Market Insight

Tech giants are going all in with the cloud

May 12, 2014

Craig Stice Craig Stice Senior Principal Analyst, Storage

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Introduction

In the last few weeks, three if the technology industry’s biggest giants, Cisco, IBM, and HP have announced over $4 billion in investments into cloud services. Are these massive investments just smoke and mirrors, a game of positioning in the “next” great thing, or is this a true sign of the next great thing, the cloud?

Findings and Implications

Tech giants are going all in with the cloud.  On May 7th, HP announced a major step into their investment into the cloud by unifying its cloud portfolio under a single brand, Helion.   HP also announced a $1 billion investment into open-sourced cloud products over the next two years.   This followed a similar announcement from IBM where it announced their IBM Cloud Marketplace, a single location where customers can go to learn, and buy cloud software and services from IBM and their partners.   IBM also recently announced a $1.2 billion investment into their SoftLayer cloud service and a $1 billion investment into its middleware software cloud service.  In March, Cisco announced a $1 billion investment over the next two years to build, together with their partners, the world’s largest global intercloud – a network of clouds.

 

In the world of today’s massive scale public cloud datacenters companies like Amazon, Google, and Microsoft certainly have the market cornered.  Why then have HP, IBM and Cisco recently announced such incredible investments into a market that seems untouchable? 

 

Like any surging new technology market, as it becomes walled with what seems an impenetrable barrier, others begin to peck at it to find the niches.   Not to say that HP, IBM, and Cisco are small players in the IT industry, but they are certainly doing everything they can to find their place in the cloud.   The strategy for these tech giants isn’t necessarily to compete directly against Amazon and Google, but to put themselves in a leading position within the enterprise private and hybrid cloud markets.  In the enterprise markets, the cloud (both public and private) is now beyond the development phases, and clearly beginning the deployment phase.   Enterprise markets are where HP, IBM, and Cisco have their strengths and roots already set, so providing secure, reliable, branded services for enterprise cloud development, these tech giants are positioning themselves and investing now to be leaders in this market. 

 

IHS forecasts that global enterprise IT spending on cloud based architectures in which storage, servers, applications and content can be configured and delivered in a framework that is rapidly scalable, can  be dynamically provisioned, on-demand and with minimal management requirements will double from about $115 billion in 2012 to about $230 billion in 2017.

 

Conclusion

There is an incredible acceleration of innovation happening, driven by Cloud development and the explosion of connected devices or the Internet of Things (IoT), all resulting in an industry disruption with changing requirements, workloads, and customization.  The immense growth of cloud computing is also reshaping the requirements of the server hardware, to where pure processing power is no longer the priority.  OEMs are recognizing that the cloud growth trend is more than just possible, but likely probable and either need to be ahead of it, or will fall behind.   The focus is no longer on general purpose servers, but realizing they need to be a part of the bigger cloud picture with software, support, infrastructure, and services while utilizing their strengths in security and a trusted brand to pave their way.  Making $1 billion dollar investments today into a growing market of this size, are necessary moves.

For more detailed information on how the cloud is changing the server industry, see IHS’s new report, “The Cloud: Changing the server hardware landscape; one open standard at a time.” 

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