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Inside IBM's $7-Billion Cloud-Solutions Business: 4 Great Digital-Transformation Stories

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IBM

(Note: After an award-winning career in the media business covering the tech industry, Bob Evans was VP of Strategic Communications at SAP in 2011, and Chief Communications Officer at Oracle from 2012 to 2016. He now runs his own firm, Evans Strategic Communications LLC.)

CLOUD WARS -- Since IBM began breaking out its trailing-12-month cloud revenue a couple of quarters ago, lots of folks around the tech industry have been shocked out of their boots to learn that 106-year-old IBM has a robust, deep, and fast-growing cloud-computing business with almost $16 billion in annual revenue.

As the inside-the-tech-bubble purists dig into that whopping number, they're fairly willing to swallow the fact that $8.8 billion of the $15.8 billion total comes from IBM's "as a Service" offerings: IaaS, PaaS, SaaS and also a category fairly unique to IBM called "Business Process as a Service."

But, those clipboard-cloud configurators wonder, where in the wide, wide world of sports does IBM's remaining $7 billion in cloud revenue come from?

Because surely, they insist, cloud computing was created to be various "as a service" offerings and can surely never be anything but "aaS" subsets, right?

What those narrow-minded theorists fail to comprehend, though, is that in our modern world of self-driving cars, 3D-printed houses, intelligent appliances, molecular medicine and even autonomous, "self-driving" databases, it is backward at best and absurd at worst to believe that a generational shift as profound and widespread and fast-growing as cloud computing would ever be confined to some early-stage and highly limited definitions.

But inside the tech bubble, those know-it-alls have convinced themselves that the tech industry is in some ways a reality unto itself, and that what those far-flung "customers" do or don't do with our precious IaaS and PaaS and SaaS is all just fun and games.

What nonsense!

So here's how IBM--#5 on my Cloud Wars Top 10 list as shown in nearby graphic--described that "other" $7 billion in cloud revenue in its Oct. 17 press release outlining its Q3 results: "...$7.0 billion for hardware, software and services to enable IBM clients to implement comprehensive cloud solutions."

Bob Evans

"Foul!" cry the purists. "That's not legitimate 'cloud' revenue—that's faux-cloud  cloud-washing non-cloud!" Yes, without ever knowing just what IBM's customers were doing and were getting in return for that whopping $7.0 billion in cloud revenue, the cloud intelligentsia were fully prepared to lock their blinders on tight and deny any possibility that the extraordinarily quick and deep uptake of cloud computing by businesses will lead to unexpected innovations, fresh approaches, brilliant breakthroughs, and an inevitable extension and expansion of the original concept and definition of cloud computing.

I'm reminded of my days as a cub reporter back in the days of the Civil War when I filed what I thought was a breakthrough story to my brilliant but crusty editor at Electronic News—I had just been hired to cover these newfangled things called "personal computers"—about a software application called VisiCalc that was causing businesspeople to buy Apple II computers just so they could run the VisiCalc spreadsheets.

"Evans," my editor said, "the big problem with this story is that it's about something that's just not tangible: software. This newspaper writes about real, tangible, products—high-tech products—and while I don't know what software is, what I do know is that it's not a product. So forget this non-story, and go find one about products."

The cloud didn't come into existence fully formed—hell, we've now got databases as a service and IBM's business-process as a service and all-kindsa-things as a service.

And what these four great IBM customers are doing to cloud-enable more and more of their existing technology, and to create cloud-compatible environments across increasing percentages of their digital estates, are simply pushing the boundaries of the cloud across new horizons, which after all is precisely the dynamic that has always driven the tech industry to become one of the most-influential and world-changing businesses the world has ever known.

So let's take a look at what American Airlines, Lloyds Banking Group, Dream Payments and AMB Sports and Entertainment are doing with this slice of IBM that I've chosen to call its "cloud-conversion factory."

AMB Sports and Entertainment

American Airlines: Eleven months ago, American picked IBM Cloud as the foundation for a massive cloud transformation that will eventually accelerate and simplify internal processes and allow its website to handle increasingly greater volumes of traffic and transactions. American, the world's largest airline, has begun the process of migrating a number of mission-critical apps to the IBM Cloud, including AA.com, its customer-facing mobile app, its global network of check-in kiosks, and its cargo-customer site.

For this project that IBM considers part of its $7-billion "cloud conversion" business, IBM is helping American create broad hybrid-cloud functionality that will eventually allow those customer-facing systems to run on the IBM Public Cloud while also ultimately building seamless connectivity between those systems and American's on-premises and legacy third-party systems.

When the transformation is complete, American wants to have its AA.com website, its global network of kiosks, and its mobile apps all supported by the same cloud-enabled system. Other benefits American is building with the help of IBM's "cloud conversion services":

  • Be able to instantly update flight schedules across all applications, giving customers on cancelled flights more options and more control for rebooking.
  • Security was a huge factor in the airline's selection process and the company felt IBM offered the best and most-secure public-cloud offering on the market. In addition, American wanted a partner that could handle the complexities of connecting 50+-year-old legacy applications to the cloud at enterprise scale.
  • Obtain full access to open-source technology and developers through Cloud Foundry, which IBM fully supports.
  • Begin to leverage IBM's "Garage Methodology" for rapidly creating apps via micro-services architecture.

Lloyds Banking Group. Four months ago, IBM signed a whopping $1.5-billion cloud deal with Lloyds to extend cloud capabilities across the business to boost efficiencies and trigger the more-rapid creation and rollout of digital offerings and services for customers. IBM said that Lloyds top priority for this deal is to increase its business agility, particularly in the areas of rolling out new digital products and services more quickly and to leverage new technologies more rapidly and with greater impact.

On the non-aaS ledger, the IBM Cloud services will be hosted in both Lloyds and IBM data centers in the UK, with IBM managing the application-migration services to the cloud. In turn, Lloyds will leverage those cloud services for both internal and external applications.

Dream Payments. A 3-year-old fintech company powering commerce and payment services across mobile devices and the Internet of things, Dream Payments is a radically different type of customer than either the venerable Lloyds or American Airlines. For both of those companies, IBM could leverage long-standing relationships and technology incumbency—but neither of those advantages were at play in any way with Dream Payments.

As high growth began to strain Dream's ability to scale with traditional systems, it decided to migrate to the IBM Cloud infrastructure in partnership with VMware Solutions, a combination that gave Dream the ability to meet the needs of its rapidly growing scale-up business.

Dream said one of the constraining factors of its old model was that when growth required it to expand its infrastructure, the company needed 3 months to procure, deliver and install hardware—a maddening amount of time for its customers in the dynamic and fast-changing financial-services sector. But with IBM Cloud, it can deploy and provision servers, switches and firewalls in days instead of months.

On top of that, the IBM deal allowed Dream to greatly accelerate pilot projects required for each of its prospects, and to reduce the cost for such essential projects due to the strict and unique security requirements for each.

AMB Sports and Entertainment. To deliver on the requirement from owner AMB that the new Atlanta Mercedes-Benz Stadium deliver an unparalleled fan experience, the brand-new facility had to be one of the most technologically advanced in the world, offering fans the following:

  • A giant "Halo Board" video screen ringing the ceiling and featuring 82,500 square feet of LED displays;
  • An on-premises data center and backup technology to store and manage the massive video files, animations, stats, near-real-time highlights and news updates projected onto the Halo Board;
  • Mobile ticketing and parking-pass purchasing; and
  • Food and beverage ordering and public transportation information.

The IBM Cloud will host and deliver three separate "IBM Fan Experience" applications (designed, by the way, by IBM iX), as well as essential operational applications for the stadium. In addition, IBM's created an enterprise backup service for both local and offsite backup to the IBM cloud with each location storing up to 50 terabytes of data, primarily for feeding the massive Halo Board.

Again, IBM is leveraging all of its wide-ranging capabilities to deliver not only cloud services but cloud-enhanced traditional services and capabilities to the facility. In addition to workloads running in the public cloud, IBM's created an onsite data center for additional processing and storage, and by using fiber instead of copper in that data center, the stadium should use 30% less power than normal.

Could any of the cloud-only vendors have done even some of this crossover work, let alone all of it? Absolutely not—and IBM might be the only company on Earth that can span all of those traditional and cloud technologies and skills.

And that's not only why it has a $7-billion "cloud conversion factory" business (my term, not IBM's), but also why IBM is helping to completely redefine what "the cloud" is here in 2017 going into 2018, and to completely redefine what customers can and should expect from their tech vendors.

As the Cloud Wars get more intense and the stakes rise, #5 IBM is looking better and better. And the wonky cloud purists are looking more and more silly.

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