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

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BB: Partnerships seem to be another important part of your strategy. You have an expanded partnership with VMware that you spoke about at VMworld. You have a partnership with Workday. Can you explain the overall partner strategy for advancing the cloud position and what should customers expect in the way of future partnerships?

One type of partnership enables clients to do things they couldn’t do before. VMware would be a great example of that. I would put Apple in the cloud in that bucket where we enable clients to move workloads from on-premise onto the cloud. They can consistently manage and have a consistent platform and a stack where they can build the application once and run it where it makes sense, whether it be on-prem or in the cloud. Then you want to automate that such that it’s easy for them to move from one to the other. Sometimes they’re going to start in the cloud and build the application and move it on-prem. Sometimes they’ll take an on-prem current application and move it to the cloud. We want to make it easy for them to go back and forth to map to whatever business model or whatever business objectives they have.

We had Marriott onstage with us (at VMWorld). That was an important thing for Marriott because they want to have that flexibility. It’s technology that clients use on-prem to enable them to use that in the cloud and that drove a lot of the VMware partnership. It’s the same thing with Apple because one of the pieces of the Apple relationship is Swift. As you know, Swift is heavily used in building the mobile application but clients need to be able to connect the mobile application to backend systems. We enable Swift to be run in the enterprise and in the cloud. That’s enabling new capability in the connection of this hybrid notion. That’s one class of partnership.

The other class of partnership is like what we’ve done with SAP, Box and Workday, in which they’re looking for a world-class public cloud so that they don’t have to spend all their time and energy investing in their own private cloud. They want to go public cloud and for them, the other thing that’s attractive is my global presence. Because they’re all trying to expand their businesses into global markets and the fact that I’m sitting already in data centers all through Europe, I’ve got nine data centers in Asia, enables them to take their offerings and get into new markets quickly without having to invest all of their money on building out the infrastructure. It opens up the opportunity for them to expand their business into new markets.

JG: You had talked earlier about the industry-specific focus of your efforts. Some analysts we had talked to in advance of this spoke about a recent internal structural change, the creation of an industry platforms group. Can you tell us about that?

We made an announcement internally here at IBM. Look at what we did with Watson Healthcare. That really became a model that we believe will permeate through multiple industries. We will go after the other industries and replicate what we’ve been able to do in healthcare in those industries. Financial services would be a natural for IBM - given our position in financial services and what we’re doing in technologies like blockchain - and helping financial services companies move into the cloud.

JG: Just so I understand, Robert, how is that group structured? That’s one group that oversees all of the industry-specific capabilities you’re bringing to market?

Yes. There are certainly a lot of things we do that are common to industries. The cloud is an example. The cloud is the cloud. The cloud doesn’t know an industry. There are separate capabilities that we will build on top of the cloud that are unique to a certain class of applications or certain industries. Blockchain is a great example for financial services. You saw new acquisitions in healthcare of Truven, Merge, and Phytel. There is a set of applications and data that is applicable to healthcare. You would anticipate that we would continue to do that now in other industries and being able to take our Watson technology and apply our Watson cognitive technology into multiple industries. Most industries are data driven and process driven and any time you can take data and apply things like cognitive and analytics, you get insight. When you get insight you improve the process, you come up with new business models and you can drive that digital transformation. Every industry that we look at is going through some form of digital transformation. What we want to do is we put that unit together to focus in on specific industries as we go forward.

JG: I would assume this also has a big impact on who you sell to. Is it bringing in more line of business executives that you have to talk to about these industry-specific capabilities?

I think that’s a good observation. The people who are making decisions are not just the technical team or the CIOs anymore. The lines of business are heavily involved. When cloud was all about compute and storage that was a CIO decision. Now that the cloud is becoming a discussion around business process, business models, data specific to an industry, the line of business is now being involved so it is a different sell. It is much more of a consultative sell, hence why Bridget van Kralingen, who ran our Global Business Services unit, was a natural to run this. We believe it’s much more of a business transformation than it is just technology. Technology is a means to an end. I’m partnering closely with Bridget to make sure that I provide the best platform, the cloud that enables that level of transformation that happens in an industry context.

BB: Robert, I wanted to ask you about the public cloud. In Gartner’s latest Magic Quadrant report, Amazon Web Services continues to be the market leader. Microsoft is seen as a second place vendor and it seems like there’s a whole host of other vendors fighting for market share, including Google, IBM and others. What do you think of that characterization of the public IaaS cloud market and where do you see IBM fitting in?

Gartner has a very narrow definition of what the cloud is. They actually talk about Infrastructure-as-a-Service and that’s what their report is based on. We think it is too narrow. We don’t think it’s a client view. Forrester just put out a new report and they positioned IBM as a leader, especially when clients are trying to do hybrid. Gartner tends to have a very narrow view, probably the most narrow view of the market that I’ve ever seen, but even in Gartner, if you look at some of their other Magic Quadrants, they position us extremely well. They excluded a lot of capability we have. They excluded our Platform-as-a-Service capability. They excluded our bare metal capability, which is a big differentiation for our cloud over other clouds. It’s something that enables us to do things that others cannot. If you look at our VMware partnership, a lot of that was enabled because we had the bare metal capability. We can do things for clients that some of the other public cloud providers cannot do. We think that Gartner took a very naïve view, a very small, narrow view of the market.

BB: What steps are you taking to ensure that SoftLayer and the IBM Cloud are even more competitive versus an Amazon?

Again, we look at the investments at three levels. One is Infrastructure-as-a-Service and we’ll continue there. We’ve made public that we’re spending billions of dollars just like all the other providers. We continue to expand geographically - we expanded into Korea last week. We’ll make an announcement here, another announcement in Europe in the northern hemisphere likely in September. We keep expanding the capability that is in our data centers. We have the latest and greatest technology.

For instance, the next-generation Intel servers have security updates in the hardware. We’re already deploying those servers into our infrastructure. Then there’s all the value added. There’s internet of things, Blockchain and Watson Cognitive, all the Bluemix services. We’re continuing to invest there. What I would say to clients is that this is a race for value, not a race for size. Some of the analysts have gotten enamored with size but when you think about it from a client’s perspective, if they have a provider who has half a million servers or has a million servers it really doesn’t mean much to the client.

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