Ex-Employee Divulges Shortfalls In IBM's Cloud Business

CowboyRobot writes "IBM's cloud computing revenues are smaller and less 'cloud-intensive' than customers and Wall Street analysts might think. That's the claim of a former IBM employee who backed up more than a few of his/her critical assessments of the vendor's cloud prowess with a number of confidential internal documents shared with InformationWeek. The documents put IBM's 2012 cloud-related revenue at $2.26 billion, a figure the company has declined to disclose publicly. In 2011, IBM did issue a roadmap that set forth the goal of reaching $7 billion in annual cloud revenue by 2015, so the much lower figure raises doubts about whether the company is on track. Noteworthy is data that shows that roughly half of current IBM cloud revenues are tied to hardware, in many cases systems used to run customers' private clouds or partner clouds."

Comments

Oh no!

[Anonymous Coward]

Only two billion dollars a year!

Most businesses would kill to have that kind of revenue.

Re:Oh no!

[swan5566]

Except for those who are are already making much more than that.

Re:Oh no!

[Anonymous Coward]

Ha, that was my thought when it was revealed that Microsoft had sold $900 Million!!! worth of surface tablets. Which was a measly 1% of the market.

Oh, no they sold almost a billion dollars worth of product and that was a _FAILURE_. Gaining 1% market share the quarter in an established market with multiple players is actually pretty good. The problem of course is that they thought they were going to march in an take 30% with just a few hundred million in advertising. You have to wonder what the MBA's were thinking... Oh wait, that is probably the problem a bunch of MBA's that haven't actually started/grown a business.

How many of those Chinese android manufactures sold a billion dollars worth of product? I'm betting most of them are happy if they hit 10 million.

Re:Oh no!

[wjcofkc]

What planet are you from? MS wrote off $900 million in surface tablets. They didn't sell them. There are about 6 million units collecting dust in a warehouse right now.

Re:Oh no!

[NatasRevol]

Microsoft had sold $900 Million!!! worth of surface tablets. Which was a measly 1% of the market.

Or 100% of Microsoft's market share.

Re:Oh no!

[Tablizer]

Don't give 'em ideas

Re:Oh no!

[Anonymous Coward]

You should recheck your figures, they also sold nearly $900 million in tablets.

http://macdailynews.com/2013/07/30/microsofts-surface-sales-figures-are-in-and-theyre-a-total-disaster/

But, yes they wrote off $900 million too, as well as hiding another $900 million in advertising.

So its pretty much a disaster for Microsoft, but that assumes the advertising helped sales at all. More than likely the majority of the sales were surface pro's being purchased by people looking for a lightweight ultrabook alternatives.

Either way, a new entrant appeared in an existing market with two established players, and gained 1% market share... Not really that bad. Its bad only if you have designed your business around controlling 50% or more. Even if they need 10% to get the ball rolling, they could buy that by running promo deals, or contests for kids.

Cloud Often = Same Old Datacenter

[xxxJonBoyxxx]

>> roughly half of current IBM cloud revenues are tied to hardware, in many cases systems used to run customers' private clouds or partner clouds.

Does this really surprise anyone here? Isn't that the whole point behind "private cloud" to get top management derps to check the "cloud" box without actually changing how the existing datacenter and applications are run?

Re:Cloud Often = Same Old Datacenter

[Nyder]

>> roughly half of current IBM cloud revenues are tied to hardware, in many cases systems used to run customers' private clouds or partner clouds.

Does this really surprise anyone here? Isn't that the whole point behind "private cloud" to get top management derps to check the "cloud" box without actually changing how the existing datacenter and applications are run?

I miss the day when clouds were called servers...

Re:Cloud Often = Same Old Datacenter

[Anonymous Coward]

You publicly disclose this 0-day marketing exploit? Traitor!

Re:Cloud Often = Same Old Datacenter

[Frobnicator]

No, it shouldn't surprise the geeks.

For geeks, "the cloud" simply means remote computers. The "cloud" referencing the icon for the Internet that has been in use since the early 1970s in network diagrams.

For non-geeks, "the cloud" is a mystical source of infinite storage and infinite computing power, harnessed by the magic of the Interwebs.

Re:Cloud Often = Same Old Datacenter

[Zak3056]

For geeks, "the cloud" simply means remote computers. The "cloud" referencing the icon for the Internet that has been in use since the early 1970s in network diagrams.

For non-geeks, "the cloud" is a mystical source of infinite storage and infinite computing power, harnessed by the magic of the Interwebs.

You've just described the relationship between a residential electrical customer and the electrical utility (the end user doesn't see the turbines, he just knows that the magic wall outlet makes his TV work). Which, all things being equal, is a pretty good comparison, given that "the cloud" is really just a reversion to the old time sharing model of computing. We geeks supply the GeeBees and the WiFis, and the rest of the world plays Angry Birds, secure in the knowledge that they are technologically savvy because they "understand" "the cloud."

Re:Cloud Often = Same Old Datacenter

[hutsell]

I miss the day when clouds were called servers...

I also miss the day when the client-server architecture was considered better than the dumb terminal-mainframe model, a variation of that model now being being marketed as the cloud.

Re:Cloud Often = Same Old Datacenter

[Anonymous Coward]

Just wait another 5 years. Things will be swinging back in that direction again by then.

Re:Cloud Often = Same Old Datacenter

[Anonymous Coward]

Just wait another 5 years. Things will be swinging back in that direction again by then.

Only if it's done before the government decrees it's too much computing power for suspects ...err, citizens. " Why? Are you doing something we should know about? Since everything is online now, you only need at most a tablet for shopping, making purchase and consuming premium content."

Re:Cloud Often = Same Old Datacenter

[dowens81625]

I have another Magic utility - My kitchen sink not only does it magically produces cold water but hot water too..... And another make hole that makes it disappear.

Ever wonder what percentage of America would survive an extended blackout period if we were to shutoff Electricity, Water, and Gas Utilities for just 1 year or even 3 months say December through February. Then turn everything back on and count the bodies of those that couldn't figure how to live.

Fallout...

[Anonymous Coward]

Didn't take long for the second quarter rash of layoffs to produce some fallout. I suspect there will be more former IBMers coming out with internal docs.

Somehow I smell Microsoft is behind this..

[Anonymous Coward]

no?

Re:Somehow I smell Microsoft is behind this..

[djupedal]

Nah....those wonks are still trying to get Wi-Fi to work. After all, they were last to the internet, so be patient.

Re:Somehow I smell Microsoft is behind this..

[Anonymous Coward]

Give them a break, it is hard to setup wifi under flying chairs.

Angry mob of IBM lawyers with pitchforks imminent

[mrbester]

"He / she's a whistleblower! Can we burn him / her?"

maybe...

[Charliemopps]

In 2011, IBM did issue a roadmap that set forth the goal of reaching $7 billion in annual cloud revenue by 2015

Is it possible that since 2011 when the cloud hype was at its peak, IBM like the rest of the world has realized that "the cloud" has some serious drawbacks and companies all over the world are pulling their assets out as fast as they can? Ironically today our entire Sales org was down for 2hrs because of some network hiccup 300 miles away from us cut off access to our "Cloud" based sales app. Per the vendor this was not an outage of course. The service was still up we just couldn't connect to it.

There is no IBM

[rsilvergun]

there's a bunch of sales reps and H1-B contractors gathered round an old name nobody remembers....

Re:There is no IBM

[Anonymous Coward]

You are correct good sir.

Re:There is no IBM

[Zeromous]

You make it sound as if everyone has been laid off from IBM and replaced with contractors. I'm sorry to tell you but it's just the positions that no longer provide value.

Re:There is no IBM

[Anonymous Coward]

From what I know of the situation (and I know a few guys that work there), your almost correct.

The problem is...how do you define value. To the current overlords in IBM, it's a matter of making numbers for the next quarter and helping to firm up the numbers for next year, so that they may in turn please their wall street overlords.

Their definition of value is purely monetary, and they need that value immediately. They're not as concerned with moving technology (or the technological community) forward....that's not the right kinda value to them anymore. There is only money.

Granted...money should be important to a business, but they're bending over for wall street.

Re:There is no IBM

[Zeromous]

I think if you took Wall Street out of the picture at any large public company, the result would still be the same. I've worked at a few large companies over the years and I've found that budget rules, and if you aren't growing the money isn't flowing at a very macro level. Entire product lines can be killed once they stop making money and this can have some scary effects. I would submit though, that it is often possible to be strategic in a market and still push technology forward. The problem is this is hard to replicate consistently! I'm sure we can all think of a few examples. ;)

Maybe if there were more philanthropically inclined capitalists with private companies more things would advance and money wouldn't drive every decision, but then private shareholders can be merciless in their own way.

Today, I said aloud in my cubicle as I watched the rocket liftoff/horizontal/landing, "Oh Elon, please give me a job!"

Re:There is no IBM

[Anonymous Coward]

Umm - how much does IBM spend on research? How many patents? I think those tend to be technology, right?

Re:There is no IBM

[Anonymous Coward]

That sounds like comcast!

Re:Angry mob of IBM lawyers with pitchforks immine

[Anonymous Coward]

Please explain how this is "whistleblowing". Was IBM doing something illegal? Were they cooking their books? However, this guys walks out with confidential material and gives them to the paper. That sounds more like the action of a disgruntled worker. If I was his coworker I would be worried about sharing with him, because I don't think I could trust him.

Snowden's got nothing on this guy...

[HockeyPuck]

This guy may be ex-IBM, but IBM's lawyers are gonna sue this guy into oblivion...

That's no moon... that's Armonk...

The coud

[Mister Liberty]

is hot air.

In short..

[Anonymous Coward]

The word 'cloud' really doesn't mean anything specific. To use 'cloud' as an indicator of how you invest real cash without further qualification is absolutely foolish.

This is not an IBM exclusive issue.

All outsorucing..

[Anonymous Coward]

public cloud like all IT outsorucing is going to lead to pain.

outsourcing upfront costs are because the vendor is willing to go to lows that *you* aren't willing to go to. If you have the will to endure continual hardware failure, long outages, terrible service, you can do better than the provider.

Exception being small business, where economies of scale are against you. But larger companies quickly get into territory where 'public cloud' is nonsense.

if you cannot build, buy

[lophophore]

IBM bought SoftLayer, one of the larger Cloud Computing providers in the US. That will contribute to their revenue quite a bit.

The employee who disclosed confidential documents better lawyer up, IBM is known for hiring the sharpest-toothed lawyers money can buy.

Re:if you cannot build, buy

[Anonymous Coward]

IBM bought SoftLayer, one of the larger Cloud Computing providers in the US. That will contribute to their revenue quite a bit.

The employee who disclosed confidential documents better lawyer up, IBM is known for hiring the sharpest-toothed lawyers money can buy.

IBM had to buy SoftLayer because their in-house cloud solution sucked. IBM's Smart Cloud solution was really just a dust cloud.

IBM brings in a bunch of old salesmen, like mainframer old, to market their Smart Cloud solution. IBM basically took all their old products for managing datacenter components and branded them as Smart Cloud. I know they had some OpenStack stuff in there, but they never wanted to talk much about it.

SoftLayer is very cool. I just hope IBM doesn't screw it up.

What the hell are you talking about?

[rsilvergun]

IBM was pretty public about laying off all the non-Sales positions and moving anything to do with technology and engineering overseas or giving it to Visa applicants. It was a cornerstone of the strategy. They're a 'consulting' firm now. They sell commodity services using cheap foreign labor paid at subsistence wages.

I suppose if you mean that the sales people are the only ones that add value you're right, in your own fashion. But if you feel that way what the heck are you doing on /.? Astroturfing?

Re:What the hell are you talking about?

[H0p313ss]

laying off all the non-Sales positions

That's not even close to the truth, there are still thousands of Americans doing development and support in the United States, the Littleton, Austin, Beaverton and Raleigh labs are still going strong. There are more around the world, but the population of the united states is less than 5% of the world.

Re:What the hell are you talking about?

[Anonymous Coward]

I've worked @ the Austin location. There are whole groups that no longer exist there, having been moved overseas. There are other groups where overseas has been moved here... The plant was once a sprawling arrangement of building spanning a few square miles, everything from manufacturing, sales, and engineering. Now its mostly a shopping mall with one remaining building on one side of the street, and a half dozen office buildings on the other side. A few years ago they moved the Tivoli people into the complex but other than that the workforce trend is a nice downward curve.

The only bright spot seems to be the POWER processor/hardware engineering group. That group seems to be fairly resilient...

You insensitive cloud!

[Tablizer]

smaller and less 'cloud-intensive'

I am cloud-intensive, you insensitive clod!

NSA

[Anonymous Coward]

1. NSA
2. NSA
3. NSA

Really you'd have to be dumb