Amazon AWS vs IBM SoftLayer: Why IBM cannot dominate Amazon as a Cloud Computing Services Provider?

Amazon AWS vs IBM SoftLayer: Why IBM cannot dominate Amazon as a Cloud Computing Services Provider?

Can IBM SoftLayer ever dominate Amazon AWS? Today, Amazon is the biggest Cloud Computing Services provider. Amazon AWS already has a number of large enterprises running production workloads on it, and the trend is accelerating. IBM is unquestionably a strong brand with deep customer relationships — it exerts a magnetism for its customers that competitors like HP and Dell don’t come anywhere near to matching. 

Why IBM SoftLayer cannot dominate Amazon AWS?

1. Is IBM SoftLayer worthy?

IBM's own cloud did not work, and now it has thrown out that strategy and is now pinning its hopes on SoftLayer, which was never a credible AWS competitor to begin with. IBM acquired SoftLayer last year and announced addition of more than 1,500 customers just after three months of its acquisition of SoftLayer.  It certainly helps immensely that SoftLayer is a more compelling solution than SCE, but customers continue to acknowledge that they don’t necessarily feel they’re buying the best solution or the best technology, but they are getting something that is good enough from a vendor that they trust. SoftLayer has always competed to some degree against AWS (philosophically, both companies have an intense focus on automation, and SoftLayer’s bare-metal architecture is optimal for certain types of use cases), and IBM SoftLayer will as well.

2. Amazon is not limited by the traditional IT constraints

The fact that Amazon does not have a long history in enterprise IT is precisely why it's the preferred public cloud solution. It doesn't have legacy baggage, so is not limited by the traditional constraints we place on IT and IT technology providers such as IBM. Amazon AWS is also very disruptive to traditional enterprise vendors because Amazon doesn't care all that much about profit margins. Amazon's stated strategy is to invest more money in growing market share and capability rather than taking profits. Amazon was able to build its offering from the market requirements up. It doesn't have to deal with maintaining synergy with existing and ageing product lines, nor does it have to deal with the internal politics as IBM does.

3. IBM won't beat Amazon -- or the other major cloud providers, for that matter -- because IBM is, well, IBM. IBM has done a poor job in both understanding the cloud computing marketplace and providing compelling products to capture the market.  Although IBM does understand the enterprise and certainly has the sales force to go sell stuff to enterprises, it doesn't have a culture prepared to promote public cloud services, which are very different than enterprise hardware and software. 

In addition, the more cloud services that IBM sells, the less money it will make. In essence, it will displace existing IBM hardware and software with its own public cloud offering. If not, Amazon, Microsoft, Rackspace, and Google will displace IBM hardware and software. It's truly a no-win situation for IBM, but other large enterprise providers are in the same boat.

Statistics

If you go with a cloud services only argument, AWS is twice as large as IBM. If you include hardware in the cloud revenue equation, the two are about equal on revenue give or take a few million. IBM claims that IBM Cloud supports 270,000 more Web sites than Amazon and supports 24 of the top 25 Fortune 500 companies. Amazon took in around 35 percent of the $1.2 billion spent globally on public IaaS in the fourth quarter of 2012, and IBM came in a distant second with 5 percent, according to Synergy Research Group. Other studies show the same (or worse) for IBM, with a few analyst firms leaving IBM off the research altogether, instead naming Rackspace, Microsoft, and Google as Amazon's true competitors. Gartner states that Amazon AWS has 5 times the size of the next 15 cloud vendors combined. 

As for pricing comparison's IBM's SoftLayer has the most AWS-ish pricing schemes. SoftLayer's pricing is transparent. IBM's other cloud calculators take a bit more work. The biggest takeaway is that AWS is on its enterprise rivals radar in a big way.

Conclusion

IBM SoftLayer has a strong value proposition for certain use cases, but today their distinctive value proposition is a different one than AWS’s, but a very similar one to Rackspace’s. But IBM SoftLayer is still an infrastructure-centric story. I don’t know that they’re going to compete with the vision and speed of execution currently being displayed by AWS, Microsoft, and Google, but ultimately, those providers may not be IBM SoftLayer’s primary competitors.