Servers at a SoftLayer data center. (Photo: SoftLayer)

Servers at a SoftLayer data center. (Photo: SoftLayer)

IBM Acquiring SoftLayer to Boost its SmartCloud

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softlayer-servers

Racks of servers inside a data center at cloud infrastructure provider SoftLayer, which is being acquired by IBM.

IBM is acquiringSoftLayer, the world’s largest privately-held cloud infrastructure provider. This is huge news, speeding up IBM’s focus on providing cloud services and bringing one of the largest hosting providers under Big Blue. Financial terms were not disclosed.

IBM is also announcing the formation of a new Cloud Services division, which will combine SoftLayer with IBM SmartCloud into a global platform. The new division will provide a broad range of choices to both IBM and SoftLayer clients, ISVs, channel partners and technology partners. SoftLayer’s services will complement the existing IBM portfolio with its focus, simplicity and speed, the companies said. The division will report to Erich Clementi, Senior Vice President, IBM Global Technology Services.

“Our clients are telling us they want to realize the transformative benefits of cloud today – not just for individual applications, but across their entire enterprise,” said Clementi. “SoftLayer is a perfect fit for IBM. It will help us smooth the transition of our global clients to the cloud faster, while enabling IBM to more efficiently offer them its broad portfolio of open IT infrastructure and software services.”

Buying SoftLayer allows IBM 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.

“We’re very happy we’ve found a matching worldview in Dallas,” said Eric Clemente, on a joint company call. Clemente also said that the rationale for the acquisition is the ability to “offer clients choice across the spectrum of our offerings, and offer a point of integration.”

“We’re trying to eliminate barriers for cloud adoption in the enterprise,” said Clemente.

Philbert Shih, managing director, Structure Research, puts it simply: “The IBM acquisition is about adapting to the new realities of IT infrastructure: delivery in a service model and the flexibility to mix and match different types of infrastructure in hybrid scenarios.”

“SoftLayer will enable IBM to deliver an industry first,” said Ric Telford, VP IBM Cloud Services on the call. ”This Provides an easy on-ramp, especially for Fortune 500s to adopt cloud.” Softlayer allows customers to select bare metal services, creating a private environment, which was appealing to the enterprise-centric IBM. “Hybrid cloud is really what our clients are looking for. By building on dedicated servers, it opens it up to enterprise,” said  Telford.

‘Born on the Cloud’

“SoftLayer has a strong track record with born-on-the-cloud companies, and our move today with IBM will rapidly expand that footprint globally as well as allow us to go deep into the large enterprise market,” said Lance Crosby, CEO of SoftLayer. “The compelling opportunity is connecting IBM’s geographic reach, industry expertise and IBM’s SmartCloud breadth with our innovative technology. Together SoftLayer and IBM expand their reach to new clients – both born-on-the-cloud and born-in-the-enterprise.”

“In the early days, we catered primarily to internet-centric companies,” said Crosby on the joint call. “We were built by engineers for engineers. In the last several years, we’ve realized this is a very enterprise-grade product, and we’ve seen the SoftLayer customer base change fairly dramatically towards enterprise customers.”

Headquartered in Dallas, Texas, SoftLayer serves approximately 21,000 customers with a global cloud infrastructure platform spanning 13 data centers in the U.S., Asia and Europe. Among its many innovative cloud infrastructure services, SoftLayer allows clients to buy enterprise-class cloud services on dedicated or shared servers, offering clients a choice of where to deploy their applications. These clients will benefit greatly as new enterprise grade functionality from IBM emerges for SoftLayer customers, who will then have a unique opportunity to incorporate it as their business grows.

SoftLayer has a breakthrough capability that provides an easy “on ramp” especially for the Fortune 500 to adopt cloud. And for the SoftLayer born-on-the-cloud customers, IBM opens a new market into the enterprise.   Specifically, SoftLayer allows cloud services to be created very quickly on dedicated servers — rather than a virtual one, which is the norm in the public cloud.

This acquisition will:

  • Speed IBM’s ongoing focus to provide cloud services for the Fortune 500 which have yet to capitalize on cloud computing.
  • Compliment and extend IBM’s existing SmartCloud portfolio, which is already on track to deliver $7B in annual cloud revenue in just 18 months.
  • Expand reach to new clients including born-on-the-cloud companies and traditional enterprises.

IBM chose SoftLayer is that it will enable IBM to deliver an industry first: marrying the security, privacy and reliability of private clouds with the economy and speed of a public cloud. For the Fortune 500, this couldn’t come at a better time.

IBM intends to expand SoftLayer cloud offerings to include OpenStack capabilities, consistent with its entire SmartCloud portfolio and historic commitment to open standards such as Linux. Given that most companies will mix public and private cloud services, clouds need to interoperate. In that way, firms can better leverage cloud to run their social, mobile and Big Data applications.

IBM will also support and enrich the SoftLayer cloud-centric partners and ecosystem and its performance capabilities for Big Data and analytics. IBM will provide go-to-market and customizable resources for its expanding cloud ecosystem.

Advisors, Financials Not Disclosed on Joint Call

The joint company call also revealed that advisors on either side will not be disclosed.  There was no comment on the numbers, despite some media outlets pegging it at a $2bn+ acquisition. When asked about SoftLayer’s growth rates, and what IBM expects out of it, Clemente responded, “We certainly don’t buy a company to grow slower than the market.”

“This is still a market in acceleration, it’s still nascent,” said Clemente. “You’ve seen us invest heavily in cloud– this comes after years in investments ($6bn a year in R&D $4bn in SaaS Cloud)”

 

About the Author

Jason Verge is an Editor/Industry Analyst on the Data Center Knowledge team with a strong background in the data center and Web hosting industries. In the past he’s covered all things Internet Infrastructure, including cloud (IaaS, PaaS and SaaS), mass market hosting, managed hosting, enterprise IT spending trends and M&A. He writes about a range of topics at DCK, with an emphasis on cloud hosting.

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One Comment

  1. Smart move. :)