IBM to Acquire SoftLayer
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1 IBM to Acquire SoftLayer How this May Change the Enterprise Cloud Services Landscape and What it Means to Customers Perspective 2012 Neovise, LLC. All Rights Reserved. Report
2 Introduction On June 4 th, 2013, IBM announced its definitive agreement to acquire SoftLayer Technologies, Inc., the world's largest privately held cloud computing infrastructure provider. The acquisition denotes a massive expansion of IBM s cloud services and represents a significant disruption to the enterprise cloud services market. The acquisition denotes a massive expansion of IBM s cloud services and represents a significant disruption to the enterprise cloud services market. SoftLayer currently serves approximately 21,000 customers with a cloud infrastructure that spans 13 data centers on three continents. The addition of these data centers and customers to IBM s 10 cloud computing centers across five continents will complement IBM s existing SmartCloud portfolio and give enterprises global access to a greater range of cloud services. IBM will leverage SoftLayer s technical strengths, including software definable environments, programmable interfaces, and customizable hardware configurations, to provide clients with higher levels of flexibility, automation and control over deployments. These combined capabilities will enhance support for public, private and hybrid architectures. IBM has also announced the formation of a new Cloud Services division, which will follow the closing of the SoftLayer acquisition. The new division will combine SoftLayer and IBM SmartCloud to provide more choices to clients, ISVs, channel partners and technology partners. Market Context Two basic types of public, infrastructure as a service (IaaS) clouds have emerged: commodity clouds and enterprise clouds. As their names suggest, commodity clouds are typically built with commodity-class infrastructure and enterprise clouds are generally built with enterprise-class infrastructure. However, there are other important distinctions beyond the brand or grade of underlying hardware. The differences between enterprise and commodity clouds, as well as their respective advantages, have frequently been debated. Some camps claim commodity clouds are the single best approach to IaaS, while others claim the same for enterprise clouds. In reality there is room for both approaches as well as some in-between approaches; and more often, businesses are looking for solutions that utilize aspects of both Neovise, LLC. All Rights Reserved. Page 1
3 One specific attribute debated by the commodity and enterprise camps is reliability. The commodity cloud camp says that reliability in the cloud comes from applications, not the infrastructure. They suggest that two or three nines of availability from the cloud infrastructure is sufficient since applications can be distributed across multiple availability zones in order to reach application availability of three or four nines or more. While it is true that new applications can be designed this way, it is often too expensive or otherwise impractical to modify existing applications to provide their own reliability. It is often too expensive or otherwise impractical to modify existing applications to provide their own reliability. Both commodity and enterprise clouds may provide facilities for redundancy such as multiple availability zones. However, the vast majority of existing applications have not been designed with this in mind. Rather than missing out on all the advantages of cloud computing for these applications, enterprises demand clouds that deliver reliability without requiring application redesign. Enterprise clouds not only use enterprise-class hardware that tends to be more reliable, they often have a greater focus on overall reliability backed by more stringent service-level agreements (SLA). While some features of commodity clouds are certainly advantageous for organizations looking to build new scale-out applications, a high percentage of existing enterprise applications will not operate as desired in a commodity cloud. For example, recent performance testing and analysis completed by Neovise and partner Cloud Spectator shows that commodity clouds often underperform enterprise options in a number of areas, including disk, network and server performance. Even when commodity clouds are capable of achieving high peak performance, they often fall short in delivering consistent performance. Choosing between enterprise and commodity clouds should be based on application requirements rather than any predetermined bias toward one type of cloud or another. At the same time, cloud selection does not have to be an either/or proposition. A given large organization is likely to have a mix of applications, including some that will run well on a commodity cloud and others that require an enterprise cloud. The question that enterprise cloud customers should be asking themselves is: How can we choose the right mix of clouds that, together, meet the requirements of our application portfolio? 2013 Neovise, LLC. All Rights Reserved. Page 2
4 SoftLayer With the announced acquisition of SoftLayer, IBM has taken the next step toward providing fullspectrum services for its cloud customers. The combined capabilities of these companies will make it easier and faster for enterprises around the world to benefit from cloud computing. IBM and SoftLayer customers should see a wealth of benefits, including: A broader choice of cloud offerings, providing maximum flexibility: o Public, private and hybrid architectures o Bare metal and virtual infrastructures o Managed services and self-service environments o Portal and API access o OpenStack and CloudStack-based cloud services o Enterprise and commodity-style clouds A greater degree of freedom when choosing what workloads and applications belong on which type of cloud, allowing them to tailor their privacy, data security and overall computing performance to their specific needs Expanded availability of international public cloud services, with SoftLayer s 13 data centers more than doubling IBM s cloud services data center presence worldwide A larger ecosystem of products, solutions, services and partners to work with, including IBM software as a service (SaaS) offerings While the benefits of acquiring SoftLayer should serve IBM s desire for a greater share of the enterprise-cloud market and more, challenges may arise as the merger moves forward: SoftLayer employees are highly motivated by their company s culture and work environment. IBM must use care to avoid disrupting this environment and associated motivation while integrating SoftLayer. SoftLayer has emphasized automation and value in its offerings. IBM must be cautious to avoid disenchanting existing SoftLayer customers, including many flagship gaming providers, when considering changes to pricing and other service attributes. IBM has a fairly solid track record of improving rather than damaging acquired companies. The unique challenges of the SoftLayer acquisition appear to be manageable Neovise, LLC. All Rights Reserved. Page 3
5 Neovise Perspective SoftLayer represents an entirely different type of cloud platform than others in the industry, leading to the possibility that IBM will make a dramatic change to the enterprise cloud service landscape. To understand this possibility, first consider a typical cloud platform as illustrated in Figure 1 below. Figure 1. A Typical Cloud Platform As suggested in Figure 1, most public cloud services simply present virtual machines or virtual servers to cloud customers. They do not directly expose the underlying physical servers in the cloud to individual cloud customers, also known as tenants. However, as SoftLayer has proven, many enterprises want more than virtual servers. They want direct access to bare-metal servers in order to squeeze out every drop of performance for databases as well as scale-up applications. They also want these physical and virtual machines to work together in a common cloud environment, with the same programmatic control and automation. This is exactly what SoftLayer delivers. While automated bare-metal cloud capabilities as well as other SoftLayer differentiators have been instrumental in the company s success, IBM has a chance to take enterprise cloud to a new level. Please see Figure 2 below to better understand the SoftLayer cloud platform Neovise, LLC. All Rights Reserved. Page 4
6 Figure 2. The SoftLayer Cloud Platform SoftLayer not only presents bare-metal and virtual machines to customers, it also presents additional clouds to them. In other SoftLayer presents a cloud words, SoftLayer presents a cloud of clouds to its customers. of clouds to its customers. Because of the extremely flexible and versatile nature of the SoftLayer platform, IBM does not have to pick just one type of cloud to deliver to customers. If it chooses, it can deliver an enterprise-class CloudStack cloud and a commodity-class OpenStack cloud, all to a single customer. It can also deliver, simultaneously to the same customer, a highly customized virtual private cloud with whatever infrastructure configuration the customer chooses. IBM can also present bare metal to the many enterprises that want to access servers in that form, while keeping the elastic, pay-as-you-go model typically reserved for virtualizationonly clouds. Neovise believes this approach, if fully embraced by IBM, can represent a game changing disruption in the cloud services market, delivering enterprise customers vastly more flexibility than found in other public cloud offerings. This meta-platform also creates new opportunities for IBM to more efficiently run existing outsourced and managed services workloads from its enterprise customers. Neovise also expects IBM to make much of its middleware software 2013 Neovise, LLC. All Rights Reserved. Page 5
7 portfolio available to run as a service on the SoftLayer platform and accessible to developers and applications regardless of which cloud service they choose from IBM. Based on research completed by Neovise in 2013, 74% of US-based businesses that use cloud computing are using more than one type of cloud, including public, private and hybrid clouds. Enterprise organizations are even more likely to use multiple clouds and have significantly more stringent requirements for their cloud service providers. They demand high performance, consistent performance, reliability, availability, security, guaranteed service levels and more. Yet they also have applications with conflicting requirements when compared to other applications in their portfolio. Thus they need multiple clouds, each with unique attributes. This meta-platform approach enabled by SoftLayer creates new opportunities for IBM throughout its hardware, software and services organizations. It also opens the door to cloud computing for many more enterprises that want a single partner who can deliver flexibility and choice across most every aspect of IaaS. With SoftLayer, IBM is now positioned to deliver on the broadest set of enterprise cloud computing requirements across the industry with multiple clouds on a common platform. IBM is now positioned to deliver on the broadest set of enterprise cloud computing requirements across the industry Neovise, LLC. All Rights Reserved. Page 6
8 About Neovise Based on independent research and analysis, Neovise delivers essential knowledge and guidance to cloud-related technology vendors, service providers and systems integrators, as well as business and IT organizations that purchase and use cloud-related services and technology. Our offerings include research, advisory and collateral development services that help our customers and their customers make optimal decisions and formulate winning strategies. Research. Analyze. Neovise. For more information, visit Neovise, LLC. All Rights Reserved.
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