Light Reading

Have IBM & Apple Partnered Their Way to Cloud Leadership?

Mitch Wagner
7/18/2014
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IBM and Apple were the first big success stories for cloud computing, and they've had to stand by and watch other companies enjoy the fruits of the industry they invented.

Apple launched the iTunes Store in 2003, turning the music industry upside-down (it still hasn't recovered) and kicking off the modern cloud era. But sadly for Apple, the iTunes store was its only big cloud success: iCloud is a niche product, serving Apple apps only, while MobileMe and Ping were industry jokes. iTunes was the ultimate one-hit wonder -- like this:

As for IBM's history with cloud computing: What do you think Timeshare was?

Timesharing and mainframes were the first generation of cloud computing, and the foundation of IBM's monopoly over the computer industry through much of the 20th Century. IBM has has been less successful with the cloud in this century, although that's changed recently. The company is shifting its focus to the cloud, and its business is growing, despite an overall sales slump for IBM that's stretched nine dismal quarters.

Cloud Computing, 1969 style
Source: Wikipedia
Source: Wikipedia

Both IBM and Apple have had to watch gloomily as Google, Microsoft, and especially Amazon have pushed the two companies to the sidelines of the industry they created.

That could change with this week's groundbreaking IBM and Apple partnership. Apple will provide iPhones, iPads, and support for those devices, while IBM provides enterprise expertise -- 100 apps for vertical industries, as well as security and analytics and cloud support. (See Analytics, Security Key to Apple, IBM Tie-Up.)

Even separately, IBM and Apple have been getting their cloud acts together recently. IBM's cloud offerings as a service are now at an annual run rate of $2.8 billion, compared with $2.3 billion as of the first quarter. That's still just a fraction of IBM's $100 billion revenue last year, but it's brisk growth. Cloud sales grew 50% for the first half of 2014 year-over-year.

And Apple's new cloud offerings, announced last month, look very promising. The company is getting into the Internet of Things with interfaces for home automation and healthcare, broadening iCloud to be a Dropbox competitor for document storage, and launching CloudKit to allow developers to build applications using iCloud. (See Apple Launches Biggest Changes Since iPhone and Apple Launches Evil Plan to Steal Carriers' Customers.)

Taken together, IBM and Apple can offer a cloud one-two punch: IBM has the enterprise business and Apple the consumer side.

No, not that kind of punch.
Source: Wikipedia
Source: Wikipedia

Moreover, IBM offers the cloud infrastructure and Apple provides the client devices. In order to truly lead the cloud, companies need to control the user experience from end to end: That's why Google acquired and relaunched Android and, more recently, why Amazon introduced its own phone. You can't lead the cloud if someone else controls the point of contact with the user.

Apple and IBM are a powerful combination. In a few years, when we talk about cloud leaders, we may find ourselves listing Amazon, Google, Microsoft... and the IBM and Apple partnership. That depends on how well they execute. But both Apple and IBM are great at executing; these are two focused companies that do what they say they will do.

What does this mean to carriers? The same thing the cloud always means: It's a great opportunity for carriers to provide connectivity between data centers, and from the data center to the user. But it's also a threat: As carriers themselves look to get into cloud computing, they find powerful incumbents already there.

By the way, this article was inspired by a blog post by veteran industry analyst (and Light Reading friend) Tom Nolle: The Battle in, and for the Cloud. Tom is definitely on a roll this week. (See How NFV Gets a Foot in the Door for SDN.)

— Mitch Wagner, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profileFollow me on Facebook, West Coast Bureau Chief, Light Reading. Got a tip about SDN or NFV? Send it to wagner@lightreading.com.

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bosco_pcs
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bosco_pcs,
User Rank: Light Sabre
8/6/2014 | 5:43:15 AM
Re: Play well with others?
@nasimon,

I suppose time will tell but instead of lifting just a couple of my statements, I hope you will consider everything I have said. After all, we all agree the two companies have very different cultures and IBM has not been doing so well.

But my case is precisely because of these - and not in spite of - factors that IBM will try to make it work. Mind you, it is no longer the one calling the shot like the last two times when the two companies tried to partner together.

Additionally, while Apple may have very shape minds, in terms of technologies, design and marketing, have you heard of its consulting in the corporate environment?

So you are right that they have very different markets. But again it is precisely of that fact that turf war might be minimized!

Just a thought but I think it won't take long to find out. Perhaps in less than a year time
nasimson
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nasimson,
User Rank: Light Sabre
8/5/2014 | 11:31:23 PM
Re: Play well with others?
> I think the real speculation is if this is the first step of integration
> relationship of the two companies.

Really? I dont think its going to happen. The two companies operate with very different cultures in very different markets. Partnershpip on cloud is OK - although I dont have very high hopes.

But integration on a broader level would be a good example of a situation where 1+1=less than two.
Mitch Wagner
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Mitch Wagner,
User Rank: Lightning
7/22/2014 | 8:37:15 PM
Re: Big change for Apple
Some corporate users are reportedly asking for their BlackBerrys back.
sam masud
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sam masud,
User Rank: Light Sabre
7/21/2014 | 3:55:12 PM
Cui bono?
With nine straight quarters of declining sales, it's likely IBM needs such a partnership more than Apple. For the rest of the story on Big Blue, here's a very interesting article that was published last week:

http://davidstockmanscontracorner.com/1-5-million-per-scalp-at-microsoft-another-folly-of-monetary-central-planning/

PS: loved the music video...might consider launching a site called LightTube :-)
thebulk
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thebulk,
User Rank: Light Sabre
7/21/2014 | 3:49:23 PM
Re: Play well with others?
Valid points indeed, Lets wait and see, If it works out I will be excited, if they break up early on, I wont be surprised either. 
bosco_pcs
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bosco_pcs,
User Rank: Light Sabre
7/21/2014 | 3:43:35 PM
Re: Play well with others?
Perhaps it is a matter of opinion. However, I'd like to add another salient point. Mr Tim Cook was a IBMer. He is likely to be aware of IBM's culture. Incidentally, I knew he came from Campaq but I was quite surprised to learn of his IBM background because the late Jobs wasn't really nice to Ms Ellen Hancock upon his return from exile. Another plus is he is also an operational guy deep down.

I guess we need to define "mess it up." I mean, except for the 100 or so Apps and the servicing provided by IBM, there is little downside risk. Huge cost to Apple? No. Watson worse than Siri? I don't think so. Each ruins the other's reputation? Unlikely.
thebulk
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thebulk,
User Rank: Light Sabre
7/21/2014 | 3:28:01 PM
Re: Play well with others?
@bosco_pcs, 

I agree it will be an amazing partnership, as well as with the strides both CEOs have made, but I do not think it will take a lot to mess it up, until its well established I think it will be touch and go. 
bosco_pcs
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bosco_pcs,
User Rank: Light Sabre
7/21/2014 | 1:20:06 PM
Re: Play well with others?
They could certainly mess up because of turf war but the incentive is huge for both. Imagine using Apple as the gateway to Watson!

More important, it is not your father's Apple or IBM. CEO Cook has done a lot of silo busting since he took the reign at Apple. And CEO Rometty's fate has a lot to ride on this partnership. I suspect the progress of this partnership will be a topic at her senior staff meeting on a daily basis.

Technically, it is absolutely complementary and even synergistic. It will take a lot to mess it up!

I think the real speculation is if this is the first step of integration relationship of the two companies. Mind you, IBM doesn't really sell PC anymore. What's stopping it from paddling iMac and MacBook beyond this MobilityFirst partnership? And if IBM succeeds in unloading the server biz to Lenovo, AIX may be the way of the past too. And what about the rumor about fusing iOS and OSX? So Apple can save a ton from scaling up sales at the enterprise level while IBM can collect a nice cut without spending a ton of R&D down the road.

With that in mind, I am sure both CEOs will have the directives to their respective staffs to pull out all the stops or risk a call to the carpet

 

 
DHagar
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DHagar,
User Rank: Light Sabre
7/21/2014 | 12:41:00 PM
Re: Big change for Apple
@danielcawrey, agreed.  It has created a perfect alignment of products and capabilities.  I believe this can overcome past limits, such as thebulk points out, where Apple wants to have the game to themselves.  These companies get credit for recognizing the shift and taking full advantage of what they can create together.

 
danielcawrey
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danielcawrey,
User Rank: Light Sabre
7/20/2014 | 3:36:54 PM
Re: Big change for Apple
Over the past few years, I have seen a huge shift away from Blackberries to iOS in the enterprise. And Apple has been trying to get its enterprise act together by giving larger companies some direct access to be able to build big business solutions. 

It seems that the IBM deal was inevitable. Both companies need each other to compete against Google and Amazon. Those three are winning in the enterprise business -who would have thought that five years ago?
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