Context: IBM and Bell recently announced their partnership to provide business customers across Canada with access to specialized cloud services via Bell’s Business Cloud. According to the agreement, Bell will deliver secure, high speed access to a range of on-demand compute and storage options available through the IBM Cloud.
Synergy the source of partner success – left and right side delivery needed in hybrid scenarios: IBM has made considerable investment in building data centre footprint across Canada and currently has 19 facilities, 2 of which are “cloud data centres,” located in Markham, Ontario and Drummondville, Quebec; these facilities form part of IBM’s global SoftLayer network. Bell also boasts significant data centre capacity: with assets acquired in purchase of Q9 Networks, it now operates 27 data centres that can support 39 MW of IT load, from which it delivers Cloud Compute, IaaS delivered through multiple platforms including Bell’s in-house cloud infrastructure. With the new agreement, customers may also access SoftLayer infrastructure via the Bell Cloud. According to Nevil Knupp, VP of Cloud, IBM Canada, despite abundant resources, there is no overlap in cloud service delivery between the partners as all customers have need of both traditional and dynamic cloud workloads:
“Whether it’s our 19 or Bell’s data centres – and they are a big managed service/colo provider – this is an opportunity for customers to connect traditional and cloud workloads together, and for us to offer customers all services and choice in how they want to run it. Bell needs all the data centres they have for what I call the left-hand side of hybrid cloud (the on-premise side), and the cloud data centres for that true, dynamic workload cloud. Their managed services business is a true compliment to ours. The partnership saves them from having to make a capital investment in building cloud capability, since they can use that from us.” While Bell had offered hosted private cloud, Knupp explained, through the partnership, they are also able to deliver private or public via the SoftLayer platform to augment existing services.
Delivering beyond VPN over the Internet: For many applications, VPN over the Internet is viewed as an acceptable method for managing cloud data traffic that provides adequate security and performance. However, as Knupp explained, this technology does not deliver quality of service bandwidth or the ability to scale with cloud requirements, due to issues like (and including) competing service demands the ISP may be experiencing. Under the terms of the new agreement, Bell will provide customers with a dedicated connection to its MPLS network – and to the IBM SoftLayer data centres in Markham and Drummondville. “You can buy the amount of bandwidth you need and be guaranteed that it will always deliver the performance required for the traffic and also secure that line as no one else will be on it,” said Knupp. “This is a way for customers to connect in with committed SLAs and not have the Internet as a variable between them and the cloud. This is not something that is managed on the Internet, but it’s something that customers want.”
Scaling the network to align with cloud models: Use of dedicated lines to securely connect operations across geographical distance is within the realm of the possible, “but it is very expensive,” Knupp noted. But in servicing the IBM cloud, Bell is able to take a part of a communications path established between customer premises and IBM facilities, and sell customers only what they need on a more cost effective basis, providing “national telecommunications connectivity at a local kind of cost, as if the cloud data centre was right in their neighbourhood.” As Knupp explained, the disconnect between provisioning bandwidth upfront and supporting dynamic, flexible cloud demand is precisely the issue that the IBM-Bell partnership is designed to address: “rather than order 1 or 10 gigabyte circuits [as in traditional supplier contracts], where you have to buy to service the maximum demand you might experience and which likely leaves the circuit underutilized, with the Bell service, you are able to buy connectivity much more on an as-a-service basis because they can sell you the fractional bandwidth needed for your usage and this can be turned up as usage goes up. It’s much more variable and suits the cloud model perfectly.”
Price a point to reach into new market segments and the list doesn’t hurt: For IBM, the relationship with Bell has clear advantages from the perspective of market coverage. Bell will make the SoftLayer offering available to its extensive customer base, including the small to medium sized enterprise accounts, with reach that far surpasses what IBM would have in Canada. “Our offering is available to many more businesses,” Knupp explained, “but it’s also available to them at a lower entry cost. By buying that Bell Cloud Connect when an Internet VPN just won’t do, businesses of a certain size who maybe couldn’t trust their workload to the cloud now can. So it’s a rich opportunity for us.” And for hybrid cloud customers, he argued that the low telecommunications entry cost means customers who are considering moving some workloads to public cloud can “get in small” and grow their requirement over time, rather than make the difficult decision needed to justify the bandwidth costs in a traditional service deployment. For the developer community, he added, enterprise class connectivity can offer the validation that an application provider might need in conversations with their own clients, as they pitch a new offering with industrial strength reliability at enterprise buyers.
The bottom line: IBM’s cloud announcement underscores the importance of building ecosystem for providers looking to develop cloud market share. The company is creating a compelling growth story for its cloud business, pointing to a 57 percent revenue increase in 4Q, and year-end cloud volumes of $10.2 billion in 2015, and sharp increases in its “as-a-service” revenue, pegged at $4.5 billion for 2015. While a further breakdown of this revenue is not available from IBM, InsightaaS expects that a sizeable proportion of IBM’s cloud revenue is derived from professional services (as opposed to cloud product) income, a traditional stronghold for the company.
IBM also touts a leadership position in private & hybrid cloud, as per analysis provided by Synergy Research, which identifies IBM and Amazon, in no particular order or weight, as the top providers in this area. Synergy’s more comprehensive look at cloud, however, puts IBM on par with Google (behind AWS and Microsoft) in the overall cloud infrastructure services market. This view is aligned with other analyst firms, such as Gartner, which sees market consolidation around Amazon, Microsoft and Google in IaaS, and Wikibon, which positions IBM as the fourth-leading provider in the PaaS marketplace.
At the same time these indicators suggest that there is room for IBM’s cloud to move, there is reasonably strong consensus indicating that cloud has reached a tipping point in global markets, and that hybrid IT in particular, becoming a new norm for the majority of enterprises. According to new Canadian research conducted by InsightaaS/Techaisle Research, ‘cloud’ penetration (all forms, including SaaS) has reached 41 percent in the small business, and is essentially universal in midmarket (100-499 employees) and enterprise (500+ employees) businesses; in fact, more than 90% of these midmarket and enterprise firms have already begun connecting on-premise infrastructure with public and/or virtual private cloud.
The question, of course, is ‘what is to be done’ to capitalize on this growing opportunity? IBM’s answer for the Canadian marketplace is a good one that operates on two levels. By partnering with an established telco brand, the company is able to address a lingering concern in cloud adoption (secure, reliable access), but also to extend affordable access to new market segments – drawing mid-market communities closer into the traditional IBM enterprise cloud fold. For Bell, the potential is similar if different: delivering access to IBM’s SoftLayer compute and storage platform, in addition to its own hosted, managed services and cloud offerings, may help the service provider approach new customers with varied cloud platform options, while driving overall traffic demand.
Ultimately, the key question is how this benefits the customer. According to Knupp, the economies of scale that the IBM-Bell partnership will provide offers a unique opportunity for new mid-market customers to benefit from enterprise grade, secure and reliable access to an enterprise cloud offering – bundling cloud and connectivity may indeed serve as a welcome means of simplifying cloud consumption, assuming the dedicated line to a dedicated cloud offering represents a good trade-off for the multi-cloud shopping experience.