IBM Unveils Cloud-Computing Initiative Aimed At Large Companies

International Business Machines Corp. (IBM) unveiled new software to help large companies move some of their operations onto the Internet, the latest move by the technology company to capitalize on the fast-growing trend of cloud computing.

IBM on Thursday announced a new service--dubbed "Smartcloud"--that will enable clients to use a Web-based interface to install applications and configure databases on a platform provided by the company. The initiative is part of IBM's push to expand into the cloud, one of the fastest growing areas in information technology.

IBM's move further highlights how businesses are showing a greater interest in cloud computing, which enables more cost-efficient access to computer servers and data storage over the Internet and internal networks. Cloud computing has become a catch-all term associated with the savings gleamed from moving applications online as opposed to buying and managing software and physical equipment.

IBM has said it expects cloud computing to grow into a $7 billion business by 2015. The company hasn't disclosed how much of its revenue currently comes from cloud computing, but the company has said its cloud revenue doubled in 2010 and is expected to double again this year.

"We're already in the billion-dollar club today," Steve Mills, IBM senior vice president and group executive of systems and software, said in an interview with Dow Jones Newswires.

Data tracker In-Stat LLC has said U.S. spending on cloud computing and managed hosting should surpass $13 billion in 2014, up from less than $3 billion in 2010.

IBM is attempting to differentiate itself from some of the main players who have already made big bets on the cloud. Competitors such as Amazon.com Inc.'s (AMZN) Web Services, Microsoft Corp. (MSFT) and Google Inc. (GOOG) employ cloud features that let customers pay for what they use, like a utility, as opposed to plunking down a fixed investment.

IBM says its offering includes more features aimed toward large enterprise customers, such as heightened security, data privacy and the ability to certify the system for regulatory requirements. Moreover, IBM is offering a plethora of options, including public, private and hybrid clouds.

"This is a strong advance among several in the industry for helping enterprise IT take advantage of cloud technologies and new cloud business models," said Frank Gillett, a vice president and principal analyst at Forrester Research Inc. "IBM's announcement isn't unique, but it's a good step forward."

A typical client would spend tens of thousands of dollars a month on the new offering, IBM's Mills said, though the amount will vary based on what services the customer is using.

"There's no reason why (companies) couldn't move some fairly significant production work (to the cloud) and literally start to spend hundreds of thousands or even millions a month," he said.

The unveiling of IBM's SmartCloud, however, comes amid ongoing concerns surrounding security and reliability of the cloud as well as the ability to integrate current infrastructure with new cloud services

"This announcement offers customers more flexibility to address different issues and concerns within the cloud," said Joseph Foresi, an analyst at Janney Montgomery Scott LLC.

IBM joins a host of tech companies who have recently made big cloud announcements. Earlier Thursday, Dell Inc. (DELL) said it will invest $1 billion worldwide in the current fiscal year to build new data centers and develop sets of products in areas such as virtualization. The spending is part of Dell's effort to expand its business outside of computer hardware.

Last week, Rackspace Hosting Inc. (RAX), Dell and Equinix Inc. (EQIX) said they have collaborated to develop an open-source cloud-computing platform--called OpenStack--which is aimed to compete against Amazon Web Services.

Last month, Hewlett-Packard Co. (HPQ) Chief Executive Leo Apotheker outlined plans to roll out new cloud-computing services over the next few years that he hopes will become a one-stop shop for businesses and consumers to store and retrieve data over the Web.

-By Steven Russolillo and Shara Tibken, Dow Jones Newswires; 212-416-2180; steven.russolillo@dowjones.com

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