IBM and Vodafone want to partner in the future of enterprise cloud, as the deal announced at MWC shows. Given how much enterprise hybrid cloud is a focus for cloud providers, and given IBM’s need to catch up, it’s not a surprise. Vodafone would also gain if a new enterprise vision for cloud applications promoted 5G. There are even some early indicators of success. The question isn’t whether the goals are worthy, then, but (as usual) whether there’s any meat on the bones of the deal that would provide a good chance of success.
The deal itself is an “eight-year strategic commercial partnership” that links IBM’s cloud and its AI services with Vodafone Business services and customers. The deal becomes operational in the coming quarter, and because of that early launch relative to full 5G availability, it’s clear it’s not dependent on 5G apps like IoT that require low latency. In fact, since Vodafone and pretty much everyone else is looking at the 5G Non-Stand-Alone (NSA) new-radio-only model, it’s not clear that there’s a real dependence on 5G even for the future. So what gives?
Let’s get one thing straight from the start. The direct focus of the deal is really about “carrier cloud” and not “enterprise cloud” in that the sense of the deal is promoting carrier sales to enterprises, not direct enterprise sales. However, anything about the cloud is in the end about the architecture of cloud applications, and that means that even “carrier cloud” strategies could impact the cloud at large if the strategies change or accelerate cloud architecture development. Because of the sales focus of the deal, though, we’ll have to first ask ourselves about the motivation of the players in the near term.
One obvious possibility is that IBM is looking toward a future where carrier cloud is going to be the largest incremental driver of cloud deployment. If the operators build out their own clouds, they’ll be establishing a scale of operations and a set of capabilities that will be potentially highly competitive with the current cloud providers. On the other hand, suppose IBM hosted Vodafone’s carrier cloud? Suppose that deal single-handedly made IBM one of the giants in public cloud? On Vodafone’s side, if operators are inevitably going to get into business services based on the new, microservice-based, model of cloud services, why not get to selling that stuff now instead of waiting to deploy your own cloud, and possibly getting it wrong.
I said five years ago that the largest market for public cloud computing services were applications that were not “migrated” to the cloud, but rather had never been implemented because they didn’t fit well in the current data-center-centric compute model at all. A hybrid cloud that mixes the benefits of public cloud computing and secure data center transaction processing is critical in reaping a trillion dollars’ worth of incremental spending. With the acquisition of Red Hat (which, somewhat to my surprise, IBM didn’t play up in their announcement), IBM could have all of the critical pieces needed to make this new cloud vision work.
As always, there are qualifications, it seems. The obvious one is the lack of specific linkage to the Red Hat OpenShift stuff that’s actually the technical foundation for any new hybrid-cloud vision IBM could offer. A less obvious but still important one is the linkages to “multi-cloud” in the sense of lots of public clouds, and IoT. The least obvious of all is the question of how a specific Vodafone Business relationship will impact any broader carrier-cloud plans that IBM might (or should) have.
The biggest problem with getting our hands on that trillion dollars in new cloud revenue is defining a solid architectural model for the application platform that will span multiple clouds and data centers. The industry has been spinning around on this topic for at least four years, and we only now seem to be coming to a consensus on even the basic points. It’s going to be container-based. It’s going to integrate virtual networking, and it’s going to link these two through Kubernetes orchestration. There are even a decent number of architects who could draw you a picture of this glorious hybrid future, but the challenge is first that most buyers probably don’t know any of them, and second that the details of the elements in the architecture would be different across the architects. Lack of a uniform vision always makes buyers antsy.
Red Hat has a decent number of those literate architects, and OpenShift is at least the beginning of a solid commercially credible framework for hybrid cloud. If I were IBM, I’d be singing that point loud and clear at any point in my positioning where the words “cloud” or “hybrid” were uttered. I’m not seeing that clear association here, and that means that the most compelling part of the IBM story isn’t being told, at least to the media. That’s bad because IBM’s biggest current weakness is too much reliance on sales influence and not enough on broad marketing. Remember my Robert Frost poem? “So all who hide too well away must speak, and tell us where they are.”
The second issue is that multi-cloud-and-IoT flavor. On one hand, it’s obvious that if 5G promotion is your goal, and you’re a network operator, you want to believe in IoT as much as a rabid conspiracy theorist wants to believe in Roswell UFOs. On the other hand, UFOs are still “unidentified”, which proves that fervent belief doesn’t make a market. The multi-cloud stuff could actually be more insidious; one comment made about the space in the stories on the deal says that companies have over a dozen clouds. Not the companies I’ve talked with, and surely not most companies. The more “multi” we go, the fewer true prospects there are.
The biggest problem operators have with transformation is their utter lack of realism. What they want is a future that’s profitable for the same reason the past was, which is never going to happen. There will be enterprises who do use many different clouds, multi-nationals who have no real choice if they want to cover their market areas. Most won’t, and over time the major cloud providers will expand their geographic scope to improve their own market share. Most IoT is within a facility, and will therefore never require more than WiFi or one of the sensor/controller protocols already in use. Yes, there is a need for cellular IoT, in the transportation industry in particular. No, it’s not a widespread need or one likely to develop early on.
This brings us to our final question, which comes down to the classic issue of “channel conflict”. Being a seller to the carrier cloud market is a good thing. Being a seller to an initial big player there is a good thing. Selling only to that player is a bad thing, and if it sounds to other operators like IBM and Vodafone are joined at the hip, there’s a risk that the deal will be seen as a risk to other carrier cloud infrastructure buyers. Certainly, it’s hard for an operator to differentiate their business services if they’ve got the same service supplier as all their competitors do.
This could be a case of sacrificing the long-term opportunity for short-term gain. IBM clearly needs a cloud win, and in particular one that’s truly a hybrid cloud win. They can benefit from a 5G-linked deal, though that’s not as clear a win as the carrier cloud piece. If they can ink some contracts in the first half of this year, that boosts their stock. Everyone else in the tech space thinks this way—make your numbers for the next quarter first, then worry about the ones after that with a worry-level that decreases as the quarters advance. Why not IBM?
Well, for starters, IBM’s success in the past has been clearly associated with one single thing, which is strategic account control. “Strategic” definitely doesn’t mean “only the current quarter”. I can tell you from personal contact with operators that they’ve wanted IBM to be a player in carrier cloud for at least six years, so there is an opportunity for IBM to exert some strategic influence. The operators also have what’s likely the longest capital cycle of any vertical, meaning it takes them longer to age out older equipment. That certainly puts strategic thinking at a premium. Anything IBM does to limit its strategic credibility will hurt them, likely disproportionately, in the carrier cloud market. Losing strategic credibility overall is, according to my own surveys, IBM’s biggest current problem overall, so this would be a double whammy.
Is there a positive slant that could be taken? Yes, there is. If IBM sees the carrier cloud space as both an opportunity that needs some leadership by example, and an opportunity to define the new application model for the cloud in a space that has significant revenue potential, then a deal with Vodafone would be well-justified. The big “if” is whether the deal can reap a quick result in both those areas. Get out in front of the carrier cloud and hybrid cloud markets and you have a lot to gain, but you gain it only if you get out in front.