Technology giants cross swords in the cloud

By Derek du Preez
20 Apr 2011 View Comments
IBM datacentre System i5

In recent weeks, IBM, HP and Dell have all made major cloud strategy announcements, in response to growing demand from enterprises for hosted services.

IBM has unveiled a portfolio of services and initiatives aimed at encouraging enterprise customers to move more of their infrastructure to the cloud. The offering, dubbed IBM SmartCloud, comes in two tiers – Enterprise, and Enterprise+. Both aim to reduce application development timescales, while Enterprise+ will also provide multi-tenant services to manage virtual servers, storage, network and security infrastructure components.

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HP, meanwhile, has opted to launch a public cloud offering to compete with the likes of Amazon, and aims to help customers develop a hybrid architecture. It has also committed to launching an open platform that will be aimed at providing developers with all the tools they need to build, test and deploy services.

Dell, for its part, plans to invest up to $1bn (£613m) in its cloud and services division, in a move that will see it selling virtual PCs alongside their hardware equivalents. The company will build 10 state-of-the-art datacentres in Asia, Europe and the US to increase its public and private cloud hosting capabilities.

IBM has been talking up the cloud since 2009, and has made some big moves in the area, while competitors HP and Dell are now busy trying to eat into Big Blue’s lead.

So how well equipped are these relative newcomers to deliver the cloud services enterprises are looking for?

Quocirca analyst Clive Longbottom said that Dell has been forced to make its move by market pressures and is therefore some way behind IBM in terms of innovation.

“Dell has realised that cloud computing means that a large proportion of its buying base has gone. The old model of selling hardware and related services is dying out, and it knows that it cannot just survive off the possibility of cloud service providers buying its kit,” he said.

In short, Dell’s move is a reactive one. 

Laurent Lachal, analyst at Ovum, agreed and suggested Dell and HP have to take some serious strides to catch up with Big Blue. “HP came to the cloud later than IBM, and did so reluctantly. It is trying to gain some momentum now, but it appears to be too little too late when compared with IBM’s depth and breadth,” he said.

“Dell is also just moving into the cloud, and its ambition to grow into an IT service provider will require a lot of change,” he added. “They [Dell] have a large customer base that will be happy to move to the cloud with them, but their first move is late, defensive, and not particularly articulate.”

It is unsurprising that there is some scepticism among industry watchers as to how firms that have built their businesses around hardware and related services are going to now offer a comprehensive cloud portfolio. But having taken the plunge, analysts argue that the likes of HP and Dell should look to not just mirror their hardware strategies and offer low-cost, low-margin cloud services, but instead aim to capture a wide client base using a variety of offerings.

“This should give better margins, and should also tie customers in if they get it right,” said Longbottom.

“However, if they get the whole cloud game right, then they can make offers right across the board, as the cost of implementation is negligible. So a one-man band can use a cloud service just as easily as a 400,000-person company,” he added.

Longbottom believes that all three companies are, to some extent, being led by their customers when it comes to their cloud offerings.

“With the customer base demanding to know the real business benefit behind the cloud, their contacts – the sales people – have in turn demanded more information from within the company, and the boards at IBM, HP and Dell have had to seriously consider their offerings,” he said.

“The sales force within a company is where the actual money comes from, and now real discussions between customers and sales, and some real product offerings, have come to the market.”

Lachal concurred, saying that not moving to the cloud simply is not an option.

“The cloud is going to happen, and if Dell and the others do not follow IBM, ultimately they are dead,” he said.

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