IBM Gives First Glimpse Into Cloud Sales

With processes in place to track its cloud revenue, IBM puts its SaaS business at "hundreds of millions" of dollars. It's a start, but more details are needed.
How much revenue is IBM pulling in from cloud computing? Steve Mills, senior VP of the company's software and systems business, has provided the first clue, revealing to InformationWeek that IBM's software-as-a-service revenue is now in the "hundreds of millions of dollars."

That's an important disclosure, for several reasons. Until now, IBM hasn't shared any numbers on its cloud computing revenues, other than to provide a forecast of where it hopes to arrive: $7 billion by 2015. Where that number stands right now has been anyone's guess.

The lack of transparency has, well, clouded IBM's assertions that cloud computing is one of its fastest-growing segments. When it released its third-quarter financial results in October, CFO Mark Loughridge said the company's cloud revenue had already doubled this year compared with the entire year earlier. But double what exactly? Loughridge didn't say.

Now Mills, in an interview last week with InformationWeek editors at IBM's Armonk, N.Y., headquarters, has provided a peek into this small but critical part of IBM's business. IBM's SaaS offerings--including its LotusLive collaboration tools, Coremetrics Web analytics, some Sterling Commerce capabilities, and some healthcare apps--now generate hundreds of millions of dollars in revenue.

But SaaS is just one aspect of IBM's cloud portfolio. It also sells technology and services for building private and hybrid clouds, such as its Tivoli systems management platform.

Mills disclosed that all IBM divisions have put accounting measures in place to track cloud sales. "We calibrate all these things we do related to cloud across all business units: hardware, software, services," he said. Those numbers are rolled up into a companywide cloud revenue total. But IBM is keeping that number to itself.

As I pointed out a few months ago, IBM isn't alone in its reticence to reveal cloud sales. Amazon, Google, and Microsoft are tight-lipped, too. When InformationWeek editors met with Microsoft CEO Steve Ballmer in June, he wasn't forthcoming when we asked for hard data on the growth of his company's cloud business. "I don't know whether we'd give you something more specific or not," Ballmer said. Answer: Not.

It's difficult to understand how financial analysts let IT industry leaders get away with this kind of obfuscation in what by all accounts is one of the industry's fastest growing areas. We're forced to piece together the market's size as best we can. Following a meeting last week with SAP co-CEO Bill McDermott, InformationWeek's Doug Henschen put SAP's cloud revenue in the last quarter at under 100 million Euros, or $137 million.

Yet that estimate of SAP's cloud business, like so many other cloud calculations, is back of the envelope. Now that IBM's Mills has given some basic numbers, it's time for IBM and the rest of the industry to get even more transparent.

John Foley is editor of InformationWeek Government.

To find out more about John Foley, please visit his page.

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