Editor’s note: Matthew Casey is an anlayst with Technology Business Research. He examines IBM’s data center expansion announcement made last week.
HAMPTON, N.H. – IBM (NYSE: IBM) is investing in cloud infrastructure to drive growth in the latter half of 2014.
With profit goals under a year away, top-line growth to achieve these goals is the biggest focus for IBM through the calendar year. This urgency has been demonstrated by IBM’s two most recent announcements, committing $1 billion to Watson on January 9, 2014, and today committing another $1.2 billion to expanding its cloud infrastructure. The message: IBM is spending now so that top-line growth and profit can be realized in the back half of 2014.
The structure of IBM’s 2014 revenue growth will be the acquired resources IBM has obtained over the last few years, primarily within its analytics suite, with the 2013 acquisition of SoftLayer being the keystone to support growth in these acquired analytics portfolios. SoftLayer helped fill two delivery gaps for IBM, broadening its public cloud infrastructure capabilities with thirteen globally dispersed data centers, as well as extending IBM’s go-to-market capabilities with an established route to market in the SMB space. Combined with IBM’s twelve cloud data centers, and the announced intent to invest in an additional fifteen data centers in the coming years, IBM is further bolstering the delivery capabilities for its cloud enabled software portfolio.
With data centers planned for Dallas and Virginia, focused on public sector growth, and international data centers planned in China, Australia, India and London, IBM is scaling its access to both vertically-focused markets as well as geographic growth opportunities. The immediate benefit IBM will achieve in 2014 will be the initial growth from cloud-based applications such as Kenexa or Analytics Answers that immediately get positioned in front of net-new customer bases. In addition, as data center infrastructure is built-out, IBM will more broadly establish its services-oriented cloud solutions, primarily its managed private cloud capabilities, extending geographic reach to help adhere to localized regulations and international enterprise security concerns.
Specifically, the move will help IBM better cater to multi-national enterprise customers that are developing datacenter needs on a regional or country specific basis.
From a competitive standpoint, the increased public cloud infrastructure footprint provides a more defined barrier against competitors such as AWS. While IBM does not directly compete against AWS in the public cloud space, the move does position IBM closer to Amazon, providing an alternative offering between IBM’s premium cloud suite and Amazon’s entry-level cloud infrastructure.
[IBM employs some 9,500 people across North Carolina and operates a relatively new data center at its RTP campus that is focused on cloud computing services.]
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