding everyone that it has singed more than $4 billion in multi-year cloud engagements with very large enterprises, thanks in part to its acquisition of SoftLayer, that it has over 120 of its own SaaS applications, and that as 2014 closed it had reached its goal of hitting $7 billion in cloud-related revenues. (IBM is no doubt using a very broad definition of cloud here, including application hosting and the selling of systems, software, and services when companies build private clouds.)

Synergy Research Group has just put together a report that ranks the cloud providers by revenue and growth rates, and none of the talk by IBM can change the fact that AWS has, as far as Synergy Research can calculate, hit a five-year high for its share of the overall cloud market, with just under 30 percent of the nearly $5 billion in sales worldwide for infrastructure cloud, platform cloud, and private cloud hardware, software, and services. Here is what the market shares looked like for cloud infrastructure services (excluding SaaS, which IBM puts in its cloud numbers) in the fourth quarter of 2014, according to Synergy Research:

For the full 2014 year, Synergy Research reckons that the overall market for cloud infrastructure services rose by 48 percent, topping $16 billion in revenues across all vendors of such services. AWS garnered 28 percent of the total, followed by Microsoft with 10 percent of the pie, IBM with 7 percent, Google with 5 percent, Salesforce.com with 4 percent, and Rackspace Hosting with 3 percent. Microsoft and Google exited the year growing at rates considerably larger than the overall market, while AWS and IBM were growing more or less in synch with the market.

“Many actual or perceived barriers to cloud adoption have now been removed and the worldwide market is on a strong growth trajectory,” explained John Dinsdale, a chief analyst and research director at Synergy Research in a statement accompanying the figures for cloud infrastructure sales. “The momentum that has been built up at AWS and Microsoft is particularly impressive. They have an ever-broadening portfolio of services and they are also benefitting from a slowdown in the super-aggressive price competition that was a feature of the first half of 2014.”

It is not exactly clear how IBM will be peddling cloud infrastructure services for Power-based machines, but that has been the plan for the past year. As The Four Hundred reported last March, IBM wanted to roll out Watson cognitive computing applications atop Power-based server slices running in its clouds before putting out generic slices that allowed customers to deploy their own applications. Technically speaking, there is no part of the Watson software stack that cannot run on an X86 server, but IBM contends that the high thread count and high memory bandwidth of its Power8 systems make it a better option for running the Watson software than an X86 machine. IBM wanted to start shipping these generic slices sometime in the second half of 2014, and as far as we know, some early adopter customers got access to such machines in a select number of SoftLayer datacenters.

What has not been clear is what operating systems and hypervisors IBM will support on the Power-based systems in the SoftLayer cloud. The PowerKVM hypervisor only supports Linux while the PowerVM hypervisor supports IBM i, AIX, and Linux. Given that SoftLayer’s homegrown cloud controller has hooks for OpenStack and KVM, supporting Linux and PowerKVM is the obvious place to start and the easiest place to start, too. But if IBM wants to do true hybrid computing for enterprise customers, it will eventually have to offer pay-as-you-go cloud infrastructure services for IBM i and AIX. Unless, of course, it wants to cede this part of the market to the various partners who have built modest hosting and cloud businesses for these two IBM operating systems. It will be a delicate dance for Big Blue, chasing after business but not upsetting its business partners who were building IBM i and AIX clouds ahead of it. IBM’s course of action will depend in large part on just how much demand there is for IBM i and AIX clouds or if it all just ends up being disaster recovery and backup of production workloads running in the datacenter or plain vanilla hosting of customer applications.

For its part, as we reported last month, Rackspace Hosting is not waiting around to see what its cross-state rival SoftLayer is going to do with Power systems in its infrastructure cloud. The hosting and cloud provider has committed to creating a Power-based system that it will design and donate to the Open Compute Project, which it will use internally on its cloud and integrate with its variant of the OpenStack cloud controller. Rackspace joined up with NASA in July 2010 to launch OpenStack. It would be a bit of a coup for Rackspace to beat IBM to market with Power-based cloudy slices available in volume. It seems unlikely that Rackspace would host AIX or IBM i slices on its cloud, but stranger things have happened.

There are two different ways of thinking about hybrid cloud. One involves the movement of applications across the divide between the private datacenter and the public cloud. The other involves having a mix of compute architectures so companies can deploy applications on the systems of their choice, not solely on the X86 systems running either Linux or Windows that dominate the public cloud. Both kinds of hybrid matter. IBM seems to get that and Rackspace definitely gets that.

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