In its third major announcement this week, IBM today announced a $1.2 billion investment in expansion of its global private cloud network including the construction of 15 more data centers, bringing the total to 40, and doubling the capacity of its SoftLayer platform and network, which connects the data centers and delivers IBM cloud services to customers. IBM acquired SoftLayer for $2 billion in 2013 and since has been moving its cloud services to the private network. Among the services to be added this year will be SaaS offerings based on IBM Watson.

When complete, the expansion will give IBM’s cloud network data centers in 13 countries and five continents – North and South America, Europe, Asia and Australia. Among the new locations will be Washington D.C., Hong Kong, London, Toronto, Japan, India, China, Canada, Mexico and Dallas. IBM is projecting further expansions in 2015 including at least one data center in Africa.

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Multi-data center strategy

The strategy of building large numbers of data centers worldwide rather than three or four megacenters is purposeful and a market differentiator for IBM for two reasons, said Dennis Quan, VP of Cloud Infrastructure at IBM:

1. Compliance: “For an enterprise application to be successful on a global scale we have to help clients meet regulatory requirements. By building more data centers in more countries, we can be more effective in reaching clients there and in providing services that meet that location’s regulations, including requirements that data stay inside the country.”
2. SLAs: Providing guaranteed high availability, high speed access and meeting SLAs is a major issue with cloud services. One aspect of that, he said, is “the speed of light problem. Our strategy of having data centers around the world brings them closer to more clients, providing faster access.” It also supports faster recovery if a problem develops with any one data center by shifting the compute loads to a neighboring center temporarily. The SoftLayer network also contributes to guaranteed SLA delivery by eliminating the need to deal with traffic interference, security threats and other issues on the public Internet.

IBM SoftLayer CEO Lance Crosby examines servers at the IBM SoftLayer data center in Dallas, Texas, on Friday, January 17, 2014. IBM announced it is committing more than $1.2 billion to significantly expand its global network of cloud data centers.

This investment is the latest step in a multiyear IBM plan to become a major cloud player. IBM is growing its cloud business at 70 percent year-to-year, has a staff of several thousand cloud experts, approximately 110 SaaS offerings and 1,570 cloud patients. It also has made major investments in the development of open source cloud technologies including OpenStack and CloudFoundry.

Market differentiators

IBM Market Intelligence quotes experts estimating that the global cloud market will grow to as large as $200B by 2020, much of that driven by businesses and government agencies deploying cloud services to transform their business practices. IBM is building its cloud services to meet enterprise level requirements in QoS and security, Quan said. “Our core market is the enterprise customer. At a high level our key differentiator is we design our cloud computing to support enterprise customers, which means everything is designed with enterprise-level quality-of-service. But we also have considerable business with SMBs and various vertical industries that you might expect to be with a more consumer-quality provider, such as massively multiplayer online role playing games.

“Another key differentiator is the breadth of our portfolio. In addition to today’s announcement we are working at the SaaS level, where we have a portfolio of over 100 SaaS applications from relationship management to market analysis to predictive analytics.” Those are being moved to the SoftLayer platform.

“Because of our enterprise focus, we can help CIOs leverage cloud in a way that not only provides greater ability and response but also the enterprise-grade security, auditability and access control that they require.”

Another major source of differentiation, Quan said, is IBM’s strong R&D capability, “the shear number of developers working on OpenStack, Cloud Foundry, software-defined environments, next generation software-defined network and storage capabilities. All the announcements this week from System x and Watson, which will be running on the SoftLayer platform as well.”

Looking forward

Looking forward, Quan said that one area IBM is focusing on is developing more vertical-industry specific SaaS offerings through the Smarter Planet strategy. Vertical industry focus is a growing trend in the industry in general in response in part to the need to meet different compliance and reporting requirements in different verticals, such as HIPAA (the Healthcare Insurance Portability and Accountability Act) in U.S. healthcare and SOX (the Sarbanes-Oxley Act) in the U.S. financial industry.

Quan said that the entire $1.2B is budgeted for this year, although it may not all be spent by the end of the year, depending on how quickly IBM can get the data centers built. Like Rome, “data centers are not built in a day.”

Graphics and photo courtesy IBM