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IBM Plans Aggressive Cloud Expansion with $1.2B Datacenter Investment

IBM on Friday said it will invest $1.2 billion to extend the global footprint of its public cloud infrastructure.

Big Blue will add new datacenters in 13 countries across five continents. By the end of the year, IBM said it will have 40 datacenters. 

With last year's acquisition of SoftLayer for a reported, but unconfirmed, price of $2 billion, and the build-out over several years of its own SmartCloud Enterprise cloud, IBM is about two-thirds of the way toward its goal of having 40 datacenters, according to Dennis Quan, IBM's vice president of cloud infrastructure. SoftLayer had 13 datacenters when the acquisition deal was announced last June, which suggests IBM had the same number; thus, the company is adding 13 or 14 more this year.

The effort is clearly a bid to take on Amazon Web Services (AWS), by far the most widely used cloud provider by enterprises. IBM didn't identify AWS as the reason for its aggressive expansion. But in an uncharacteristic move back in November, IBM made clear that AWS is in its crosshairs by running full-page ads in major newspapers and on buses and billboards during the AWS re:Invent customer and developer conference in Las Vegas.

"Being able to provide an enterprise-grade cloud capability to our clients requires us to have this distributed datacenter strategy so we can provide services to our customers in any geography they do business," Quan said in an interview. "If you look at our competitors, they are really not able to meet those requirements."

Over the past year, IBM has stepped up its effort to extend its fledgling cloud infrastructure, called SmartCloud. At its Pulse conference last year in Las Vegas, IBM proclaimed its intention to focus more on building out its cloud infrastructure with a major companywide commitment to standards, notably OpenStack.

That commitment led to speculation that IBM would make an expeditious move to extend its cloud footprint by acquiring Rackspace, one of the largest independent providers and an author, along with NASA, of the original (and now open source) OpenStack code. At Pulse last year, IBM vowed to become the largest contributor of OpenStack code, a distinction now held, at last count, by Red Hat.

Rackspace was out of reach for IBM with a market cap last year of $5 billion. Unable to bag Rackspace at the time, IBM acquired SoftLayer, a smaller but still major cloud provider. Ironically, SoftLayer was not operating an OpenStack cloud, an effort Quan said IBM is addressing by offering over 2,000 APIs. Late last year, IBM said it is phasing out its SmartCloud infrastructure in converting customers to the SoftLayer cloud. IBM has earmarked the end of this month to complete that effort.

"We've had a lot of success in transitioning our customers from SmartCloud Enterprise to SoftLayer," Quan said, describing SoftLayer as "a larger-scale and more reliable cloud computing infrastructure."

Asked if the SoftLayer team would be leading the datacenter expansion effort, Quan said: "We're really applying the SoftLayer model. We're just kicking it into overdrive by applying synergies from the rest of the IBM Corporation. We are going to be able to greatly accelerate the datacenter rollout plan, We're going create these SoftLayer datacenters according to the same SoftLayer model, access to the same SoftLayer private network with worldwide access through the exact same APIs, and exact same portal."

Investing $1.2 billion on more datacenters is potentially less expensive than making more acquisitions, such as trying to grab Rackspace or going after smaller providers, though Quan noted, as he's obligated to do, that IBM doesn't discuss potential acquisition plans.

As IBM looks to expand its footprint, the company will face other major competitors, including Microsoft, Google, VMware, Rackspace, AT&T, Verizon and Hewlett-Packard. Yet according to experts, no one is coming close to approaching AWS' share. Though with IBM's large base of enterprise and public sector customers around the world and its large bench of expertise in vertical sectors, Quan insists IBM will be a major provider of enterprise cloud services.

"Our globally distributed private network, which is very unique for SoftLayer, as well as our bare-metal server capability, enables not only data-intensive applications to run more efficiently but also for certain mission-critical elements of the infrastructure to provide a high-level control that you really can't get from a pure virtual machine based cloud," Quan said.

Posted by Jeffrey Schwartz on 01/17/2014 at 3:35 PM


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