Why IBM Should Buy Sun: Cloud Services

This morning’s Wall Street Journal reports that IBM is in talks to buy Sun Microsystems for $6.5 billion in cash. The deal makes sense given Sun’s distressed share price, and because both companies appear to be pursuing cloud computing — the next big computing opportunity — in a similar manner. Let’s see how each plans to tackle the cloud.

Infrastructure: Sun announced today that it will offer cloud computing and cloud storage. IBM doesn’t have this, but in a chat yesterday, Drew Clark, director of strategy and corporate venture capital at IBM, told me that if IBM needed to offer infrastructure, it would. However, IBM doesn’t think it will be a high-value service. Buying rather than building it would make sense, especially if it can get it on the (relative) cheap.

Platform: Both IBM and Sun are working with startups to build out an open cloud computing platform to connect a variety of clouds, from Amazon’s to GoGrid’s to internal clouds. Sun is already working with RightScale and Zmanda to offer cloud services and management for its cloud and others. Clark outlined a similar strategy yesterday on behalf of IBM, and mentioned RightScale and Aptana, as other providers of the management layer for the cloud.

Software: Sun and IBM both have deals to provide their software inside other clouds, such as Amazon’s EC2. If a developer keeps using Solaris or DB2, no matter which cloud they’re using, that’s a win for IBM and Sun. It’s also a win for the infrastructure providers who get access to Solaris and DB2 customers who might have not used their service otherwise.

Business Process Services: I have no idea what Sun might offer here, but Clark has suggested that IBM will gain the most value from delivering services via the cloud, such as high performance computing. “We see cloud as a service, and IBM is a services company,” he said yesterday.

So, for $6.5 billion, IBM would get the underlying pieces to deliver those services and a partner that has made some strides in developing open standards and governance measures for the cloud (Sun even has a chief governance officer for the cloud). Freedom to move data around and a proven concern for security will appeal to IBM’s enterprise customers.

Outside of the cloud, IBM and Sun both offer corporate hardware that can be built using non-Intel hardware, such as Sparc chips from Sun or Cell and PowerPC chips from IBM. The biggest issues will likely come from Sun’s relaxed culture meeting IBM’s suit-and-tie atmosphere. But if IBM can harness the ideas that come out of Sun’s engineers and bring them to execution, the deal would benefit IBM greatly. I wonder if Johnathan Schwartz, Sun’s CEO and president, would have to cut his hair?


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