IBM taps OpenPOWER for SoftLayer bare-metal service

IBM is a big backer of the OpenPOWER open-source hardware project. And it’s the company behind the SoftLayer cloud, so it was only a matter of time before it put the two together by offering SoftLayer bare-metal servers on OpenPOWER-based hardware.

The new service will come online in the second quarter, when pricing details will be made available.

Big Blue launched the OpenPOWER alliance in August 2013 to breathe new life into its POWER8 chip franchise. At that time the only vendor relying on those chips was, um, IBM.

The company managed to line up some big names, including [company]Google[/company], to back this effort. A Google spokeswoman at the time said that OpenPOWER hardware could become an option for use in Google data centers.  [company]Nvidia[/company], Tyan and [company]Mellanox[/company] also backed the OpenPOWER play.

In October, [company]IBM[/company] rolled out a new server built on the POWER8 processor and Nvidia’s GPU accelerator.

While most cloud workloads rely heavily on virtualization to pack more jobs onto less hardware, bare metal servers offer great raw performance (without the virtualization tax). Because the entire computing resource is dedicated to that job, performance can be excellent but the deployment model can be less flexible than virtualized workloads. IBM SoftLayer has offered bare metal capabilities for some time, and last year started offering that option for by the hour.

IBM’s OpenPOWER move comes at a time when name-brand (pricey) servers from IBM, [company]HP[/company] and [company]Oracle[/company][company] are under attack by low-cost white-box providers. Big web scale companies like Facebook and Google do not buy these branded boxes, instead opting to hire contract providers to build servers to their specs. OpenPOWER is an effort to counter that trend.

Microsoft woos Y Combinator startups with big Azure credits

Microsoft wants to boost its cloud’s profile among startups so it’s making $500,000 in Azure credits available to Y Combinator-backed companies.

The credits start rolling with the Winter 2015 class and will continue after that, according to this Y Combinator blog post. This can be a good number of companies — there were 106 companies in the Spring and Winter 2014 classes, for example.

Cloud credits are ubiquitous — Y Combinator has special hosting offers from [company]Amazon[/company], [company]Google[/company], [company]Rackspace[/company] and now [company]Microsoft[/company], according to Y Combinator president Sam Altman. But, $500K is a big number. (Oh, and the startups will also get three years of Office 365 subscription, “access to Microsoft developer staff,” plus a year of CloudFlare and DataStax services.

Qualified startups can typically get $1,000 to $15,000 in Amazon Web Services (AWS) credits, and there are other freebies available. Then, in September, things started going a bit haywire. Google started offering $100,000 in Google Cloud Platform credits to qualified startups. Two months later [company]IBM[/company] upped the ante to  $120,000 in credit for SoftLayer infrastructure or BlueMix PaaS. Again all for “qualified” startups.

This is a strategic gambit for Microsoft, which wants to get more young companies — many of which are probably not Windows focused — to check out Azure. It’s also a way to chip away at [company]Amazon[/company] Web Services’ prodigious lead among startups. AWS is pretty much the default cloud selection for young companies.

This story was updated at 5:24 a.m. PST February 11 to reflect that AWS typically provides qualified startups with up to $15K in promotional funding.

Oh IBM, what are we going to do with you?

The week in cloud

The past few weeks were not great for IBM but they did not bring the bloodbath — 110,000 job cuts or about 26 percent of total headcount — predicted by one reporter.

As for the round of layoffs that did kick off, [company]IBM[/company] wasn’t officially forthcoming about the number. One insider who requested anonymity said a “few thousand” workers were affected, with costs covered by a previously announced $600 million restructuring charge. And, The [email protected]a union-affiliated advocacy group for IBM workers, put the tally at 5,000 as of late last week. In a January 26 research note,  Sanford Bernstein analyst Toni Sacconaghi estimated that the $600 million charge would cover a layoff of about 8,000 people. That’s not nothing, but it’s also not anywhere near 26 percent of IBM’s workforce.

The problem is no one thinks this will be the end of cuts at IBM, which has thus far managed to avoid the sweeping layoffs HP, for example, has endured over the past few years. And, as political analysts would say, the optics were bad — as long-time IBMers were getting the boot, CEO Ginni Rometty was getting a raise (and a bonus.) 

On the bright side, IBM last week said it won a big cloud computing deal with Marriott International. Details were scant but a spokesman said this is a three-year contract on which major rivals, including [company]Amazon[/company] Web Services (AWS), [company]Microsoft[/company] and [company]Oracle[/company] also bid. (I’ve asked those three companies for comment and will update this post as needed.) Update: Oracle and Microsoft declined to comment.

Here’s the thing about IBM: It competes with an array of competitors including old IT adversaries like HP, Oracle and Microsoft but more importantly it faces AWS, which has set its sights on the sorts of enterprise workloads that are IBM’s bread and butter. And AWS is not used to the sorts of enterprise margins once enjoyed by IBM (although I would note that people who think AWS is unprofitable are mistaken.)

But, what’s particularly concerning to some IBM watchers (raising hand here) is that the company is known for buying its way into new businesses, as it did with SoftLayer two years ago, then slowly sucking the new company into the overall IBM borg. Sometimes that works fine. But my feeling all along vis-a-vis SoftLayer was that IBM needed the smaller company’s nimbler startup mentality and non-IBM worldview almost as much as it needed its technology.

Here’s what I wrote when the acquisition was announced in June 2013.

IBM is a big, important company, but its ability to turn out innovative  stuff has been constrained by a hairball of legacy technologies. The question now is whether it will take what is good about SoftLayer and infuse that into the rest of the IBM cloud (one hopes!) or muddies what is great about SoftLayer. And, to IBM’s point, we are still early in the cloud adoption cycle and the stakes are huge.

So even though it’s normal for startup execs to fly the coop within a year or so of selling their baby to a big company, it is still concerning that a chunk of the SoftLayer brain trust has already left the building — co-founder and Chief Scientist Nathan Day left IBM/SoftLayer last April, for example. Former CTO Duke Skarda apparently left late last year although his LinkedIN profile is ambiguous. And co-founder and former CEO Lance Crosby left recently; Crosby was expected to stay until at least July, which will be the second anniversary of the acquisition closing. Those who hoped for a shake up to the IBM way wanted to see a SoftLayer person — or perhaps some other relative newcomer — lead the cloud charge. That is not going to happen.

VMware’s Bill Fathers: Businesses want a business-focused cloud

When it comes to enterprise workloads, another company IBM competes with is [company]VMware[/company]. On this week’s Structure Show, VMware’s cloud EVP and GM Bill Fathers didn’t pull any punches. In a world where many people equate cloud computing with AWS, Fathers is an unrepentant critic, saying that big companies are not convinced that they can run hybrid clouds in conjunction with AWS. He cites Harley Davidson as an example of a customer which tried to go with AWS for a new application and ended up coming to VMware.

Harley Davidson created a front-end iPad app for its CRM systems so dealers could check inventories. “They tried to do it on Amazon but physically could not connect it to their existing Oracle database of record from a networking perspective and they gave up,” Fathers said. “We used NSX [VMware network virtualization] to craft a connection from their on premises environment to vCloud Air and integrated it back to applications living on premises.”

Then the money quote aka fighting words:

“I am not spending a second working out how you solve what I think is an unsolvable problem of a client who’s marooned an application in AWS and is desperately trying to get it connected securely back to an on-premises app.”

(Send cards and letters to VMware please, but also feel free comment below.)

But there’s far more. Father’s guest segment starts at about 12:30 in.

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Bill Fathers VMware Structure 2014

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IBM hits the $7B mark in cloud, but what does that mean?

IBM has pledged to deliver a $7 billion cloud business by 2015 for a couple of years — and now, according to its own numbers, it’s achieved that goal. On its fourth quarter 2014 earnings call, IBM CFO Martin Schroeter said — a couple of times actually — that this key strategic business grew 60 percent last year to hit that $7 billion goal.

But, that number is hazy. It is unclear how much of that business comes from older outsourcing deals that are being reconstituted as cloud business. On the other hand, nearly every vendor trots out nebulous numbers when it comes to cloud. As has been reported ad nauseam, [company]Amazon[/company] doesn’t break out the size of its AWS cloud business. There’s also been controversy over Microsoft’s cloud claims.

Having said that, a claim by one [company]IBM[/company] insider that this $7 billion figure makes [company]IBM[/company] the world’s largest cloud provider has to be taken with a big grain of salt. Over the past four quarters, the same category in which AWS resides logged $4.8 billion in sales, and I have to say the idea that IBM has a bigger cloud business than AWS begs disbelief probably everywhere except in IBM’s Armonk, New York headquarters.

Overall, IBM logged fourth-quarter earnings of $5.81 per share, down 11 percent from $6.13 for the year-ago period. Net income was off 13 percent to $24.11 billion from $27.70 billion for the same period. IBM shares, which initially soared to nearly $163 on the earnings news, then swooned as people dug through the numbers and IBM provided a disappointing outlook.
IBM Price Chart

But Schroeter noted that IBM is doing well in strategic “high value” segments: cloud, big data, social media and mobile.

IBM logged $25 billion in revenue from those combined segments, which he said now accounts for 27 percent of IBM’s total business. And, he noted that IBM’s “as a service” business (meaning IaaS, Paas and SaaS etc) is now purring along at a $3.5 billion run rate up from $2.2 billion last year.

In that segment its OpenStack-based Bluemix PaaS and SoftLayer cloud infrastructure businesses are key.

This story of doing well in high-value segments echoed what SAP CEO Bill McDermott, said earlier Tuesday: that SAP’s core (legacy) business is growing but that cloud is growing faster. The question for both these companies is whether growth in new businesses can make up for the dwindling of their bread-and-butter legacy stuff.

Speaking of SoftLayer, Lance Crosby, who retained his CEO title when SoftLayer was acquired by IBM two years ago for $2.2 billion, is now general manager of cloud innovation and business development at IBM. Meanwhile Robert LeBlanc, who joined IBM in 1981, is now the official cloud guy, aka SVP of Cloud  — so those hoping for an outsider perspective to guide IBM’s cloud may be disappointed.

Robert LeBlanc, SVP of IBM Cloud

Robert LeBlanc, SVP of IBM Cloud

Are you ready to take on tomorrow’s IT? Think again.

Let’s get one thing out of the way right up front. The business of IT is very complex and getting increasingly more complex every day. It does not matter whether you are the buyer or the seller; the industry is evolving into a very different and complex beast.

Evolution of the CIO

How we, as CIOs, have lead IT organizations is very different today from how it was done just 5-10 years ago. In many ways, it is easier to forget what we learned about leading IT and starting over. Of course, the leadership aspects are perennial and will always endure and grow. I wrote a bit about the evolutionary changes for the CIO in more detail with the 5 Tectonic shifts facing today’s CIO. In essence, tomorrow’s CIO is a business leader that also has responsibility for IT.

Consider for a moment that the CIO and IT organization sits on a spectrum.

CIO IT Org Traits

Where the CIO and IT sit along the spectrum impacts perspective, delivery of solutions, target, and responsibilities along with a host of other attributes for both the organization and providers alike.

The changing vendor landscape

Add it all together and today is probably the most confusing time for providers of IT products and services. Traditionally, providers have asked customers what they need and then delivered it. Today, many customers are not really sure what they need or the direction they should take. And the providers are not well equipped to lead the industry in their particular sector let alone tell a good story of how their solution fits into the bigger picture.

As an example, one provider would tell customers their cloud solution ‘transforms’ their business (the company IT is part of). This is completely wrong and over-extends beyond anything their solution is capable of. As such, it positions the company to over commit and under deliver. For the wise CIO, it leads to a serious credibility problem for the provider. It would be pretty unique for any vendor to truly ‘transform’ a company with a single technology let alone one that is far removed from the core business functions. A better, more accurate statement would be: We help enable transformation.

Be careful of Buzzword Bingo. Bingo!

In another recent IT conversation, the perception was that all Infrastructure as a Service (IaaS) solutions were ubiquitous and interchangeable. While we hope to get there some day, the reality is far from standardized. Solutions from providers like Amazon (AWS), Google (GCE), Microsoft (Azure) are different in their own rights. But also very different from solutions provided by IBM (SoftLayer), CenturyLink (SAVVIS), HP (Helion). Do they all provide IaaS services? Yes. Are they similar, interchangeable and address the same need? No. For the record: Cloud is not Cloud, is not Cloud.

The terms IaaS and Cloud bring market cache and attention. And they should! Cloud presents the single largest opportunity for IT organizations today. However, it is important to understand the actual opportunity considering your organization, strategy, capability, need and market options available. The options alone are quite a job to stay on top of.

Keeping track of the playing field

The list of providers above is a very small list of the myriad spread across the landscape. To expect an IT organization to keep track of the differences between providers and map their needs to the appropriate solutions takes a bit of work. Add that the landscape is more like the shifting sands of a desert and you get the picture.

The mapping of services, providers and a customer’s needs along with the fact that their very needs are in a state of flux create a very complex situation for CIO, IT organization and providers.

Is it time to give up? No!

Today’s CIO is looking to up-level the conversation. They are less interested in a technology discussion and one about business. Specifically, by ‘business’ conversation, today’s CIO is interested in talking about things of interest to the board of directors, CEO and rest of the executive team. Trying to discuss the latest technology bell or whistle with a CEO will go nowhere. They are interested in ways to tap new revenue streams, greater customer engagement and increasing market share.

For the CIO, focus on the strategic conversations. Focus on the business opportunities and look for opportunities that technology can help catapult the company forward. Remember that the IT organization no longer has to do everything themselves. Divest those functions that are not differentiating. As an example, consider my recent post: CIOs are getting out of the data center business. If you are not willing to (or capable of) competing at the level that Google runs their data center, it is time to take that last post very seriously. Getting rid of the data center is not the end state. It is only the start.

IBM beefs up cloud worldwide with more data centers

Remember that data center land grab we keep talking about?  It’s not letting up. This week it’s IBM’s turn (again) to claim data center expansion to fuel its effort to offer cloud services worldwide.

[company]IBM[/company] is adding 8 new data center locations via a partnership with [company]Equinix[/company]. Those locations come in addition to three new data centers in Germany — a particular focus for all the cloud powers — Japan and Mexico City. The latter three data centers, now online, are part of a $1.2 billion investment announced early last year.

The Equinix deal gives IBM’s SoftLayer cloud services more coverage (via Equinix Cloud Exchange) from Amsterdam, Dallas, Paris, Northern California, Singapore, Sydney, Tokyo and Washington D.C. In October, IBM announced a cloud expansion into China in partnership with Tencent.

SoftLayer officeIBM sees more enterprise accounts — many of which already deploy private clouds “behind their four walls” — looking at off-premises clouds, said Angel Diaz, VP of open standards.

“That might be a dedicated zone of a public cloud or a public cloud, but the magic, sweet spot is hybrid, which connects those two worlds [private and public clouds] together,” he added.

IBM will not have that sweet spot to itself. A dozen or more competitors including traditional rival [company]Hewlett-Packard[/company] and sometimes-ally [company]Red Hat[/company] are also gunning for that market. Then there’s [company]VMware[/company] and [company]Microsoft[/company].  And Amazon Web Services, which used to sort of pooh-pooh the need for private cloud, has changed its messaging and introduced products to facilitate hybrid cloud set-up. And all of these vendors are adding data centers and cloud capabilities around the world.

Amazon recently opened a new region in Germany and Microsoft is working in that direction. Germany is a critical battle ground due to the size of that market and its stricter-than-usual rules around keeping citizen data in-country.

For more on the cloud computing competitive landscape, check out this talk from Battery Ventures’ Technology Fellow Adrian Cockcroft from Structure 2014.

[youtube https://www.youtube.com/watch?v=VaFktjlLp5M]

This story was updated at 11:30 a.m. PST to reflect that AWS opened a new “region” not a new data center in Germany.