IBM Puts SoftLayer At New Cloud Unit's Core

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The OpenStack cloud community will find it has a major addition to its membership as IBM converts SoftLayer Technologies' existing 13 data centers in North America, Europe and Asia into an implementation of the open source code cloud.

And with that conversion, IBM will have the vehicle it needs to compete with Amazon Web Services for enterprise-level, cloud computing customers. SoftLayer, a seven-year-old, rapidly growing infrastructure-as-a-service provider, will give IBM greater IaaS core competence and extend its reach as enterprise users start to spend on cloud services.

SoftLayer CEO Lance Crosby welcomed the changes Monday, as IBM completed its acquisition, first announced June 4. Crosby said he and the rest of the SoftLayer executive staff will remain in place with multi-year contracts, along with their 700 employees, as they transition into becoming "a foundation unit" in IBM's new Cloud Services division, which will consist of SoftLayer plus existing SmartCloud services. The division will be a unit of IBM Global Services.

Crosby said, "I don't know yet," when asked what his title will be. He will report to Jim Comfort, general manager of Cloud Services.

Part of the lack of concern about titles is the clear central role that SoftLayer will play within the newly created cloud unit. Dennis Quan, IBM VP of SmartCloud services, said the SoftLayer name will be preserved as a label of IBM's core IaaS. The acquisition "will be a huge accelerator for our cloud business" as SoftLayer's public facing services join IBM's existing public and private SmartCloud services, Quan said in an interview. IBM already operates 10 Enterprise Plus cloud data centers offering IaaS around the world.

[ Want to learn more about how SoftLayer has tailored its service to big data analytics? See When Big Data Meets Bare Metal, SoftLayer Fits. ]

In addition, from the SoftLayer founders' point of view, the price may have been right. Although Dallas-based SoftLayer is privately held, both Bloomberg and Dow Jones financial news services reported that the price on SoftLayer was "almost $2 billion," a description that Crosby called "extremely close."

With the SoftLayer purchase, IBM gets 13 additional data centers, each of them well connected to both telecommunications carriers' private lines and the Internet. The cross-connectivity is a critical element in SoftLayer's appeal to IBM and one of the reasons that it was finding an increasing number of enterprise customers.

Crosby said SoftLayer had spent $200 million to intentionally build up an international presence with strong connectivity by establishing data centers close to Equinix, Telex and Internap of the Americas communications centers. SoftLayer also has facilities close to 111 Hudson St. and 75 Broad St. in New York City, both well-known carrier exchanges, and One Wilshire Boulevard in Los Angeles, the carrier exchange where fiber optic cables linking Asia to the U.S. come out of the water.

In establishing such connections, SoftLayer is doing what Amazon Web Services did through Equinix and other carrier exchanges in establishing its Direct Connect service. It allows both data and workloads to be sent from the enterprise via a private line to an Amazon compute center.

"Almost all of our large clients connect directly to us," Crosby noted in an interview.

SoftLayer operates more than 100,000 servers in its data centers, but its existing infrastructure is based on commodity Intel x86 instruction set servers. One of the first things it will do, now that it's part of IBM, is add IBM Power chip-based servers to run IBM customers' AIX and Linux applications, Crosby said. The addition will take place before the end of the year, he expected.

As the conversion to OpenStack proceeds, Crosby expects SoftLayer will add higher level, more secure "tier one" storage services to its simple storage service, which currently resembles Amazon's S3. Quan said IBM "doesn't have any specific dates" at this point to describe when the conversion to OpenStack will be completed or when Power servers will be available in SoftLayer centers. But the combined Enterprise Plus and SoftLayer data centers will also be able to host a large catalog of software-as-a-service. Over the past five years, IBM has acquired 100 SaaS companies. Their products have been converted into such IBM hosted applications as IBM Sterling Transportation Manager, Emptoris Contract Management, Digital Analytics and Marketing Center.

In addition, SoftLayer has established its own reputation for hosting low latency, big data analytics running on bare metal servers using Cloudera's commercial version of Hadoop or the MongoDB NoSQL system.

As the conversion to OpenStack proceeds, IBM and its SoftLayer unit will gain a new platform from which to approach enterprise customers with the prospect of building out their private clouds in an architecture that is compatible with several public clouds.

Crosby said he wanted to compete more effectively 12 months ago as he watched Amazon Web Services start to rapidly expand its customer base. "We couldn't keep up with their brand name. I wanted a partner with the brand, with the marketing initiative" to compete.

Up until that point, SoftLayer had primarily served as infrastructure for Internet startups, smartphone application companies and online social gaming firms. About 18 months ago, SoftLayer saw an uptick in its signing up of new enterprise customers, and 12 months ago companies that had been talking about cloud computing started "spending real dollars on the cloud." SoftLayer's top 25 customer list gradually turned over to include mainly enterprise cloud users, such as Rexall, Intel, Citrix and Disney (previously it had Disney's Playdom online game unit).

IBM noticed the change as well and initiated talks with SoftLayer. Crosby said once the June 4 definitive agreement to acquire became known, SoftLayer found "we had a lot higher profile with enterprises and closed deals" that had been in the talking stage for months. His team welcomes the challenge of providing service to larger customers.

"Infrastructure-as-a-service, we have that nailed," he said.