Is IBM's Assault on Amazon a Case of Sour Grapes?
While there's little hard data to show market share for the use of public cloud computing services, most would agree that Amazon Web Services (AWS) is by far the most widely used Infrastructure as a Service (IaaS) to date.
Analyst Ben Schachter of Macquarie Capital said AWS' revenues this year could hit $4 billion. The Wall Street Journal reported this week, though, that Schachter's figure sounds much higher than prior estimates, which pegged revenues in the $1 billion to $2 billion range. As rivals such as Google, Hewlett-Packard, IBM, Rackspace and Microsoft are gunning for that business by expanding their own services, Amazon is clearly getting under Big Blue's skin, in particular.
After giving up on its contested losing bid for a $600 million cloud contract for the CIA to Amazon late last month, IBM took to the media last week, arguing it has a larger cloud business than Amazon. IBM ran an ad that claims its cloud powers 270,000 more Web sites than Amazon. Having acquired SoftLayer this year, IBM also argued that its cloud service lets customers run apps on dedicated servers without interference from "virtual neighbors."
The timing of the ads -- right after losing the CIA bid and just days before Amazon's re:Invent customer and partner conference -- is also telling. I spoke with Mark Dietz, director of IBM SmartCloud solutions, last week and asked if the ad campaign was timed in concert with AWS re:Invent, and he denied any connection.
But IBM is apparently running ads on buses in Las Vegas, where the conference is taking place, noted AWS Senior VP Andy Jassy in his keynote address at AWS re:Invent. Jassy didn't mention IBM by name, but left little doubt that he was referring to Big Blue.
"An old-guard technology company based in New York seems to be pretty worked up about AWS these days," Jassy said as he held up the ad.
"The advertising is creative, I'll say that," he continued. "I don't think anybody that knows anything about cloud computing would argue this company has a larger cloud computing business than AWS. But it's a way to jump up and down and to hand-wave to try to distract and confuse customers instead of trying to build comparable functionality to what AWS has. We believe that customers are smart. And we believe that customers are not going to allow them to have the wool pulled over their eyes easily. And we believe that in this day and age of the Internet, and the transparency that that provides, and given how inexpensive it is to try these technology infrastructure platforms, that customers will figure out what's what."
Dietz doesn't see it that way. "We're making bold moves in the cloud and this ad campaign really underscores that," he said, referring to IBM's acquisition of SoftLayer, which brings 21,000 IaaS customers into the fold.
Nevertheless, IBM's campaign targeting Amazon was surprising. I asked Dietz if there were sour grapes over the CIA deal.
"That's definitely not the case," he insisted. "I wouldn't say anything to diminish the importance of the CIA contract but I'd emphasize that's one deal. If you look at just the federal sector alone, we have bigger deals and more customers in the federal sector, let alone businesses large and small using different aspects of our overall cloud portfolio."
IBM has made significant investments this year that further its efforts to push into cloud computing. Embarking on such an ambitious campaign challenging Amazon is the latest sign IBM means business when it comes to cloud computing. But the two companies have very different philosophies on the end game.
In his re:Invent keynote, Jassy spelled out Amazon's philosophy: "We have a pretty different view on how hybrid is evolving than a number of the old-guard technology companies. I think the old-guard technology companies believe that what enterprises want is to run most of their workloads on-premise behind the firewall, and then they just want to have a little bit of an ability to surge to the cloud. We have a very different view of that. We believe in the fullness of time that very few enterprises are going to own their own datacenters, and those that do will have much smaller footprints than they have today."
IBM, Microsoft and VMware are emphasizing a hybrid world for many years to come, and in the end the wares they're building are preparing them for a world that Amazon envisions. The only subject of debate that remains is whether datacenters will become the exception rather than the rule, and how long that will take to materialize.
Posted by Jeffrey Schwartz on 11/14/2013 at 11:31 AM