Ginni,

Last week, we presented a counterpoint to the recent negative press on IBM. I’ll take it a step further. I believe that IBM is actually the vendor that is closest to providing “Enterprise Cloud.” But what is sold, how it is sold, and the vision of the end result still needs a lot of work.

I’ve both competed against IBM at EMC and worked with IBM as a partner. When competing, our fear was getting maneuvered by IBM out of the deal when they went right to the CxO. When partnering with IBM, I was frankly surprised and disappointed at the fumbling. As a shareholder, I would have been livid.

• Because of internal turf issues, IBM reps got stuck on whether to propose product, services, or cloud instead of focusing on what the customer wanted
• Because differentiated core technologies like GPFS were positioned as products instead of part of a strategy and delivery model, they lost in feature-to-feature comparisons
• There were repeatedly missed opportunities for leadership, where the customer was looking for a new vision of computing, blending attributes of traditional enterprise technology with the cloud – instead, the customer got generic positioning (or worse, marketing-speak)

I have three recommendations to address these issues.

Choose a core business model and profit center

Everyone at IBM needs to understand the core way IBM makes money. Everything else is leverage.

Fortunately, all the other vendors have only learned to make money from one source: AWS (self-service infrastructure), Google (advertising), EMC (hard drives), HP (ink cartridges). IBM is the only major technology vendor that has actually learned how to profit from multiple streams: IBM is the largest technology consultant, one of the biggest providers of professional services around open source, one of the largest managed hosting and SaaS vendors, and one of the largest sellers of packaged software and hardware appliances.

However, IBM needs to focus on the business model and profit center that its competitors cannot realize: the technology consulting (from strategy to architecture to operations) and full range of technology delivery models (fully managed to self-service SaaS) necessary for Enterprises to transition to modern computing. Leave the product sales of packaged applications and appliances to the customers that really want to figure out the future themselves, and to the vendors that are built to sell to them. For the customers that realize the challenges are too big to handle alone, IBM can be the objective guide to help the customer succeed, deploying whatever software, hardware, or service makes sense for the job.

Leverage core technologies as building blocks for delivery models, not products

Some in the media are confusing the entire hardware business with undifferentiated commodity. While it’s true that IBM needed to divest “packaging” like rack mount servers, core IP like chip design is very different. As leverage of commodity x86 compute reaches its end, there is opportunity for another generational leap in improved hardware and interfaces to the processing and memory within the hardware. That is what Apple saw with P.A. Semi, EMC sees with DSSD, and Amazon is exploring with ARM. IBM already has expertise in chip design and manufacturing. Launching OpenPower with partners like Google is a good first step, but IBM needs to double down to either take share from Intel broadly, or at very least, benefit from the core technology within their own delivery infrastructure.

The same building block philosophy is true on the software side. Customers today are looking for a gamut of IT service models that require tremendous scale and flexibility on the part of the provider. For example, many of the largest enterprises want to move data to a cloud service, but will continue to require on-premises storage as well for certain data sets and applications. This is where complex technologies like IBM’s GPFS (a clustered file system), ACE (data distribution and migration software), and SCSA (self-service storage provisioning) should shine, but are mis-positioned as products. A mixed on-premises, off-premises model with different storage interfaces, different tiers, different provisioning processes, and an overall governance structure is not something most enterprises will want to figure out themselves. Using its differentiated storage software components, IBM can easily and successfully position a managed service, rather than going head-to-head with other storage vendors on product features and pricing.

IBM has leveraged SOA technologies like Enterprise Service Buses in the past to embed themselves into a whole generation of enterprise infrastructures. Cloud-oriented software requires a similar strategy and a re-examination of the IBM portfolio.

It’s time to lead – customers are begging for a coherent technology strategy

It’s not just about the cloud﹣fundamental technology re-architecture is at hand. Many of the things that make the cloud attractive to software vendors (lightweight programming languages, cross-platform UI frameworks, web-friendly APIs, dynamic scaling), also apply to enterprises themselves. As the traditional enterprise software model comes under attack, custom software development has again become a viable alternative for highly targeted solutions, while SaaS fills the need for quicker, more end user driven solutions. A range of technology delivery models must be available for different workloads, data governance, and cost structures. A new core of processing, storage, and interfaces is required to scale and maintain cost advantage in the Game of Clouds. Only a handful of customers can navigate the scale of transformation required. Everyone else needs a leader to guide them.

The end result is a new configuration of the IBM business:

 

Can AWS, Google, HP, Dell, EMC/VMware/VCE/LenovoEMC/Pivotal coherently cover the gamut of solutions and transitions that a Global 500 company has to make across their business? Help make the correct service delivery, persistence, database, middleware, and presentation choices and evolve them over time? Help the customer properly evaluate, deliver, and operate the solution from both a technical and business context? No way.

It’s no small undertaking, but the modern technology infrastructure will be bigger and richer than either the mainframe and client/server eras. IBM has the assets to lead. Don’t let it slip away.

Regards,

Leo Leung

 

Photo “Letters” by Paul Simpson