IBM updates Cloud strategy after CIA loss

IBM has brought 6000 new customers to the Cloud in the past year, according to the company

Two years after losing high-profile government work to Amazon Web Services, IBM has revamped the way it structures enterprise cloud services contracts, thanks in part to its $US2 billion acquisition of cloud services provider SoftLayer.

"The loss of the CIA contract to AWS was obviously a blow to IBM," said Charles King, head of the IT analyst firm Pund-IT, responding to a query in email. "Whether it will make the company more competitive is hard to say until a similar deal comes along. But I believe IBM's Cloud solutions are considerably stronger with SoftLayer than they were before."

In 2012, IBM protested the Central Intelligence Agency's award of a $US600 million contract vehicle to competing vendor AWS. Reviewing the case, the Government Accountability Office agreed with the CIA that IBM did not show sufficient evidence that it could easily scale up cloud operations to meet increasing demands, and ranked AWS as having more technical skills to offer in the area of Cloud services.

That IBM is widely used within the US government and AWS was a relative novice to supplying such services to this market did not reflect well on IBM's then-nascent set of Cloud services.

Since the SoftLayer purchase last July, IBM has used the company's assets to power its growing portfolio of hosted services, such as the Bluemix set of hosted services. SoftLayer also provides the underpinning for a growing number of services based on the company's Watson intelligent assistant technology, as well as a set of infrastructure services that was widely used even before the IBM purchase.

IBM has announced that SoftLayer has snagged 6000 customers in the past year, including some high-profile names such as the department store Macy's and appliance-maker Whirlpool.

Other enterprise customers IBM name-checked included Heineken, Philips Smart TV, Radio Shack, University of Pittsburgh Medical Center, Honda, Toyota, Pacific Gas & Electric, L'oreal, AT&T, Visa and Continental Airlines.

"We've made significant inroads in every industry in the world, whether it is retail, industrial manufacturing, health care, financial, insurance," said Lance Crosby, CEO of IBM SoftLayer.

The customer wins suggests that much has changed since IBM lost the CIA bid, and the changes reflect IBM's growing sophistication in offering cloud services. Enterprise IT decision makers will often look to a potential vendor's customer list as a validation of the vendor's service.

In the government market, IBM is now building two facilities dedicated for federal government use, in Ashburn, Virginia, (outside of Washington) and in Dallas. These facilities will meet the government's requirements for security and data privacy.

Also, over the past several months, IBM Global Business Services sales people have been trained to sell Cloud to the federal agencies, Crosby said.

Perhaps most importantly, IBM's billing mechanisms have changed to better reflect a customer's usage in the cloud. Billing was one of the chief issues with IBM's original proposal to the CIA.

"Prior to SoftLayer, the previous billing to the cloud was not by the hour, like SoftLayer is," Crosby said. "These two new facilities will have everything available by the hour, like other Cloud providers."

The work seems to be paying off: IBM has recently won contracts from US federal government agencies such as the US Department of Interior, the General Services Administration, Housing and Urban Development, the Defense Advanced Research Projects Agency, National Archives and Records Administration, the Department of Veterans Affairs and the National Weather Service.

IBM has invested a lot of energy in bulking up its cloud services since last year.

The company is investing $US1.2 billion in building out data centers, working to bring the total to 40 around the globe by 2015. IBM is also investing an additional $US1 billion to round out its Bluemix portfolio of services, and has purchased three companies -- Cloudant, Silverpop and Aspera -- just to embed their cloud management technologies into SoftLayer.

"We're still in early days for Cloud in terms of both cloud offerings and customer adoption. While I expect cloud services and providers will continue to evolve, IBM is a strong foundation to build on," King wrote.

About half of the 6000 SoftLayer customers are existing IBM customers looking to move at least some of their operations to the Cloud, Crosby said.

This is not surprising. Nearly half of all large enterprises will move at least some of their operations to hosted environments, IT analyst firm, Gartner, has estimated.

One big driver for new business has been mobile computing, Crosby said. Banks, for instance, have been scrambling to offer mobile services, even if their back-end operations aren't prepared for this new type of workload.

"Five years ago, people checked their bank account balance maybe once or twice a month. Now they are checking it on their smartphone 10 times a day. Mainframes weren't built for Web levels of interaction, so we're doing that type of interaction out of the cloud," Crosby said.

Macy's, which operates 840 department stores in the U.S., obtained IBM hosted services, and a private connection to IBM's data centers, in order to offer more computerized interactions with its customers, as well as to set up a disaster recovery system that would resume operations should Macy's primary systems fail.

"Macy's is really doing Big Data analytics to understand their customers better," Crosby said. The company wants to go past the routine of addressing potential customers by marketing segments, and is looking at ways to customize offers and other material for each person.

In addition to the customer wins, IBM is also announcing a number of new cloud services.

The company launched Watson Engagement Advisor, a service that can help businesses in marketing, sales and customer service.

A high-speed transfer technology, called Aspera, provides a way to move large amounts of data across SoftLayer datacentres. A new storage service, called Elastic Storage on Cloud, provides hosted storage.

The company has also issued new services for managing IBM services as well as an adapter, called JumpGate, for moving OpenStack workloads across different cloud providers.

Joab Jackson covers enterprise software and general technology breaking news for The IDG News Service. Follow Joab on Twitter at @Joab_Jackson. Joab's e-mail address is

Join the Good Gear Guide newsletter!

Error: Please check your email address.

Tags IBMManaged ServicesSoftware as a servicecloud computinginternetInfrastructure services

Our Back to Business guide highlights the best products for you to boost your productivity at home, on the road, at the office, or in the classroom.

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Joab Jackson

IDG News Service
Show Comments

Cool Tech

Crucial Ballistix Elite 32GB Kit (4 x 8GB) DDR4-3000 UDIMM

Learn more >

Gadgets & Things

Lexar® Professional 1000x microSDHC™/microSDXC™ UHS-II cards

Learn more >

Family Friendly

Lexar® JumpDrive® S57 USB 3.0 flash drive 

Learn more >

Stocking Stuffer

Plox Star Wars Death Star Levitating Bluetooth Speaker

Learn more >

Christmas Gift Guide

Click for more ›

Most Popular Reviews

Latest News Articles


GGG Evaluation Team

Kathy Cassidy


First impression on unpacking the Q702 test unit was the solid feel and clean, minimalist styling.

Anthony Grifoni


For work use, Microsoft Word and Excel programs pre-installed on the device are adequate for preparing short documents.

Steph Mundell


The Fujitsu LifeBook UH574 allowed for great mobility without being obnoxiously heavy or clunky. Its twelve hours of battery life did not disappoint.

Andrew Mitsi


The screen was particularly good. It is bright and visible from most angles, however heat is an issue, particularly around the Windows button on the front, and on the back where the battery housing is located.

Simon Harriott


My first impression after unboxing the Q702 is that it is a nice looking unit. Styling is somewhat minimalist but very effective. The tablet part, once detached, has a nice weight, and no buttons or switches are located in awkward or intrusive positions.

Featured Content

Latest Jobs

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?