CSPs

IBM Cloud Services: Slowing Growth or Still Hot?

Martin Schroeter, CEO, Kyndryl
IBM CFO Martin Schroeter

IBM's Strategic Imperatives businesses -- areas like cloud services, analytics, mobile and security -- are still growing, but not as quickly as one influential Wall Street pundit would like.

While IBM's legacy businesses (hardware, software, IT services) contracted, the Strategic Imperatives focus areas were supposed to offset those declines. But here's the problem, according to Bernstein:

"Alas, a new/different worry is emerging… the growth rate of IBM’s Strategic Imperatives has slowed materially over the last three quarters, growing just 7% on an organic basis at constant currency in the just reported quarter (FY Q2). By contrast, strategic imperatives grew at 22% and 16% in each of the prior two years."

Still, IBM statements from a few weeks ago paint a different picture. CFO Martin Schroeter in July told CNBC that the company is on-track and perhaps slightly ahead of its $40 billion strategic imperatives goal by 2018.

IBM has also taken issue with Gartner's view of the IaaS segment -- which suggests Amazon Web Services, Microsoft Azure and Google Cloud Platform are pulling further ahead of big blue. The situation was slightly more upbeat in a recent Synergy report, which says IBM's cloud market share has held steady over the past year.

Some of the confusion involves the way IBM reports cloud revenues -- which isn't as transparent as some analysts would like.

Whatever the case, a few things are clear to me. First, IBM retains close relationships with Global 2000 CIOs -- which means large enterprises are inclined to investigate IBM's cloud offerings.

But my concern involves the company's cloud strategy for smaller and emerging partners. During the company's PartnerWorld summit earlier this year, there weren't many many ISVs or SMB cloud partners on hand. Many of the partners were still lamenting IBM's decision to sell its x86 server business to Lenovo.

IBM SMB Cloud Progress

Still, there are signs of progress in the SMB sector. One of them involves Continuum, which runs its Continuity247 business in IBM's cloud. MSPs, in turn, leverage the Continuum247 platform to safeguard SMB customer data.

IBM will have a strong presence at Navigate 2016, a Continuum customer conference set for September. IBM needs to replicate that strategy with additional ISVs across the small and midmarket sectors.

Among the potential deals to watch: Workday -- the fast-growing provider of SaaS applications -- plans to use IBM's cloud as a software development and testing platform, the two companies are expected to announce on Aug. 15, according to The Wall Street Journal.

Joe Panettieri

Joe Panettieri is co-founder & editorial director of MSSP Alert and ChannelE2E, the two leading news & analysis sites for managed service providers in the cybersecurity market.