IBM Acquiring Cloud Service Provider SoftLayer

IBM announced on Tuesday it is acquiring SoftLayer, the large privately held Infrastructure as a Service (IaaS) provider.

Though IBM said it is not disclosing terms of the deal, numerous reports state the deal is valued at $2 billion. SoftLayer has 13 datacenters spread across North America, Europe and Asia, which complements IBM's 10. IBM also said its SmartCloud platform runs 100 Software as a Service (SaaS) cloud networks.

The deal is the largest to date for IBM CEO Ginni Rometty, who has stepped up IBM's cloud efforts since taking the reins a year-and-a-half ago. Rumors surfaced back in March that IBM was circling the wagons of Rackspace as well as SoftLayer. While Rackspace is larger than SoftLayer, some viewed the former as a more logical choice because its compute and storage infrastructure were based on OpenStack. Rackspace was also the founding corporate sponsor of OpenStack, the rapidly expanding open source cloud computing operating environment.

Just weeks earlier, IBM used its Pulse conference in Las Vegas to announce all of its cloud computing efforts would use OpenStack infrastructure. IBM went so far as to say it wanted to leapfrog Rackspace as the leading provider of code to the OpenStack Foundation.

With Rackspace's market cap of $5 billion, IBM apparently was able to get a better deal out of SoftLayer, itself a cloud pioneer. Founded in 2006, SoftLayer launched its cloud network around the same time Amazon Web Services started offering EC2. SoftLayer today says it has 21,000 customers. Though it's known to serve mostly companies that conduct business over the Internet, such as social networking, mobile and gaming companies, SoftLayer in recent years also started catering to large enterprises and has said its annual revenues are $400 million.

On Tuesday's conference call, Ric Telford, IBM vice president of SmartCloud services, said SoftLayer will give its clients an "onramp" to the public cloud, and talked up SoftLayer's ability to let customers move their apps to dedicated cloud servers rather than multi-tenant virtual servers.

"By using these dedicated servers, software that was built for on-premise use can be more easily ported to the cloud," Telford said. "It doesn't have to go through as much heavy configuration as it does with a virtual server, which it was not developed to work with. This really is an onramp for the Fortune 500 as well as small organizations who have been waiting for an enterprise-grade cloud. It's important because clients need cloud to be a foundation of their social, mobile and big data transformations. As such, IBM sees this acquisition as a milestone and changing the cloud discussion from one of only reducing IT costs, which is where a lot of the conversation was originally around cloud, to impacting the business strategy."

Does that mean it isn't suited for lower-cost multi-tenant clouds? Not at all, SoftLayer's Crosby said.

"We have a multi-tenant public cloud, a single-tenant private cloud and a single-tenant bare metal for dedicated server. They each have their own advantages. We want our customers to buy the best technology that fits their needs," he said. "What we have found is our most sophisticated users end up utilizing all three flavors of it. It's all driven by a single pane of glass and a single API."

About the Author

Jeffrey Schwartz is editor of Redmond magazine and also covers cloud computing for Virtualization Review's Cloud Report. In addition, he writes the Channeling the Cloud column for Redmond Channel Partner. Follow him on Twitter @JeffreySchwartz.