The week in cloud
The past few weeks were not great for IBM but they did not bring the bloodbath — 110,000 job cuts or about 26 percent of total headcount — predicted by one reporter.
As for the round of layoffs that did kick off, [company]IBM[/company] wasn’t officially forthcoming about the number. One insider who requested anonymity said a “few thousand” workers were affected, with costs covered by a previously announced $600 million restructuring charge. And, The [email protected], a union-affiliated advocacy group for IBM workers, put the tally at 5,000 as of late last week. In a January 26 research note, Sanford Bernstein analyst Toni Sacconaghi estimated that the $600 million charge would cover a layoff of about 8,000 people. That’s not nothing, but it’s also not anywhere near 26 percent of IBM’s workforce.
The problem is no one thinks this will be the end of cuts at IBM, which has thus far managed to avoid the sweeping layoffs HP, for example, has endured over the past few years. And, as political analysts would say, the optics were bad — as long-time IBMers were getting the boot, CEO Ginni Rometty was getting a raise (and a bonus.)
On the bright side, IBM last week said it won a big cloud computing deal with Marriott International. Details were scant but a spokesman said this is a three-year contract on which major rivals, including [company]Amazon[/company] Web Services (AWS), [company]Microsoft[/company] and [company]Oracle[/company] also bid. (I’ve asked those three companies for comment and will update this post as needed.) Update: Oracle and Microsoft declined to comment.
Here’s the thing about IBM: It competes with an array of competitors including old IT adversaries like HP, Oracle and Microsoft but more importantly it faces AWS, which has set its sights on the sorts of enterprise workloads that are IBM’s bread and butter. And AWS is not used to the sorts of enterprise margins once enjoyed by IBM (although I would note that people who think AWS is unprofitable are mistaken.)
But, what’s particularly concerning to some IBM watchers (raising hand here) is that the company is known for buying its way into new businesses, as it did with SoftLayer two years ago, then slowly sucking the new company into the overall IBM borg. Sometimes that works fine. But my feeling all along vis-a-vis SoftLayer was that IBM needed the smaller company’s nimbler startup mentality and non-IBM worldview almost as much as it needed its technology.
Here’s what I wrote when the acquisition was announced in June 2013.
IBM is a big, important company, but its ability to turn out innovative stuff has been constrained by a hairball of legacy technologies. The question now is whether it will take what is good about SoftLayer and infuse that into the rest of the IBM cloud (one hopes!) or muddies what is great about SoftLayer. And, to IBM’s point, we are still early in the cloud adoption cycle and the stakes are huge.
So even though it’s normal for startup execs to fly the coop within a year or so of selling their baby to a big company, it is still concerning that a chunk of the SoftLayer brain trust has already left the building — co-founder and Chief Scientist Nathan Day left IBM/SoftLayer last April, for example. Former CTO Duke Skarda apparently left late last year although his LinkedIN profile is ambiguous. And co-founder and former CEO Lance Crosby left recently; Crosby was expected to stay until at least July, which will be the second anniversary of the acquisition closing. Those who hoped for a shake up to the IBM way wanted to see a SoftLayer person — or perhaps some other relative newcomer — lead the cloud charge. That is not going to happen.
VMware’s Bill Fathers: Businesses want a business-focused cloud
When it comes to enterprise workloads, another company IBM competes with is [company]VMware[/company]. On this week’s Structure Show, VMware’s cloud EVP and GM Bill Fathers didn’t pull any punches. In a world where many people equate cloud computing with AWS, Fathers is an unrepentant critic, saying that big companies are not convinced that they can run hybrid clouds in conjunction with AWS. He cites Harley Davidson as an example of a customer which tried to go with AWS for a new application and ended up coming to VMware.
Harley Davidson created a front-end iPad app for its CRM systems so dealers could check inventories. “They tried to do it on Amazon but physically could not connect it to their existing Oracle database of record from a networking perspective and they gave up,” Fathers said. “We used NSX [VMware network virtualization] to craft a connection from their on premises environment to vCloud Air and integrated it back to applications living on premises.”
Then the money quote aka fighting words:
“I am not spending a second working out how you solve what I think is an unsolvable problem of a client who’s marooned an application in AWS and is desperately trying to get it connected securely back to an on-premises app.”
(Send cards and letters to VMware please, but also feel free comment below.)
But there’s far more. Father’s guest segment starts at about 12:30 in.
Hosts: Barb Darrow and Derrick Harris.