Editor’s note: On Monday, (NYSE: IBM) said it had acquired Cast Iron Systems, a California-based company focused on “cloud” computing and integration. Financial terms weren’t disclosed. Allan Krans, an analyst with , analyzes the impact of the buy.
By Allan Krans, special to Local Tech Wire

HAMPTON, N.H. – In cloud computing, delivery is the easy part

IBM can meet any flavor of delivery options, but needed the glue to tie them all together. With a broad portfolio of offerings that spans professional services, hardware and software, IBM is well-positioned to deliver software functionality any way its customers choose. Whether its public cloud, private cloud, purpose-built devices or traditional on-site software delivery, IBM can match any customer requirement for software delivery.

Cloud delivery may be the easy part, however, as customers need cloud solutions that can be assimilated into and managed by their existing onsite IT assets. Pure play cloud vendors such as Google and Salesforce.com can extol the virtues of a totally cloud-enabled world, but IBM must deal in the messy reality in which cloud and onsite IT exist side-by-side.

As the largest management vendor in the traditional IT space, IBM is the logical candidate to lead in cloud systems management, and its purchase of Cast Iron Systems is a big step in that direction.


IBM’s brand will blow the doors off Cast Iron’s integration opportunities

Cast Iron bills itself as the No. 1 Cloud Integration Company and the importance of its role within customer accounts it anything but trivial. Knitting together IT systems, many of which are fundamentally different and can physically reside anywhere in the world is at the core of Cast Iron’s business.

CIOs have incredibly high expectations in terms of performance and responsiveness for the companies that provide such critical IT functions, and Cast Iron has met those expectations for many large customers, Dell, Dow Jones, and Time Warner included, even though it was a venture-funded startup with less than 100 employees.

Now with the backing of IBM’s brand and significant resources, TBR expects the wheels of Cast Iron adoption to be greased, providing even more opportunity for a company that saw revenue increase ten-fold since 2005.

Cloud becomes another supporting role for IBM

In the cloud, just as in the traditional IT space, IBM will continue to focus on enabling and supporting customers IT environments. Though IBM is one of the largest IT vendors globally, most non-technical users have no direct interaction with any of its products. Unlike HP or Microsoft, IBM has no consumer-focused offerings at all, and unlike Oracle and SAP, business users have no interaction with its business application offerings. IBM has built the world’s second largest software business by focusing entirely on back-end functions such as system and data management, and will adoption that same role in cloud computing.

Cloud enablement becomes big business

The market opportunity from cloud computing extends far beyond the applications themselves. Companies such as Salesforce.com and Microsoft will build signification businesses around cloud offerings, but an entire ecosystem of adjacent businesses are blossoming up around cloud services. Though adoption is increasing, non-cloud adopters continue to outweigh cloud adopters (according to TBR’s Cloud Computing Adoption Study). For IT vendors, the business opportunity is not only selling cloud services to the majority of the market that has yet to adopt, but also providing the solutions that will entice those customers to adopt. TBR believes cloud enablement is a significant opportunity for IT vendors – tackling the obstacles that are holding customers back from cloud services.

IBM will monetize the bottleneck to cloud adoption

IBM’s acquisition of Cast Iron directly targets the largest customer pain point associated with cloud computing. Cloud security receives significant attention as an adoption barrier, but in TBR’s Cloud Adoption Study, integration was cited by 45% of non-cloud adopters as the leading barrier. Customers are not willing to offset the cost savings generated by cloud solutions with increased management costs and complexity.

Regardless of how software is delivered – on-site, through the cloud, or via an appliance – integration and management are key decision points for any solution. Whatever solutions is chosen must integrate with existing assets and be centrally managed. The acquisition of Cast Iron provides IBM the tools to make this vision a reality for its customers, whether they’re using IBM, Amazon, Salesforce.com, or other cloud services in heterogeneous environments.

TBR expects Cast Iron assets to be widely used through IBM, including being sold on a stand-alone basis, integrated with IBM cloud services, and used extensively by the Global Services team.

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