Mark Loughridge is really proud that IBM’s cloud business grew 80 percent year over year. On Tuesday, Loughridge, IBM’s CFO, trotted out that stat repeatedly on the company’s fourth quarter earnings call – although he never actually provided the revenue number. He also gave shout-outs to business analytics, the Smarter Planet initiative and the good old-fashioned mainframe as other bright spots on IBM’s roster.
So cloud is growing great. But exactly how is IBM defining its cloud revenue?
Some flows from sales of IBM’s SmartCloud Enterprise public cloud and an array of private clouds that the company manages for business customers. SmartCloud itself draws on other pieces pulled from the IBM overall software lineup including Tivoli provisioning and orchestration capabilities, some elements of WebSphere, and some development tooling from Rational Systems, according to an IBM spokeswoman. Sales of IBM’s new PureSystems converged hardware into cloud scenarios also gets counted.
And then there’s all the ancillary services that go into implementing and supporting cloud deployments at customers. As is usually the case, IBM wraps up all its hardware and software in a bunch of lucrative services. But other than those tidbits, IBM doesn’t really spell out what’s cloud and what’s not.
IBM is hardly alone in reporting murky cloud numbers. Amazon lumps revenue from Amazon Web Services into “other.” In September, Oracle started breaking out cloud revenue, although it appears to lump it in with new software license sales overall, so that’s a little confusing.
IBM wants to move to a “higher quality” revenue stream based on the big three axes of analytics, cloud and Smarter Planet. And, Loughridge said it is well on its way to hitting the 2015 $20.00 per share earnings target set two years ago.
Folks are watching this transition carefully. When Ginny Rometty took over as IBM CEO last year, she was expected to continue down her predecessor’s path of moving more into cloud services and analytics. She’s continued to spend on mobility, cloud and analytics acquisitions — with IBM buying companies like Varicent, Kenexa, Worklight, and Vivissimo in the past year. But the payoff is not clear.
I’m not alone in thinking that the lack of clarity on cloud revenue by IT providers — from Amazon to legacy IT players like IBM, HP, Oracle — is purposeful. They don’t want to tip off competitors and — I would bet — the real cloud numbers are nowhere near as rosy as they would like us to think.