IBM Cloud Renaissance: General-Purpose Clouds Out, Industry Clouds In

Considering the impact former Bank of America CTO Howard Boville has had in just his first year as senior VP of IBM Cloud, perhaps some other big cloud providers will seriously consider adding customers to their executive ranks. 

IBM is #9 on my weekly Cloud Wars Top 10 rankings, and is #7 on my new Industry Cloud Top 10 list.

A gifted speaker as well as world-class technologist, Boville shared in a recent conversation his perspectives on industry clouds, IBM’s long history of mastering how industries operate, the orchestrated interplay between security and data, and the existential need for businesses to “decalcify” their business processes in today’s fast-paced world.

To get my quick video take on the significant changes Boville is driving within IBM, please check out this episode of our daily Cloud Wars Minute video show.

“As a customer of a great many technology companies relative to the institution that I worked at [BofA] before coming to IBM, I could see very often that for large enterprise companies with legacy environments, the cloud offerings just didn’t work,” Boville said.

And those cloud shortcomings relative to big corporations were many, wide and deep. 

“They weren’t relevant, they weren’t secure, they didn’t have the compliance controls in place,” Boville said.

“Now, those cloud offerings were superb business models, obviously, for cloud-native companies. But for those companies with legacy environments, they weren’t appropriate. 

“So IBM has been working on the basis of building clouds specific for industries. And why would we do that? Well, that’s because we’ve been servicing large enterprises for over a hundred years, so it’s just a natural motion to actually have this form factor there.”

Describing the time before industry-specific clouds as Chapter One of the cloud story, Boville said the market opportunity is enormous because big customers have simply not been willing to make major commitments to the cloud as a general-purpose tool. The top-level reason for that reluctance is simple: every time the cloud vendors insisted that the only way forward was with the cloud, the smart customers couldn’t get a decent answer to their single question: why?

“There’s no value simply moving your applications off your computers and putting them onto somebody else’s,” Boville said.

“There is zero value in that. There’s no strategic output that you get from that kind of approach.”

Industry-specific solutions, however, are finally enabling large enterprises to get the answers to their question about why should I move—what’s the business benefit?

So as Chapter 2 of the cloud story begins and the focus shifts from whiz-bang technology to business outcomes, the market growth should be spectacular.

“I think there’s a number of factors,” Boville said. “If you look at the total numbers for cloud adoption through the lens of cloud-native companies, it looks like everything’s moved to cloud.

“But if you look at the enterprise space, particularly in regulated industries, it’s low single-digit in terms of their applications that have moved to the cloud. And that isn’t because there’s a natural reticence to use new technology—rather it’s that the problems that have to be solved to be able to use the capabilities of cloud are more complex.”

Unless a cloud provider understands that at a visceral level, the customer will remain on the sidelines because the vendor is unable to answer the “why” question, Boville said.

“And again—and I certainly observed this when I was consuming technologies—unless you deal with a company that’s got a heritage in terms of solving for those complex problems, you just simply pass one another in the conversations that you’re having.

“And the reason why I came to IBM was I could see the assets that IBM had, but also there’s the deep heritage in terms of understanding the complex problems that you have if you work in governments, in financial services, telecommunications, and healthcare, automotive industry and so on, and that’s the big opportunity,” Boville said.

“But to be able to play in those marketplaces, to be able to deliver the value, you’ve got to deliver industry-specific capabilities.”

IBM is betting its future on its ability to deliver precisely those types of industry-specific capabilities—and we’ll get to those in a moment—that amount to a $700-billion opportunity, Boville said.

“The marketplace that we’re going into isn’t tapped. So the target addressable market based upon analyst reports for the core markets we’re going for is around $700 billion. And the market penetration for the use of cloud can be in low single-digits based upon highly regulated industries, and probably less than 20% in less-regulated industries. 

“So the whole notion that the cloud battle or the cloud wars are over, no—it’s only just begun for large enterprises,” Boville said.

“In fact, it hasn’t begun at all really. And that’s why we’re very confident in the thesis that we’re delivering. And we’re getting this very positive feedback from the customers that we’ve obviously got very long-term relationships with because of the nature and the history of IBM.”

So how is IBM making that happen? Here are Boville’s thoughts on some of the key elements in IBM’s strategy.

Data Access.

Contrasting IBM’s stance on customer data to those of other cloud providers whose overarching business models require them to use customer data, Boville said, “Our philosophies are different to that, which is your data should be your data and that shouldn’t be seen as a mechanism where we would send you a ransom note, should you ever want it back, for a very expensive fee when we provide it back to you. So if you pull a thread on that philosophy, it also then means that we’ve developed our architectures in a different way. So for example, key encryption for your ability to get to your data—only our customers have those keys. That’s different from other cloud-service providers. We see no reason as why we should ever get access to your data.”

Data Governance.

“Once the data is in our cloud, we build confidential compute capabilities, which means that your data will be encrypted not only at rest and in transit, but also in use. If you think that through, that means that you can do a lot more from an IT-governance perspective and a data-governance perspective. The first thing that would show up is that the actual quality and the purity of the data doesn’t get corrupted, which is essential to ensure that you have responsible AI. But secondly, you can mix with third-party data sources in the knowledge and assurity that you’re not going to actually put your customer’s data at risk from a privacy perspective or from a laws, rules and regs perspective.”

Open Hybrid Cloud.

“It always kind of struck me with fascination that the way that you would kind of consume cloud services is you’d move your applications there and you’d move your data there. Because in the real world you never move all of your data to one place. You have data in your own on-premise environments, you have it in terms of different areas, but essentially you were taking your most-precious resource and putting it into these little locked chambers that you couldn’t do the alchemy to create the mixture of things to create something else from the periodic table. So that ties into the open hybrid cloud approach we have, which is you should be able to get as much equal access to your data on-premise as you could in a cloud construct to actually mix that data to create, as I said, it’s kind of alchemy in terms of the new ingredients. So that’s very unique to IBM and it’s because we’re not a pure-play cloud provider. 

“The answer isn’t, ‘Cloud—what’s the question?’ Rather, we’re situational relative to what a customer would want.”

Multicloud.

“And it’s really resonating very strongly with the marketplace because of the obvious reasons: ‘All right, fantastic—you’re liberating my ability to get to all of my data, irrespective as to where it may be, whether it’s on-premise or in the IBM Cloud or in another cloud as well.’ From that perspective, I don’t necessarily see IBM in this kind of fight-to-the-death competition with the other cloud providers. I actually see us being complimentary to the other cloud providers.

“And why do I see that? Because in my old role again as a customer, and when I talk to CIOs in organizations, they’re always going to consume multiple cloud providers because you don’t want to be locked into a pace of innovation of one cloud provider, nor do you want to be locked in from a financial perspective and nor do you want the IT operational or cybersecurity risk of being with one provider as well. So therefore, everything that we build is in that context.”

Cloud Engine.

Boville said IBM’s newly launched serverless Code Engine “ties into this philosophy that as a customer, you are going to consume from multiple clouds.” Code Engine allows businesses to “build your applications once and run them anywhere: on-premise, in IBM’s cloud, or in other clouds. 

“And why is that important? It’s important because essentially a CIO is doing two core things. You’re forever trying to drive the optimal level of productivity from your IT assets and your developers and from those creating value, and obviously doing so in a way that’s secure and compliant. The current model without the capabilities that IBM are providing means that you’d have to have a development team that would be able to develop against your on-premise environment, a different set of skillsets for a proprietary cloud service provider one, another different set of skillsets for a proprietary cloud provider two, and so on. So that’s incredibly inefficient from a developer perspective, but also the reason why those other cloud providers are proprietary is because it locks you in. With the capability that we have, it means you can write once on that, and you’re not locked in.”

Final thoughts

The reason I’m enthusiastic about IBM Cloud’s new opportunities under Boville is that I’ve made the case for the past few years that IBM has all the pieces to be a hard-charging leader in the digital revolution but lacked the internal will and/or leadership to pull all those pieces together and silence the internal warring factions.

Boville, with the full backing of CEO Arvind Krishna, seems to be doing just that. And nowhere is that new sense of vision and leadership more clear than in this blunt assessment from Boville on the significance of IBM’s all-in bet on industry clouds.

“The nice thing about the approach we took at IBM is we pivoted from trying to be a general-purpose cloud to the core industries that we’re focusing on, so I can really, really ensure that I’m building the kind of stuff that I want you to consume with really good quality engineering, really understanding the actual problems that customers face,” Boville said.

“And then also the investments that I make—and I’m spending many billions of dollars to build that capacity and capabilities—all of what I’m building is very specific for the markets that I’m going for, as opposed to this generic thing that then the customer has to do a huge amount of customization around. 

“That didn’t make any sense in my old role. And it certainly isn’t making sense when I talk to CIOs in the markets that we’re focusing upon.”

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