Is Facebook Moving WhatsApp off IBM?

Facebook is reportedly looking to bring its messaging service to its own data centers, costing IBM a marquee customer.

Mitch Wagner, Executive Editor, Light Reading

June 7, 2017

3 Min Read
Is Facebook Moving WhatsApp off IBM?

IBM could be losing one of its biggest and most prominent cloud customers, as Facebook is reportedly moving WhatsApp to its own data centers.

WhatsApp is used by more than 1 billion people, and currently runs on more than 700 high-end IBM SoftLayer servers, according to a CNBC report, citing an anonymous source familiar with the matter. WhatsApp is one of IBM's top-five customers for its cloud service.

Facebook acquired WhatsApp for $19 billion in 2014 and left the app running on the servers it always used, CNBC said.

Figure 1: Photo by [GFDL or CC BY-SA 3.0], via Wikimedia Commons Photo by [GFDL or CC BY-SA 3.0], via Wikimedia Commons

Losing WhatsApp as a customer isn't necessarily a ding on IBM Corp. (NYSE: IBM). Facebook has its own world-class cloud infrastructure, and it makes sense for Facebook to want to use its own resources.

But losing WhatsApp would take away a prime endorsement at a time when IBM is struggling to gain traction in the cloud market.

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IBM Cloud is the fourth-biggest cloud service, lagging far behind Amazon Web Services Inc. (AWS) and also behind Microsoft Azure and Google Cloud, according to recent market statistics by Mary Meeker, a general partner at Kleiner Perkins Caufield & Byers . AWS has 57% market share, compared with 34% for Azure, 15% for Google Cloud and 8% for IBM. (See Cloud Growth Spawns Worries, Mary Meeker Reports.)

IBM's non-cloud legacy businesses are dragging the company down, even as cloud and other "strategic imperatives" grow at a brisk space. IBM quarterly revenue has fallen 20 quarters in a row up to the quarter ending March 31. Revenue was $18.2 billion, down 3% year-over-year, while strategic imperatives -- cloud, cognitive solutions including Watson, analytics, mobile and security -- was $7.2 billion, up 12%. Cloud revenue was $3.5 billion, up 33%. (See Legacy Business Still Dragging IBM Down.)

IBM scooped up cloud and managed hosting services from Verizon, adding 700 customers to IBM cloud and expanding the company's global footprint. (See IBM Scoops Up Cloud Assets From Verizon.)

— Mitch Wagner Follow me on Twitter Visit my LinkedIn profile Visit my blog Friend me on Facebook Editor, Enterprise Cloud News

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About the Author(s)

Mitch Wagner

Executive Editor, Light Reading

San Diego-based Mitch Wagner is many things. As well as being "our guy" on the West Coast (of the US, not Scotland, or anywhere else with indifferent meteorological conditions), he's a husband (to his wife), dissatisfied Democrat, American (so he could be President some day), nonobservant Jew, and science fiction fan. Not necessarily in that order.

He's also one half of a special duo, along with Minnie, who is the co-habitor of the West Coast Bureau and Light Reading's primary chewer of sticks, though she is not the only one on the team who regularly munches on bark.

Wagner, whose previous positions include Editor-in-Chief at Internet Evolution and Executive Editor at InformationWeek, will be responsible for tracking and reporting on developments in Silicon Valley and other US West Coast hotspots of communications technology innovation.

Beats: Software-defined networking (SDN), network functions virtualization (NFV), IP networking, and colored foods (such as 'green rice').

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