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IBM updates cloud strategy after loss of CIA pact

IBM has brought 6,000 new customers to the cloud in the past year, according to the company

By Joab Jackson
July 15, 2014 05:42 AM ET

IDG News Service - Two years after losing high-profile government work to Amazon Web Services, IBM has revamped the way it structures enterprise cloud services contracts, thanks in part to its $2 billion acquisition of cloud services provider SoftLayer.

"The loss of the CIA contract to AWS was obviously a blow to IBM," said Charles King, head of the IT analyst firm Pund-IT, responding to a query in email. "Whether it will make the company more competitive is hard to say until a similar deal comes along. But I believe IBM's cloud solutions are considerably stronger with SoftLayer than they were before."

In 2012, IBM protested the Central Intelligence Agency's award of a $600 million contract vehicle to competing vendor AWS. Reviewing the case, the Government Accountability Office agreed with the CIA that IBM did not show sufficient evidence that it could easily scale up cloud operations to meet increasing demands, and ranked AWS as having more technical skills to offer in the area of cloud services.

That IBM is widely used within the U.S. government and AWS was a relative novice to supplying such services to this market did not reflect well on IBM's then-nascent set of cloud services.

Since the SoftLayer purchase last July, IBM has used the company's assets to power its growing portfolio of hosted services, such as the Bluemix set of hosted services. SoftLayer also provides the underpinning for a growing number of services based on the company's Watson intelligent assistant technology, as well as a set of infrastructure services that was widely used even before the IBM purchase.

On Monday, IBM announced that SoftLayer has snagged 6,000 customers in the past year, including some high-profile names such as the department store Macy's and appliance-maker Whirlpool.

Other enterprise customers IBM name-checked included Heineken, Philips Smart TV, Radio Shack, University of Pittsburgh Medical Center, Honda, Toyota, Pacific Gas & Electric, L'oreal, AT&T, Visa and Continental Airlines.

"We've made significant inroads in every industry in the world, whether it is retail, industrial manufacturing, health care, financial, insurance," said Lance Crosby, CEO of IBM SoftLayer.

The customer wins suggests that much has changed since IBM lost the CIA bid, and the changes reflect IBM's growing sophistication in offering cloud services. Enterprise IT decision makers will often look to a potential vendor's customer list as a validation of the vendor's service.

In the government market, IBM is now building two facilities dedicated for federal government use, in Ashburn, Virginia, (outside of Washington) and in Dallas. These facilities will meet the government's requirements for security and data privacy.

Also, over the past several months, IBM Global Business Services sales people have been trained to sell cloud to the federal agencies, Crosby said.

Reprinted with permission from Story copyright 2014 International Data Group. All rights reserved.
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