IBM cloud chief: The next phase of cloud is a race to add value

Robert LeBlanc explains how IBM’s portfolio of SoftLayer IaaS, BlueMix PaaS and cognitive Watson services add value atop basic cloud services

At 105 years old, IBM has been through more than a few major technology transformations. Arguably, none is bigger than the current retooling of the company around cloud computing – an effort overseen by Robert LeBlanc, senior vice president, IBM Cloud. LeBlanc says IT leaders and business executives aren’t caught up in Wall Street’s worries over IBM’s revenue declines or the pace of the cloud transformation.

Instead, they’re focusing on the higher-value capabilities – like Watson cognitive computing or internet of things functions – IBM is layering atop what LeBlanc calls the ‘phase one’ cloud that will help them transform their own businesses.

In an interview with Network World Senior Editor Brandon Butler and IDG Chief Content Officer John Gallant, LeBlanc talked about how IBM is tailoring its cloud services to specific vertical industries and what Big Blue is doing to enhance its Platform- and Infrastructure-as-a-Service capabilities. He also discussed why partnerships with companies ranging from VMware, Box, SAP and Workday are strengthening IBM’s cloud play.

John Gallant: We want to make sure our readers understand the overall cloud strategy IBM has embraced and the major transition IBM is going through. What is the overall cloud strategy?

It’s a three-pronged strategy. One is that we’re very much focused on cognitive solutions and that’s really bringing analytics and AI to all of the solutions, which are very much industry oriented. We started with our focus on healthcare and we’re extending that to other industries. The second is that everything we do is on the cloud. We are focused on building all of these solutions on the idea of cloud. We’re also focused on bringing some of our traditional offerings onto the idea of cloud. As an example, all our relevant middleware offerings are now available on the cloud so the client can run it on-prem and they can run it inside the cloud. The third is we’re doing everything in an industry context and that really feeds into what we’re seeing from clients here and the next generation of the cloud.

Let me expand on that a little bit. In the first wave, everybody looked at the cloud as a way to save money. I could get cheaper compute, cheaper storage, cheaper networking and the cloud was a good way for people to get better economics. In some cases, they looked at that as: ‘Hey, I’m going to move my application to the cloud or I’m going to burst to the cloud. Instead of buying that extra server I’ll just run it on the cloud when I need to’. I think we’re moving to the next phase of cloud and that’s where the cloud is becoming a platform for innovation.

What I mean by that is the cloud is enabling clients to do things today that they otherwise wouldn’t have been able to do - certainly not at the speed and scale that they have in the past. This is starting to spawn new business models. It’s spawning new business processes. It’s allowing clients to move into mobile at a rate and speed that they’ve never seen before. The reason is they now have access to capability and technology that before would have required a level of investment. They would have to procure servers, configure them, get them all ready, buy software and that literally can take months when in most cases now, with little or no investment they can get access to newer technologies. That’s what I call the value and where the cloud is now becoming a platform for innovation.

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A couple of examples on the IBM side and what we’ve done with Watson: We’ve got over 30 cognitive services now that are available on the cloud. In fact, the only way we’re delivering our cognitive services is on the cloud. Whether I’m a small startup company or I’m a large enterprise, I have access to that set of technology capabilities without having to make a large, upfront investment. That enables me to do a lot more sandboxing, a lot more testing, trying things and seeing where I can come up with new innovation.

We’re the first to put blockchain services up on the IBM cloud and we offer different levels of security with that blockchain capability. Look at Internet of Things and the connection of all these physical devices, as well as all the services you need to ingest data at rates that most companies or enterprises couldn’t ingest at. You’re talking billions of pieces of information being ingested at a pretty dramatic rate.

Hence, why we bought the Weather Company. When we bought the Weather Company, everyone said: ‘Wow, IBM is getting into the weather data business’. Yes, weather data is important and we think that weather data actually impacts a lot of business processes, whether it be supply chain or airline scheduling. We have data that we can now help clients with but more importantly, what the Weather Channel gave us is the ability to ingest data and deal with data at scale. We got a lot of technology that we’re applying into the internet of things space. Again, it’s value added on top of the cloud.

JG: In her presentations, CEO Ginny Rometty talks about this transition in terms of IBM focusing on higher value opportunities. What does that mean from a cloud perspective?

Some of the cloud vendors will tell you to bring your applications, bring all your data and you can run it on my cloud. That’s what I call phase one of the cloud. Phase two of the cloud is the additional value. I can bring IoT services, I can bring cognitive services, I can bring a PaaS platform, our Bluemix. We’ve got over 150 services on our Bluemix platform which runs on the cloud, really allowing the higher value. Those are the things that clients can do more with. Instead of just giving them compute and storage and elasticity and allowing them to scale up and down and pay for what they use, it’s also the functions that will run on the cloud that I now have access to that I can [use to] build my next new application or my next solutions. Instead of having to build everything from scratch, I now have a real set of building blocks on which to build those next-generation applications.

Brandon Butler: We saw that cloud revenue was up 30 percent in the last quarter to about $3.4 billion. Can you outline what falls into that cloud revenue bucket?

We split our cloud revenue externally into two pieces. We talk about the total cloud and we always talk about the trailing 12 months because the world of cloud is moving very quickly. Our last 12-month trailing is $11.6 billion, of which $6.7 billion of that is as-a-service. That’s where we provide the capability to the client as a service and that’s what a lot of people think about when they think about the cloud.

As an example, our SoftLayer platform where we provide the compute and storage as a service, that’s all included in that number. The difference between as-a-service and the total cloud is what clients are doing in the private cloud. That’s where clients are building out their own clouds and in a lot of cases they’re actually building hybrid clouds in which they have a private cloud connecting to a public cloud. In fact, most enterprises are building some kind of hybrid solution. There are some applications and solutions that will run just on the public cloud but in most cases the clients are trying to connect back to traditional transactional systems, to their databases, to their data and so they’re building up these private clouds. In fact, if you look at data from IDC and others, there still is more spend in private cloud than there is in the public cloud. You were at VMworld recently, correct?

BB: Yes.

You saw some of the data that [VMware CEO] Pat Gelsinger showed about private clouds versus public clouds. We’re seeing it as a combination, so when we say $11.6 [billion] that includes what we’re doing for clients on private cloud. Remember that also includes some of the things that we do in terms of our strategic outsourcing and our consulting business where we’re helping clients build their cloud strategy. We’re helping them build their private clouds as well as what they do in the public cloud.

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