Analysts: How to make IBM Cloud services more competitive

Press its enterprise lineage

IBM Cloud services are not in the top tier with the general-purpose clouds for net-new application development, but the company has strong relationships within the enterprise market.

"It's certainly not growing as fast as AWS, GCP or Azure. But as we see more enterprise adoption, I wouldn't discount them just yet," said Deepak Mohan, an analyst at IDC.

Jeff Byrne

The best plan for IBM is to lean on its market perception and lineage that it is enterprise-ready and has a large, loyal customer base, added Jeff Byrne, an analyst with Taneja Group in West Dennis, Mass.

"The old adage that no one ever got fired for choosing IBM is probably still true in a lot of ways -- even though the younger IT generation has never even heard of that," he said. "Customers, both IBM and non-IBM customers, still view them as a safe choice."

Many traditional enterprise customers are still testing the public cloud, and IBM customers are much more likely to shift their on-premises assets to IBM Cloud services than they are to move those workloads elsewhere, Byrne said.

Push infrastructure, go vertical

IBM Cloud Private, added late last year, is a platform-level connection between the public IBM cloud services and customers' private assets aimed at the growth of hybrid cloud. But the company should do more to automate tools for hybrid deployments and package support to make its cloud more accessible to less sophisticated and smaller enterprises, Byrne said.

IBM also should raise the profile of its VMware offering to house vSphere-based workloads on the public cloud, especially as VMware puts more of its marketing and R&D focus behind the AWS alternative, Byrne said.

IBM is most competitive at the platform layer and with professional services, and it has checked the boxes for private and public, Kubernetes support and data services, migration and app development, said Rhett Dillingham, vice president and senior analyst for cloud services at Moor Insights & Strategy, based in Austin, Texas. All that leads to IBM's pursuit of vertical-specific products, rather than an à la carte slant that has the best of everything.

"They're not going to lead with their infrastructure offering, but they need it to be competitive enough that it doesn't undermine their good solutions as a data platform and cloud management platform," Dillingham said.

Given IBM's move to offer a healthcare-centric flavor of its cloud, it would be smart to do more vertically oriented offerings for industries such as finance and manufacturing, where the regulatory compliance and support are baked into the tools, Byrne said.

Some infrastructure shortcomings have hurt IBM in the past. IBM Cloud services lack some tools for high availability and have limited discount structures and partner ecosystem support, Dillingham said. IBM was also one of the first to offer a Kubernetes service run on a public cloud, but that wasn't widely tested outside of its existing install base because of questions about the underlying infrastructure.

And while there is a perception that IBM's SoftLayer bare-metal service languished and fell behind, IBM continues to invest in its infrastructure, Dillingham said. Now, the company must show its customers the value of that investment and provide a clear vision for how they can use that progress to make the shift to the public cloud.

IBM also needs to do more to expand its partner ecosystem and get the word out about what it's done over the past few years to invest in its cloud services, Dillingham said.

Court developers and invoke AI

To be more competitive in the cloud, IBM must address the developer market, because companies turn to those employees for input on which cloud can do the most to improve productivity, Mohan said.

"Decisions around cloud are being driven from the bottom up," Mohan said. "They're not totally shifting gears and becoming decision-makers, but they are stronger influencers of that decision compared to the past."

Their vision should be that Watson becomes the basis for how users interact not just with their data in the cloud, but with the cloud itself to make the cloud more intuitive to provision and administer.

A big part of that is price. IBM Cloud Lite, added last November, addresses some of those issues with a free tier to catch developers' attention, but the low-end servers on IBM Cloud cost twice as much as they do on any of the other major platforms, Mohan said.

The IBM Cloud user base is concentrated in a smaller set of big-spending customers compared to the rest of the major vendors, which makes its progress relatively difficult to track. And while IBM Cloud lacks that broad preference from the developer community, it has the breadth and strength to compete well with any provider, Dillingham said.

The biggest step for IBM to further expand its growth is to exploit Watson, Byrne said. So far, Watson has been available mostly as API services to infuse those capabilities into existing apps. But the technology should be more pervasive to catch the eye of enterprise customers.

"Their vision should be that Watson becomes the basis for how users interact not just with their data in the cloud, but with the cloud itself to make the cloud more intuitive to provision and administer," he said.