The Need For Speed: IBM Picks Up Cloud Provider SoftLayer

IBM is acquiring SoftLayer Technologies, a cloud computing infrastructure supplier, in a move that will boost IBM's cloud computing offerings and put IBM in more direct competition with Amazon Web Services and Rackspace.

IBM also is reorganizing its cloud services operations, creating a new Cloud Services division that combines SoftLayer with its current IBM SmartCloud offerings.

SoftLayer is the world's largest privately held cloud computing infrastructure supplier, according to IBM. Rumors circulated earlier this year that IBM and EMC were both considering buying the Dallas-based company in a deal potentially worth $2 billion.

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IBM did not disclose the financial terms of the deal, which it expects to close in the third quarter following the completion of customary closing conditions and regulatory clearances. SoftLayer's majority shareholder is GI Partners of Menlo Park, Calif.

IBM channel partners said the move certainly makes sense for IBM from a technology perspective, expanding the company's cloud service capabilities. But they also see potential benefits if IBM can adopt SoftLayer's nimble business and channel processes in the fast-moving cloud market.

"I think it's a good move for IBM," said Chris Pyle, president and CEO of Champion Solutions Group, an IBM partner in Boca Raton, Fla. He said SoftLayer's business processes make it easy for its channel partners to on-board customers and upsell additional capacity such as adding virtual machines.

Pyle, while praising IBM's SmartCloud technology, said the company isn't as nimble as SoftLayer, Amazon and other cloud infrastructure service providers. "I'm hoping that IBM will follow SoftLayer's channel strategy," he said.

Speed and agility in the cloud market do seem to be part of the strategy behind IBM's move. "IBM is acquiring SoftLayer to make it easier and faster for clients around the world to incorporate cloud computing by marrying the speed and simplicity of SoftLayer's public cloud services with the enterprise-grade reliability, security and openness of the IBM SmartCloud portfolio," the company said in a statement.

"SoftLayer accelerates IBM's ability to integrate public and private clouds for its clients, with flexibility that provides deployment options that enable a faster, broader transformation for small, medium and large businesses with a range of performance and security models," the company said.

NEXT: IBM To Combine SoftLayer With Its SmartCloud Portfolio

IBM's SmartCloud portfolio includes technology for public, private and hybrid cloud systems. The SoftLayer acquisition "will accelerate the buildout of our public cloud infrastructure," said Erich Clementi, senior vice president of IBM Global Technology Services, in a statement.

One of SoftLayer's value propositions is that it offers customers the choice of running cloud applications on either dedicated or shared servers. The company has been particularly successful serving online gaming companies -- more than 60 have begun using SofLayer in just the last two quarters, according to the companies.

"We're seeing an increased need from our clients for help with how best to leverage cloud computing technologies whether public, private or a hybrid approach," said Ruth Minj, general manager of IBM industry solutions at Perficient, an IBM premier business partner, in an email to CRN.

The SoftLayer acquisition "further strengthens our ability as [an IBM partner] to offer our clients with solution offerings that are cloud-based, lower upfront IT investments, and gain faster returns on investment," Minj said.

SoftLayer operates 13 data centers in the U.S., Asia and Europe that serve 21,000 customers. IBM operates 10 cloud computing centers on five continents.

The new Cloud Services division will combine SoftLayer's operations with IBM's SmartCloud product and services portfolio and "provide a broad range of choices to both IBM and SoftLayer clients, ISVs, channel partners and technology partners," IBM said. "SoftLayer's services will complement the existing portfolio with its focus, simplicity and speed."

The division will be part of IBM Technology Services, reporting to Clementi. IBM said that over time it plans to offer many of its own cloud applications, including Smarter Cities and Smarter Commerce, through SoftLayer.

Cloud computing is one of IBM's key initiatives and the company expects its cloud-related revenue to reach $7 billion by the end of 2015.

PUBLISHED JUNE 4, 2013