IBM Bullish on Industry Clouds: 5 Reasons Why

Looking to reignite revenue via the red-hot industry-cloud market, IBM believes its specific focus on four heavily regulated industries—financial services, healthcare, telco, and government—will help persuade the giants in those fields to begin their big leap into the cloud.

On my weekly Cloud Wars Top 10 rankings, IBM is #10. On our separate Industry Cloud Top 10 rankings, IBM is #7. And in both cases, IBM needs to begin showing signs of significant revenue growth or it will be in danger of dropping off the former list, and of slipping lower on the latter.

In that context, I wanted to share 5 strategic reasons why IBM senior vice-president Howard Boville believes the company’s unique approach to industry clouds will catch the attention and interest of heavily regulated customers that have, for the most part, been hesitant to get into the cloud until it proves it can handle their unique governance, security, and compliance requirements.

Boville and I spoke recently and yesterday, and in a piece called IBM Cloud Seeks Peace, not War, with Amazon, Google and Microsoft, I shared some of his thoughts on the intriguing new tack IBM Cloud is taking with the big hyperscalers.

For today’s piece, I want to focus on Boville’s articulation of IBM’s industry-cloud capabilities. If you’d like to hear the entire interview, check out this episode of the Cloud Wars Live podcast: IBM Industry-Cloud Blitz | Cloud Chief Howard Boville.

And to reveal that outlook, here are 5 key excerpts about industry clouds from my conversation with Boville.

1. “Hyperfocused” on 4 Industry Clouds

“We continue to be hyperfocused on the four markets in regulated industries—healthcare, telecommunications, financial services, and government—and it is really kind of working with the industries that I just mentioned to build capabilities that are relevant for them in a hybrid multi-cloud context. So having a lot of fun, essentially building the products that I was interested in getting in my old role as a CIO, but also really working very closely with lots of different business leaders in those industries to really understand what it is they can get to deliver business value as opposed to simply moving workloads from their environments to another environment.

“And the market is really responding very well to the actual thesis that we have that having specialist clouds is where the real value can be derived.”

2. Co-Creation with Multiple CXOs

“When I started 18 months ago, we started an open-source project for controls. So what we did was spin up three financial services groups—one for Chief Information and Chief Technology Officers, the second for Chief Risk Officers, and the third for Chief Information Security Officers—all of which have a different aperture on life and the problems that they solve for. And that was the reason for having three separate ones. 

“The other actual guiding principle was to have them global because we wanted to capture the subtleties or the nuances of regulations in different jurisdictions. So we pulled anchor customers or anchor prospects from all points on the compass. W started then with eight banks, but fast-forward to where we are now: we’ve got 70-plus financial services institutions all contributing their actual control frames as it relates to wide variants of cloud. So cloud service-provider controls, but also software as a service, plus third-party and fourth-party risk, which has been much publicized over the past 18 months.”

3. More specialization coming: from global to regional

“It’s been an incredible success as the membership has been increasing from 8 customers to 70-plus, but we’re changing the charter now as we speak. As I mentioned, initially the charter was tied to global institutions, and what we are now doing is actually going to regional. So continental because in every jurisdiction, there are slight differences in terms of how regulators think about cloud. In Europe, where I’ve just come from, there’s certainly a very vibrant market from a regulatory perspective with a lot of conversations and policy discussions around sovereign clouds.”

4. Three key guiding principles for customers

“The first is how are they deriving the highest level of productivity from the assets that they have employed to compete in the marketplace—whether that’s people, software, cloud capabilities, infrastructure capabilities, and their supply chain?

“The second is how they actually get value creation from that: how does the work with all of those components, all of those raw materials, if you like, deliver value for their customers and their shareholders?

“But the third area is the actual controls: what controls do they have to be adherent, but also to still operate in a way that they’re getting the optimal level of productivity and value creation? And the thesis that we’ve been working on and started with and has proven to be completely correct is the ability to actually get a productivity and value creation at a very quick pace can be either impeded or accelerated by how thoughtful you are about the controls that you have to live within. Therefore working with a platform, which is IBM’s platform for regulated industries, where we built these controls in from the outset, means that’s one element of the three legged stool you don’t have to worry about.”

With those 70-plus financial institutions working very closely with IBM Cloud on these three guiding principles, IBM is able to be “working within the wisdom of crowds—and also of wisdom of clouds—because we’re actually taking the community control frameworks and therefore everything gets a little bit better based upon the different risk postures institutions have.”

5. Customers deserve—and demand—open clouds

“The final point around this is at no point has IBM declared that this will be a proprietary advantage that we have, that you can only get these control rules from IBM’s cloud. We’ve always had the design philosophy that the world will be hybrid and multi-cloud, and therefore the capabilities that we provide can extend to other cloud providers and those extend to other cloud providers, and also extend to your on-premises environments.

“To meet this design philosophy, the strategy that CEO Arvind Krishna has established includes a capability called IBM Satellite, which allows customers to build once and run anywhere, which helps with a regulatory concern around interoperability and portability, particularly in the event of an IT operational issue or a cybersecurity issue. But it also means that customers can do with cloud what they’ve always done on-premise, which is to make decisions as to where they place their workloads relative to the risk posture of the actual supporting business processes.”

Final thoughts

It all sounds great—as I’ve said before, Boville is a gifted speaker and makes a very compelling case. But at a point, IBM needs to convert that eloquence into customer wins and rising revenue or else that large and extremely aggressive cohort of other major cloud providers will find ways to erode the unique advantages IBM now has. 

From a purely technological perspective, someone could make the argument that such a time will never come. But the business world is not governed by “purely technological perspectives”; rather, it’s governed by business imperatives.

And to meet those imperatives, business leaders want to go with the winners.

So IBM needs to prove that it is a winner in not only cloud strategy but also in the cloud marketplace.

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