IBM versus Amazon Cloud Computing: Can Big Blue disrupt itself?

After ten consecutive quarters of shrinking performance, it finally gave up.

In October 2014, when IBM CEO Ginni Rometty released its third-quarter financial report, she announced that IBM would abandon the "2015 Vision Plan" formulated in 2010.

Ken Keverian, senior vice president of global strategy at IBM, said: "When we first set the 2015 financial report target, the overall environment was relatively stable. But now the environment is changing very quickly. Generally, changes in our industry are measured in six months. If we set it according to the past five-year plan, in the face of such rapid changes, that target would not be applicable."

Rometty and her leadership team regard speed as the key to the success of this round of transformation. In 2014, although the financial figures IBM gave to investors did not improve, the changes that IBM has undergone in this year have been dazzling.

Winning in the Ecosystem

"Once you understand something, you can't turn a blind eye to it. Once you understand something, you have to put it into practice." This is what Rometty said at the IBM THINK Summit. The forum is IBM's highest-level global business forum, and this year it will be held in China.

In the past few decades, IBM has always been able to foresee the changing trends of the industry early and put forward one leading concept after another, such as e-commerce and smart earth. This time, Rometty explained her understanding of industry trends to Chinese customers. She believes that the entire industry is practicing three historic technological changes. Each of these three technologies is enough to subvert the technology industry, but now three changes are happening at the same time, and the world will also change: First, big data is becoming a new natural resource in the world, changing many industries and professions, and increasingly becoming a key factor in bringing competitive advantages. Second, cloud computing is subverting the traditional IT industry. The cloud provides a digital service method to deliver any technology or business process. Third, mobile and social are changing the way individuals interact and participate, which in turn affects more industries.

Faced with these trends and complex changes, the challenge for IBM, a giant, is how to dance lightly, turn around quickly, and influence these changes after seeing the trends. "These changes have made IBM committed to gathering new capabilities. We have completed the divestiture of important businesses and put down huge chips." The chips referred to by Rometty include the acquisition of public cloud company Softlayer for US$2 billion, the construction of 40 cloud data centers around the world for US$1.2 billion, the investment of US$1 billion in the development of PaaS platform BlueMix, the establishment of a new Watson Group for US$1 billion, the sale of x86 server business to Lenovo for US$2.3 billion, the sale of chip manufacturing business to GobalFoundries for US$1.5 billion, and the investment of US$3 billion in the development of new chips.

On the other hand, in the face of new changes, IBM is actively building a new ecosystem while uniting all forces that can be united, whether they are developers, start-ups, partners, or even former competitors or strangers. The list of partners includes Apple, Twitter, SAP, Microsoft, Tencent, etc.

IBM and Apple have had a "grudge" for many years, but this year the two sides reached an intention to cooperate comprehensively and jointly create a new category of business applications. IBM's big data and analysis capabilities will be embedded in Apple's iPhone and iPad to promote the transformation of the entire enterprise mobile market. Twitter, which had no intersection with IBM before, also cooperated with IBM. The massive social data from Twitter will be analyzed through IBM's Watson, and then the two sides will jointly develop some services and applications for special industries such as banking, consumer products, retail, tourism and transportation.

Ken believes: "Apple is a great consumer company, but it is not a great enterprise company; IBM is a great enterprise company, but we are not a consumer company. Now we can do things together that neither of us can do alone."

Will hybrid cloud take over the world?

Undoubtedly, IBM was one of the first giants to foresee the trend of cloud computing and was also one of the first companies to invest in it. But it is not easy for an elephant to turn around. IBM's last transformation took ten years, but the trend of technological change was too fast. Before IBM could stabilize, new technologies such as cloud computing and big data began to impact the entire traditional IT industry. The new generation of Internet forces represented by Amazon and Google became an important force in subverting the traditional pattern with new technologies.

IBM's traditional strengths lie in hardware and software, and its main customers are large and medium-sized enterprises. With this "advantage", IBM initially focused more on the private cloud field. At the same time, Amazon and Google, which have close contact with small and medium-sized enterprises and individual consumers, are advancing rapidly in the public cloud. The entire industry is cheering for the subversive nature of the public cloud model. IBM seems to be a little behind the times.

In 2013, IBM acquired the public cloud company Softlayer for $2 billion. "We realized the change and acquired Softlayer. SoftLayer has the scale and expertise in the Internet and provides services very quickly. We conducted a 'reverse integration' to ensure that IBM becomes more like SoftLayer," Jim, general manager of IBM's global cloud computing, told China Business News. After the acquisition and reverse integration, IBM invested another $1.2 billion this year to build 40 cloud data centers around the world, invested $1 billion in developing SaaS, and quickly established a complete cloud computing service of IaaS, PaaS, and SaaS at Softlayer.

At the same time, the cloud computing market began to cool down, and hybrid cloud became the most real demand of the enterprise market. "The development trend of cloud computing must be to combine the existing IT infrastructure of enterprises with new cloud workloads driven by the rise of data, mobile and social. In other words, hybrid cloud is the direction of cloud computing." Jim believes. Just this year, Amazon, which once strongly advocated public cloud, also publicly stated that they have realized that hybrid cloud is the reality of enterprises. According to Gartner's forecast, by the end of 2017, nearly half of large enterprises will deploy hybrid cloud.

Ken told reporters: "Customers told us that companies born in the cloud era cannot help customers combine the two worlds together. Because they only know the latest things, but don't understand the customers' existing systems. Therefore, customers need IBM to provide them with this kind of help to combine the two worlds." After hybrid cloud was recognized by the market, IBM's advantages in traditional fields were once again recognized.

"IBM serves enterprises, which is completely different from serving the consumer market. We are best at solving the most difficult and tricky problems," Ken told reporters.

"Now, we are completely on the right track," Jim said. According to the financial report, IBM's cloud services have achieved substantial growth, with revenue in the third quarter of this year increasing by more than 80% year-on-year.

"Although cloud computing is currently developing rapidly, it still only accounts for a small part of the overall IT market size." Jim believes, "Under the current competitive pressure in the world, we and Amazon are still evenly matched. Even if their prices are very low, from the perspective of long-term holding costs, we are better." Jim said that IBM is not afraid of competition with Amazon, and that it is full of confidence in the competition after completing its overall layout.

Speed ​​is the biggest challenge of transformation

In 2014, IBM proposed a new strategic direction, referred to as CAMS, which stands for cloud, big data, mobile, and social. Cloud computing is ranked first, first because of its importance, and second because it is an important support platform for IBM's overall transformation. From not knowing how to do it to completing the complete layout of hybrid cloud, IBM's five years of exploration and trial and error in cloud computing is a microcosm of IBM's transformation.

The cloud layout is ready, and big data is another important weapon for IBM to compete. IBM's R&D investment in big data software and active mergers and acquisitions in the past few years have given it an advantage in the enterprise-level big data analysis market. At the beginning of this year, it announced a $1 billion investment to establish the Watson Group, which is obviously accelerating the commercialization process. Judging from IBM's series of actions this year, IBM is getting out of chaos and all business lines are starting to speed up.

Will IBM's bad luck end this year? Rometty didn't give an answer. "We are disappointed with our performance. We saw a significant decline in customer purchasing behavior in September. Our results also show that the entire industry is undergoing unprecedented rapid changes," she said in a statement. Rometty added that IBM's businesses that have invested heavily in future growth are performing well, including software and services that help business users analyze huge amounts of data, as well as cloud computing. But these businesses are not enough to make up for the impact of the decline in IBM's traditional hardware, software and services businesses on the company's performance.

Ken expressed optimism in the interview: "For a company as big as IBM, it may take some time to increase the speed. But once it does, the growth momentum will be unstoppable."

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.