IBM is betting big on the next emerging cloud market -- the “hybrid” multicloud.
That’s a computing environment that combines multiple cloud providers and clouds—public, private, software-as-a-service.
And that’s why the technology giant is paying bucks to acquire Red Hat. The open source technology company will bring to IBM an innovative hybrid cloud platform, and a vast open source developer community.
IBM’s strategy begins with the premise that most companies view the cloud opportunity as incorporating their on-premises facilities, private clouds, and public clouds. "Working with thousands of enterprises across the world, IBM knows that a 'one-cloud-fits-all approach doesn't work," says Steve Robinson, General Manager, IBM Cloud Labs. "Instead, we are seeing clients take a hybrid multicloud approach that allows them to choose multiple cloud providers and clouds—a mix of public, private, software-as-a-service—that best meet their different needs. This gives them the open capabilities, security and flexibility to migrate critical workloads to the cloud, but also ensures they can tap into new innovative services such as AI, blockchain and analytics."
“This is not an unusual move,” Michael Brook, CTO and Co-founder of Pitchly. “IBM is in the AI/Machine Learning race with Microsoft& AWS,” Brook. “While IBM took the branding lead with Watson, they have lagged behind in transitioning to a cloud model. You should expect announcements soon of Watson-enabled RedHat applications.”
IBM’s bet on hybrid cloud comes at a time the company is trying to reverse a prolonged decline in revenues and profit margins that has Wall Street fleeing its stock.
Will the bet pay off? It depends on a couple of things. One of them is the validity of IBM’s premise. Is the cloud market really moving from “public” to hybrid?
Some analysts think so. Stephen Elliot, Program Vice President, IDC, is one of them. "The old idea that everything would move to the public cloud never happened," says Elliot. "Instead, the cloud market has evolved to meet the needs of clients who want to maintain on-premises systems while tapping a multitude of cloud platforms and vendors. The challenge for this approach is integration. Many IT companies have been talking about multicloud, but to date the user experience has been fragmented. IT and business executives are looking for multicloud capabilities that reduce the risks, and deliver more automation throughout their cloud journeys."
Roy Illsley, analyst, at Ovum, agrees. "Cloud computing is at a major inflection point in its evolution," he says. "While 20% of business processes have already moved to the cloud, 80% of mission-critical workloads and sensitive data are still running on on-premises business systems because of performance and regulatory requirements. However, in 2019 the percentage of these workloads running in the cloud will increase to over 40% and we anticipate that in the coming years enterprise clients will move to multicloud systems that cater for a broad variety of business and IT needs."
Another thing that will determine whether IBM’s bet will succeed is the size of the multicloud market. How big is it? IBM estimates it to be $1 trillion by 2020 while Statista estimates the market to be a fraction of that, $91.74 billion.
Then there’s the question whether IBM is well-positioned to seize the opportunity. Michael Brook is skeptical. “IBM is trying to have their cake and eat it too. Appeal to the broader cloud-based community, but also extinguish a fear among large and midsize enterprises that are hesitant to move to the cloud: security. The “IBM” brand gives IBM a high amount of leverage in this particular market, but functionally, it won't take much for them to compete on support. Most cloud providers offer “Infrastructure as a Service” that does little in the way of ensuring a company's enterprise operations are secure. That risk is off-loaded onto the customer.”
Still, Brook thinks that “IBM can find a place in the enterprise market quickly if they focus on enterprise support. Microsoft is also looked upon fondly by the enterprise, but IBM's move to acquire Red Hat has placed them firmly in the open-source camp.”
In the end, only markets can tell whether IBM’s bet on a technology trend will work this time around.
Wall Street is still waiting!
