7 Ways IBM Will Make $7 Billion In Cloud

1. Starter Kit for Cloud on Power Systems

One of the key ways IBM is different from other cloud service suppliers is that it can help build a private cloud that’s not just full of Intel/AMD commodity x86 servers. Rather, reflecting its many years of being a major server producer, IBM offers a private cloud architecture that includes both x86 hardware and IBM Power servers capable of running its AIX Unix OS.

That’s one way IBM is headed for $7 billion in cloud revenues by 2015. It is already offering Starter Kit for Cloud on Power Systems, which gives Power server users a way to include virtualized Power servers as part of their private cloud operations.

In IBM’s lexicon, the private cloud may be on premise or it may be in an IBM data center. It may be managed by the customer (SmartCloud Enterprise), or the customer may decide to turn over management of the physical equipment to IBM (SmartCloud Enterprise Plus). The latter used to be known as managed hosting services. It would still be managed hosting services but for the fact that, regardless of where the private cloud is located, it includes a portal for user self provisioning, deployment, and monitoring of virtual machines. Those VMs can be managed by the customer through one management interface, whether x86 or AIX VMs.

That opens the door for a data center with aging applications to move both its Unix and x86 apps into a private cloud setting and have self-servicing, metering, and chargeback features, instead of accepting a forced migration away from Unix to x86. The Starter Kit is an underreported part of IBM SmartCloud Foundation, a set of software components to enable a customer to build a private cloud, whether x86 or Power or both, for running core business applications.

In my opinion, this is one of the strengths–and weaknesses–of the IBM approach. It must serve the cloud computing interests of a large, existing customer base, and it is in IBM’s own interest to extend the life of its Power chip architecture. At the same time, IBM must convince customers that the cloud’s economies of scale come about when you standardize.

It’s good for existing IBM customers that "standardization" in this case includes both x86 and Power/AIX. It may prove less convincing to new customers that IBM is the best choice versus an x86-only vendor. The latter would include Microsoft, Google, Rackspace, or Amazon. Comfort says IBM will help the customer get to cloud computing whichever way he prefers.

2. SmartCloud Services Meet Public Cloud

In addition to helping customers implement private clouds, IBM will also help them move the workloads they choose to public infrastructure-as-a-service, whether Amazon Web Services or IBM’s (or any other public IaaS environment.) This brings us to IBM’s second way of earning revenues from cloud computing: IBM’s existing SmartCloud Services, meant to take advantage of infrastructure-as-a-service external to the enterprise data center. Included are the familiar application development and test services, plus IBM-based infrastructure-as-a-service or integration with outside IaaS providers, such as AWS. IBM uses the integration product from its Cast Iron acquisition to provide the connections.

3. New SaaS Options

IBM is planning more software-as-a-service initiatives as well. "Salesforce.com, usually regarded as the most successful cloud company to date, understood what made the sales force successful," and provided online software to increase its productivity by a factor of two or three through the use of its CRM application, Comfort noted.

IBM wants to do something similar for some targeted groups of business users–groups IBM understands well thanks to years of consulting engagements and years of service as a prime technology supplier. IBM’s WebSphere Commerce Suite, its business-to-consumer ecommerce software, has been available in SaaS form since 2008.

IBM’s Comfort, during an interview at the IBM building on Madison Avenue in New York on April 2, couldn’t specify exactly what the additional offerings might be, but he cited software to help automate processes for teams working for a chief marketing officer as a potential example. In addition, Comfort pointed to the Smarter Cities initiative that provides software to manage such services as transportation or public utilities. If it works on premise for one city, then chances are, it can be offered as SaaS for many, he said.

4. and 5. : CloudBurst And PaaS For Developers

One of IBM’s first cloud announcements was CloudBurst, a hardware appliance for calling up and managing virtual servers, still a strong element of the IBM approach to cloud computing, along with a cloud platform-as-a-service for developers, which has been extended beyond Rational tools into application deployment and management in the same environment.

These five are all revenue producers, but it’s been hard to see the overall IBM strategy in such diverse initiatives. Comfort said IBM understood cloud computing was coming four years ago and would be an important shift in the enterprise data center. It’s since concluded that the cloud affects most phases of its business and the response has to cover many different options, but in as coordinated a fashion as possible. A big part of its challenge is to convince customers that there’s a lot of hard work involved–as opposed to a one-product solution.

"Perhaps I shouldn’t say this, but one of the fallacies of IT over the last 20 years has been that the best of breed system leads to the best economies. It doesn’t," he noted. Instead it results in a wide variety of dissimilar systems packed into the modern enterprise data center, with a heavy staff investment needed to keep them running.

When the customer says he wants to transition to cloud computing, IBM will present some difficult options, as well as its catalog of consulting and software services. "You need to transform how you think about the problem," he warned.

The business is used to telling IT both what it wants and what it should run on, and IT has often met the need by selecting a best of breed solution. Now IT has to adopt a simplified and standardized environment, such as one based on x86 commodity servers, and use it to deliver what the business needs. That means a decision will have to be made whether legacy systems are migrated and whether any new development should occur outside the x86 environment. These are wrenching decisions for IT staffs that have built excellent applications in the past on non-x86 systems, Comfort conceded.

The benefits of cloud computing materialize, Comfort said, when the environment is standardized and underlying complexity avoided. If all you do is collect "what you’ve been doing for the last 20 years in a cloud environment, then you don’t realize the full benefits of cloud computing," he said.

6. Self-Servicing Portal

Each customer will choose an individual path to the cloud and, in many cases, it may make sense to convert legacy applications to either x86 architecture or full cloud applications that make use of scale-out processing.

That means part of the data center will fall short of cloud computing, where end users may self-provision applications when they need them, and the applications scale as needed. That’s usually accomplished through a Web-based, self-service portal–and, by the way, IBM already offers a self-servicing portal for both Power and x86 environments as part of SmartCloud Foundation.

To make it clear that IBM is engaged company-wide in the cloud market, it needs to issue a stronger, blanket statement to the effect that cloud computing is here to stay and so is IBM’s commitment to it. Comfort is convincing when he says IBM has laid plans to help customers transition to various forms of cloud computing through many years. That’s different from the cloud product du jour announcements that have gotten IBM this far.

IBM is also trying to play the role of honest broker for considering a customer’s wishes, one of the harder points for it to get across when it’s gotten this far as a relentless seller of its own servers. To turn to IBM for guidance and products in cloud computing, customers will need to believe that IBM has adopted two important cloud principles–depend on standard, commodity technologies and run your workload where it will run most efficiently.

7. Consulting Services

IBM is stepping into that role on all phases of cloud, including consulting services, Comfort says. The company will offer IBM components that integrate with each other and customers will decide how much help they need setting up the self-servicing portal and other parts, such as metering, chargeback, management, and security. IBM will specify an appropriate hardware architecture that includes, but is not limited to, IBM’s BladeCenter product line. Dell units may be used to build the private cloud as well, Comfort said. IBM middleware components and Tivoli management components can live there too. "But it won’t be a blue-only stack," said Comfort.

Comfort made it clear that all of IBM sees cloud computing not as a fad but as a permanent change, the natural successor to the services-oriented architecture that IBM once championed. "Cloud is the next level of abstraction above SOA," said Comfort, harkening back to his days as an IBM researcher.

It’s still a stretch, however, for IBM to make people believe that the company is committed to the cloud in the same manner as an Amazon or Rackspace, both pioneers in building x86 cloud data centers.

Still, IBM has seven bases covered when it comes to helping customers participate in the uptake of cloud computing, and plans to be raising $7 billion in related revenue by 2015.

Where will most of the revenue come from? Across the spectrum, said Comfort. One third from the SmartCloud Foundation set of software products for implementing cloud computing; one third from direct IBM cloud services, whether infrastructure-as-a-service or platform-as-a-service. And one third from SmartCloud Solutions–software-as-a-service offerings and sets of business processes targeted at specific business and industry groups.

Seven billion. It’s a tall order. Comfort says IBM is ready to deliver.