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OVUM VIEW

Summary

There is mounting enthusiasm for cloud services in the Asia-Pacific region, and enterprises are building the business case for cloud. The ultimate aim for enterprises is to build secure but extremely agile ICT infrastructures that will allow them to be nimble and innovative, and to move faster than their competitors. The cloud dividend delivers the highest yield for enterprises if it can help them to achieve that competitive advantage over their peers.

A series of cloud announcements at IBM Impact potentially put clear water between IBM and its competitors in the region. The company gave details of its highly anticipated Cloud Marketplace, which will be driven by role-based service offerings. In addition, it has launched integration services that help enterprises integrate and orchestrate their complex hybrid cloud environments. More importantly, with BlueMix IBM is building a developer and independent software vendor (ISV) community that will support future innovation for both its marketplace and its MobileFirst strategy.

Cloud has become the central plank for many ICT players' strategies in the region, but differentiation is extremely difficult. IBM's move is based on compelling differentiators that will allow it to better engage with cloud buyers. It will also up the ante against Amazon Web Services (AWS), Microsoft, Rackspace, and a variety of other telecoms service providers across the region.

Building a marketplace with a difference

In early 2014 IBM announced that it would be investing over $1.2bn in SoftLayer, including building up 15 datacenters globally. In Asia-Pacific this includes datacenters in Sydney, Melbourne, and cities in Japan, India, and Singapore, which are already operational. This investment is in response to demands for on-shore datacenters created by the data-residency and latency requirements of enterprises. The rollout of the Cloud Marketplace by IBM at Impact is another milestone, and matches AWS and Microsoft's portfolios. The marketplace brings together IBM's existing, largely vertically based, SaaS offering; its workforce management offering; and new, additional services.

What is unique is that the cloud store is divided into role-based categories, namely line-of-business users, IT managers, and developers. Role-specific SaaS solutions include data analytics tools and traditional financial management apps, and more than 200 services are currently available in the marketplace. Perhaps the biggest point of differentiation is IBM's SaaS integration offering, which is an orchestration tool that allows IT managers to manage and integrate SaaS into their existing ICT infrastructures. This is critical, because a hybrid cloud environment is the most probable model for the majority of enterprises; integration will be challenging, and has slowed SaaS adoption in the past. IBM's integration services will remove one of the barriers to SaaS adoption, and also ease the management complexity that a hybrid cloud environment brings.

Creating an ecosystem that brings innovation

Having a flourishing and extended developer and ISV ecosystem could not be more critical to building a successful marketplace. This ecosystem will ultimately be the cauldron of innovation for IBM's marketplace. In an age in which talent and skills are attracted to entities that support environments that allow innovation to flourish, developers will also be attracted by the access to IBM's installed base of customers that the marketplace will provide.

IBM's platform-as-a-service offering, BlueMix, is a developer's toolkit that has more than 30 services and will be receiving more than $1bn in investment. IBM has also provided data and analytics services for developers to deliver data-centric applications, allowing them to create "actionable" applications. This toolkit was designed to allow ISVs to focus on their development without the burden of managing the IT support that is needed. IBM provides a variety of business mentoring and VC introductions, and some funding for promising developers. It will also be launching BlueMix Garage, which brings together developers and start-ups in a collaborative environment, allowing them to learn new development skills and giving them access to IBM's expertise as well.

Ovum believes that BlueMix will be highly attractive to a wide variety of ISVs, developers, and top-notch talent – especially those looking for fully fledged support. For IBM, building an extended developer ecosystem will be an essential part of creating an armory of compelling and unique offerings in the marketplace, giving it a distinct offering in the Asia-Pacific region. This developer community can also be extended to IBM's MobileFirst strategy and other areas, including building applications for M2M, the Internet of Things, and analytics. These developers can act as vital channels for the marketplace.

Extending those channels to scale

Another daunting challenge for many cloud service providers is to achieve scale, so that investments that have been poured in can be realized quickly. SoftLayer's traditional marketing has been digital and focused on supporting a direct sales approach. IBM needs to extend its channels to include local integrators and tier-2 telecoms service providers, as well as traditional value-added resellers that are eager to get a footing in the cloud market but that may not have the necessary resources or capabilities. Telecoms service providers are ideal candidates because their network services are suitable for bundling with cloud services, and because cloud adoption often leads to increased bandwidth demand from enterprise customers. This channel extension can be done via a pure wholesale or a white-labeling model with enough margins for both parties. Additional managed service offerings, from security to web services, could potentially be sold on top. One of the major factors in AWS's global success is the 1,800 partners that it has brought together to support its cloud strategy. IBM will need to quickly expand its partner ecosystem to match AWS power for power.

APPENDIX

Author

Adrian Ho, Principal Analyst, Enterprise

adrian.ho@ovum.com

Further reading

Cloud Service Providers to Watch in Asia-Pacific in 2014, TE007-000762 (February 2014)

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