IBM scored a key cloud deal that gives it more credibility in a market that CEO Ginni Rometty believes will be worth $1 trillion (IBM, VOD)


IBM Virginia Rometty

  • IBM says it has signed a five-year, multi-million cloud, AI deal with Vodafone Idea, one of India’s biggest telecom operators.
  • The agreement gives Big Blue a chance to highlight its AI and cloud capabilities, which is important because it’s widely seen to be lagging far behind the market-leading Amazon Web Services. 
  • The deal also helps IBM stake its claim in hybrid cloud computing, a market that IBM CEO Ginni Rometty believes will be worth $1 trillion — and that she believes IBM is poised to lead. 
  • Visit Business Insider’s homepage for more stories.

IBM is poised to establish a bigger footprint in a major market after signing a five-year deal with Vodafone Idea, one of India’s largest telecom operators. The multi-million dollar deal could also give Big Blue a much-needed boost in an arena where it’s struggling to catch up with more dominant rivals: cloud computing.

IBM will help Vodafone Idea build a hybrid cloud network with AI capabilities to better serve the telecom company’s roughly 400 million customers, the tech giant said Friday.

Under the agreement, Vodafone Idea would be able to build “a more agile platform” by leveraging IBM’s artificial intelligence automation and hybrid cloud technology, Steve Canepa, general manager of the company’s media and entertainment team, told Business Insider.

“This is a strategic transformation of their architecture to allow them to become more efficient in getting their work done,” he added.

IBM’s struggle in cloud

It’s an important win for Big Blue. While historically dominant powerhouse in corporate technology, IBM has lagged rivals in the important and fast-growing cloud computing services market. The public cloud services market, with total vendor revenue of $95 billion in the second half of 2018, is dominated by Amazon Web Services, with 12.2% market share and Microsoft, with 10.2%, followed by Salesforce, with 6.8%, Oracle, 3.5%, and Google, with 3.2%, according to analyst firm IDC. IBM is in 6th place, with 2.75%, by IDC’s reckoning. 

“They did not invest early enough,” IDC analyst Deepak Mohan told Business Insider. “It took time for them to get their message right.”

But IBM launched a cloud offensive recently by touting a hybrid strategy that enables companies to run their networks across both a public cloud and a private data center. Earlier this year, IBM CEO Ginni Rometty predicted the company will become the biggest player in the hybrid computing market, which she projected will eventually be worth $1 trillion — a key reason, she says, for the company’s big $34 billion purchase of software company Red Hat. 

The Vodafone Idea deal underscored this new cloud push, which also highlights a key component of IBM’s hybrid cloud strategy: Watson, IBM’s AI technology. Earlier this year, IBM announced the wider deployment of its AI offering with Watson Anywhere, which allows for the use of the technology on any cloud a user would like. 

The India deal also features IBM’s Cloud Private offering — software applications that enable companies to manage their networks across both public clouds and private data centers.

Hybrid Cloud Strategy

“Hybrid’s certainly been a strong aspect of the new IBM positioning, particularly with the focus on IBM Cloud Private and Watson Anywhere,” IDC’s Mohan said. “They took a while to consolidate internal assets and offerings, and branding, around a common cloud message. It seems to be slowly coming together now.”

Analyst Roger Kay of Endpoint Technologies Associates echoed this point, telling Business Insider: “The company is bringing to bear a lot of the capabilities it has been touting as the forward-looking businesses, where it wants to make its mark.”

Michael Brook, chief technology officer of Pitchly, a content services platform, said the deal highlighted IBM’s bid to become more competitive in a tough market.

“With competition biting at its heels, IBM has had to find ways to differentiate itself in the market, and hybrid cloud and AI are its two biggest bets,” he told Business Insider.

Still,  IBM faces a challenging road ahead in a highly-competitive market, he added: “Underlying it all, IBM is in a very undesirable place. It is building technology first and seeking application of its technology second, and it is heavily reliant on its existing brand to push its business forward.”

Telco, tech partnerships

The Vodafone Idea deal also underscores the push toward more partnerships between telcos and tech companies.

In January, IBM also unveiled an alliance with Vodafone in which the two companies will collaborate to develop new technologies and services for adapting to AI, 5G and other major technology trends. Vodafone Idea is part of a partnership between Vodafone Group and Aditya Birla Group in India.

The alliance underscored the need for telecom companies to forge partnerships to be successful in embracing and maximizing the benefits of cloud computing, according to IDC.

“Telcos must partner,” IDC analysts said in a research note. “This venture fits the blueprint. … Telcos must partner if they want to address the full breadth of cloud services opportunities, combining their networks and access to hyperscale platform providers with partners’ infrastructures and additional capabilities. This venture enables Vodafone to accelerate its own digital transformation.”

Read More: IBM CEO says Big Blue will be No. 1 in new trillion-dollar cloud market

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