9 ms·

IBM to Acquire SoftLayer

213 points by porker 13y ago

mathattack 13y ago
The purchase makes sense, though I would have thought they have all the cloud parts they need in house. Is this more of an application play?
- hemancuso 13y ago
  25k customers paying into this cloud is also pretty valuable for IBM
  - nknighthb 13y ago
    IBM had 104 billion in revenue and 16 billion in earnings last year. I'm not sure I see 25,000 SL customers, most of whom are quite small, as substantially more than noise on IBM's books.
    - late2part 13y ago
      this acquisition buys credibility for IBM in the 'cloudosphere'.
EwanToo 13y ago
Well done a Reuters reporter back in March :) "Exclusive: EMC, IBM eye web hosting company SoftLayer- sources", suggests a $2 billion valuation. http://www.reuters.com/article/2013/03/15/us-softlayer-sale-idUSBRE92D18M20130315 http://www.reuters.com/article/2013/03/15/us-softlayer-sale-...
dewitt 13y ago
Worth observing that for all the excitement about the recent crop of billion-dollar Silicon Valley startups, SoftLayer is based in Dallas, TX (and founded only in 2005). I suspect, and this will be easy enough to prove one way or the other after a few years so feel free to call me on it, that we'll see a disproportionate number of successful exits come from /outside/ the valley. My gut tells me that high-cost of living and inter-company cannibalization are going to make it difficult for companies to sustain long-term growth in the Bay Area (once the data-skewing, one-off, billion-dollar Instagram-esque deals are factored out over time). Whereas talent will tend to stick to the one or two success stories in less saturated geographies, adding a natural doubling down effect when something is working out well. Sort of a healthy survivorship bias, in a good way. Edit: And while two anecdotes are still hardly data, I just now noticed that Indianapolis, Indiana based ExactTarget sold today for $2.5B.
- josh2600 13y ago
  If you take a worldview of the last five minutes, this is true, but if you look at silicon valley over time, it is demonstrable that many companies in the Bay Area have built holistic and scalable enterprises. Look no further than box.com for a recent example or Intel for an old one.
- nknighthb 13y ago
  SoftLayer is in Dallas because The Planet, a company dating back to the late 90s, was in Dallas and SL was founded by TP's stupidly-fired COO Lance Crosby. SL ultimately merged with/took over TP after TP had merged with EV1 (another company dating to the late 90s), Crosby continuing as CEO. None of these were startups in the ordinary Silicon Valley sense. They were, fundamentally, managed datacenters (something their geographical location was well-suited for). The companies were built to survive and turn a profit, not achieve a massive exit in the startup lottery.
  - levosmetalo 13y ago
    You say that as like turning a profit is a bad thing. Are only lottery exit aspires allowed to call themselves startups?
    - nknighthb 13y ago
      > You say that as like turning a profit is a bad thing. This claim has no basis in any reality I am familiar with.
    - darkandbrooding 13y ago
      Tone is difficult to convey via the written word, and there is a tendency for the mind to supply it when reading. Read the parent paragraph aloud, and play with the inflection of key words. Your initial tonal interpretation was one of many possibilities.
    - lttlrck 13y ago
      It's almost as if you replied to the wrong comment.
josh2600 13y ago
IBM is buying SoftLayer to try to go head up with AWS. It's not going to work. Personally I won't buy an IBM product because I know it's just like Oracle: software entrapment. Nothing wrong with that business model it's just not one I want to be involved with. In other news, great job by SoftLayer to exit as pricing pressure from AWS and GoogleAppEngine was going to steadily erode their margins over time. I feel the same way about Rackspace which I think has to be in the sights for Oracle now. So my opinion is: great job SoftLayer; questionable play by IBM.
- blparker 13y ago
  Interested in your opinion as to why you don't think this acquisition will help gain market share on AWS.
  - josh2600 13y ago
    IBM can't build a cloud of their own or they wouldn't have needed to buy SoftLayer. Since they don't have this expertise, they pay a ton of money for a company that their perceive as knowing "the cloud". This is doubly ironic because its IBM that introduced the mainframe to the world, but that's another story. SoftLayer and everyone not named Google or Amazon can't drop their prices 40+ times every 5 years because this managed hosting is their core business. Google and Amazon are playing the ultra-thin margin long game and the result is that they hope to destroy the competition with an aggressive pricing floor. When all you have is hosting, you can't lose money on hosting. Amazon and Google can lose money on infrastructure because its not their core business. The same cant be said about SoftLayer, and I don't think their ability to execute will increase as a result of this acquisition. If anything it's akin to Zynga's FUD middle management practices and the resulting layoffs yesterday. I'm super bearish on IBM doing anything meaningful with SoftLayer. It's a pure revenue play from my perspective.
    - qwerta 13y ago
      > Google and Amazon are playing the ultra-thin margin long game and the result is that they hope to destroy the competition with an aggressive pricing floor. Could you explain this a bit? I found Amazon and Google overpriced and slow compared to other hosting solutions.
barredo 13y ago
I've been a customer of... +5 years of Softlayer. Their service has been always good/great, even on odd hours. Congrats to them.
- xradionut 13y ago
  Get ready for crappy service once the bean counters at IBM start outsourcing everything...
whyleyc 13y ago
Coming soon to a managed hosting environment near you: "Call now to arrange a visit from our team of consultants to allow you to launch and configure your new server".
forgotAgain 13y ago
Seems a bit on the desperate side for IBM. Softlayer customer profile (small to medium) seems the exact opposite of IBM (very large to huge). Does IBM take the Softlayer expertise and apply it to large accounts or do they try to service a class of customers they know nothing about. On one hand IBM is selling dev-ops services to its customers. On the other, it finds itself without sufficient in-house expertise to build out its own cloud services. It's not like this is a new need for IBM. They've been talking cloud for years yet still found themselves needing to buy this capability. It seems IBM has found out that after years of shedding higher priced operations staff they were nothing but a paper tiger when it came to cloud offerings.
- darkarmani 13y ago
  > Softlayer customer profile (small to medium) seems the exact opposite of IBM (very large to huge). Does IBM take the Softlayer expertise and apply it to large accounts or do they try to service a class of customers they know nothing about. Doesn't that make sense though? They are trying to use the people and experience of SL to enter the market of small businesses. It didn't work for Cisco/linksys, but it does make sense to broaden your market if you think you can make it work.
  - tensor 13y ago
    At the same time, if IBM came out with a decent ad campaign for a new IBM service targeted at the little guy, a lot of people would take notice I'm sure.
blantonl 13y ago
I wonder what these means for all the resellers of Softlayer's infrastructure? Will they join the IBM business partner community or will they be phased out. This is going to be very interesting...
mrkodiak 13y ago
Support will now be done through RETAIN and PMRs.
shiftpgdn 13y ago
Guess that means HN is now hosted by IBM. :)
- xradionut 13y ago
  Does that mean we get a HN JCL API? :)
  - jacques_chester 13y ago
    Rexx for everybody!
    - mjcohen 13y ago
      Or, even older $ibftc $execute ibjob
ChuckMcM 13y ago
Fun stuff. Remember that IBM got its start by renting you a mainframe with software on it. I've always been struck by how similar IaaS/PaaS type companies are similar to that model. In many ways a data center becomes just a really big mainframe that you're renting out.
- mindcrime 13y ago
  Remember that IBM got its start by renting you a mainframe with software on it. I've always been struck by how similar IaaS/PaaS type companies are similar to that model. In many ways a data center becomes just a really big mainframe that you're renting out. Good, maybe it's time for me to do something useful with this personalmainframe.com domain I've been sitting on. We just need to get Matt Smith (of Doctor Who fame) to be our spokesperson... I can just picture him standing there, adjusting his bow-tie and saying "Mainframes are cool."
  - VLM 13y ago
    "Good, maybe it's time for me to do something useful with this personalmainframe.com domain I've been sitting on." A cloud of Hercules emulators that instantly spin up multiple MVS systems on demand for RJE? I donno what VTAM would think about that. Or a linux on S390 SaaS provider, I guess.
    - mindcrime 13y ago
      I actually have some ideas for a service to develop on that domain, but it's nothing to do with real mainframes. More like "Big Data Processing As A Service" where the "mainframe" bit is just an analogy. I don't have time to work on it right now though, so the idea is just kinda sitting on the backburner ATM.
kmasters 13y ago
This really only strengthens AWS, a self service cloud that anyone can manage. IBM is chasing a dying consulting model "we know best". But they dont. You yourself with the knowledge can outscale IBM using AWS. IBM's business is profiting from enterprise ignorance. Your mileage may vary...or be nonexistent.
- angersock 13y ago
  Yeah, you're wrong. IBM--if you can afford them--can beat the everliving christ out of problems you throw their way. Consider the Cell chip, or any number of e-commerce platforms they power.
harel 13y ago
I'm not sure if I should start worrying or not... We've just moved our infrastructure to SoftLayer. I'd hate it if they start to change for the worst and I'd hate it even more if I had to move to yet another data centre.
therealbork 13y ago
Nobody else here seeing the obvious reason? Let me take you back a few years. Remember the SCO lawsuit? Their attempts to sell licenses? Well, only one company bought one -- EV1. Who are now part of SoftLayer (via ThePlanet). Clearly IBM is just after said license. :-)
Hawkee 13y ago
I was with ThePlanet for many years before the merger with SoftLayer. Up to that point they were very reasonably priced and offered great service. After the merge the prices nearly doubled and when re-negotiating my contract they basically gave me the impression I'm not a worthy customer due to the prices I was used to. They're after enterprise clients now and this acquisition just furthers that goal. As a small business owner I'm happy to be out and won't be returning to this company again.
codex 13y ago
If SoftLayer sold, I presume they were selling at below cost and couldn't keep up. How does SoftLayer's pricing compare with AWS?

213 points by porker 13y ago

The purchase makes sense, though I would have thought they have all the cloud parts they need in house. Is this more of an application play?

hemancuso 13y ago
25k customers paying into this cloud is also pretty valuable for IBM
- nknighthb 13y ago
  IBM had 104 billion in revenue and 16 billion in earnings last year. I'm not sure I see 25,000 SL customers, most of whom are quite small, as substantially more than noise on IBM's books.
  - late2part 13y ago
    this acquisition buys credibility for IBM in the 'cloudosphere'.

EwanToo 13y ago

Well done a Reuters reporter back in March :) "Exclusive: EMC, IBM eye web hosting company SoftLayer- sources", suggests a $2 billion valuation. http://www.reuters.com/article/2013/03/15/us-softlayer-sale-idUSBRE92D18M20130315 http://www.reuters.com/article/2013/03/15/us-softlayer-sale-...

dewitt 13y ago

Worth observing that for all the excitement about the recent crop of billion-dollar Silicon Valley startups, SoftLayer is based in Dallas, TX (and founded only in 2005). I suspect, and this will be easy enough to prove one way or the other after a few years so feel free to call me on it, that we'll see a disproportionate number of successful exits come from /outside/ the valley. My gut tells me that high-cost of living and inter-company cannibalization are going to make it difficult for companies to sustain long-term growth in the Bay Area (once the data-skewing, one-off, billion-dollar Instagram-esque deals are factored out over time). Whereas talent will tend to stick to the one or two success stories in less saturated geographies, adding a natural doubling down effect when something is working out well. Sort of a healthy survivorship bias, in a good way. Edit: And while two anecdotes are still hardly data, I just now noticed that Indianapolis, Indiana based ExactTarget sold today for $2.5B.

josh2600 13y ago
If you take a worldview of the last five minutes, this is true, but if you look at silicon valley over time, it is demonstrable that many companies in the Bay Area have built holistic and scalable enterprises. Look no further than box.com for a recent example or Intel for an old one.
nknighthb 13y ago
SoftLayer is in Dallas because The Planet, a company dating back to the late 90s, was in Dallas and SL was founded by TP's stupidly-fired COO Lance Crosby. SL ultimately merged with/took over TP after TP had merged with EV1 (another company dating to the late 90s), Crosby continuing as CEO. None of these were startups in the ordinary Silicon Valley sense. They were, fundamentally, managed datacenters (something their geographical location was well-suited for). The companies were built to survive and turn a profit, not achieve a massive exit in the startup lottery.
- levosmetalo 13y ago
  You say that as like turning a profit is a bad thing. Are only lottery exit aspires allowed to call themselves startups?
  - nknighthb 13y ago
    > You say that as like turning a profit is a bad thing. This claim has no basis in any reality I am familiar with.
  - darkandbrooding 13y ago
    Tone is difficult to convey via the written word, and there is a tendency for the mind to supply it when reading. Read the parent paragraph aloud, and play with the inflection of key words. Your initial tonal interpretation was one of many possibilities.
  - lttlrck 13y ago
    It's almost as if you replied to the wrong comment.

josh2600 13y ago

IBM is buying SoftLayer to try to go head up with AWS. It's not going to work. Personally I won't buy an IBM product because I know it's just like Oracle: software entrapment. Nothing wrong with that business model it's just not one I want to be involved with. In other news, great job by SoftLayer to exit as pricing pressure from AWS and GoogleAppEngine was going to steadily erode their margins over time. I feel the same way about Rackspace which I think has to be in the sights for Oracle now. So my opinion is: great job SoftLayer; questionable play by IBM.

blparker 13y ago
Interested in your opinion as to why you don't think this acquisition will help gain market share on AWS.
- josh2600 13y ago
  IBM can't build a cloud of their own or they wouldn't have needed to buy SoftLayer. Since they don't have this expertise, they pay a ton of money for a company that their perceive as knowing "the cloud". This is doubly ironic because its IBM that introduced the mainframe to the world, but that's another story. SoftLayer and everyone not named Google or Amazon can't drop their prices 40+ times every 5 years because this managed hosting is their core business. Google and Amazon are playing the ultra-thin margin long game and the result is that they hope to destroy the competition with an aggressive pricing floor. When all you have is hosting, you can't lose money on hosting. Amazon and Google can lose money on infrastructure because its not their core business. The same cant be said about SoftLayer, and I don't think their ability to execute will increase as a result of this acquisition. If anything it's akin to Zynga's FUD middle management practices and the resulting layoffs yesterday. I'm super bearish on IBM doing anything meaningful with SoftLayer. It's a pure revenue play from my perspective.
  - qwerta 13y ago
    > Google and Amazon are playing the ultra-thin margin long game and the result is that they hope to destroy the competition with an aggressive pricing floor. Could you explain this a bit? I found Amazon and Google overpriced and slow compared to other hosting solutions.

barredo 13y ago

I've been a customer of... +5 years of Softlayer. Their service has been always good/great, even on odd hours. Congrats to them.

xradionut 13y ago
Get ready for crappy service once the bean counters at IBM start outsourcing everything...

whyleyc 13y ago

Coming soon to a managed hosting environment near you: "Call now to arrange a visit from our team of consultants to allow you to launch and configure your new server".

forgotAgain 13y ago

Seems a bit on the desperate side for IBM. Softlayer customer profile (small to medium) seems the exact opposite of IBM (very large to huge). Does IBM take the Softlayer expertise and apply it to large accounts or do they try to service a class of customers they know nothing about. On one hand IBM is selling dev-ops services to its customers. On the other, it finds itself without sufficient in-house expertise to build out its own cloud services. It's not like this is a new need for IBM. They've been talking cloud for years yet still found themselves needing to buy this capability. It seems IBM has found out that after years of shedding higher priced operations staff they were nothing but a paper tiger when it came to cloud offerings.

darkarmani 13y ago
> Softlayer customer profile (small to medium) seems the exact opposite of IBM (very large to huge). Does IBM take the Softlayer expertise and apply it to large accounts or do they try to service a class of customers they know nothing about. Doesn't that make sense though? They are trying to use the people and experience of SL to enter the market of small businesses. It didn't work for Cisco/linksys, but it does make sense to broaden your market if you think you can make it work.
- tensor 13y ago
  At the same time, if IBM came out with a decent ad campaign for a new IBM service targeted at the little guy, a lot of people would take notice I'm sure.

blantonl 13y ago

I wonder what these means for all the resellers of Softlayer's infrastructure? Will they join the IBM business partner community or will they be phased out. This is going to be very interesting...

mrkodiak 13y ago

Support will now be done through RETAIN and PMRs.

shiftpgdn 13y ago

Guess that means HN is now hosted by IBM. :)

xradionut 13y ago
Does that mean we get a HN JCL API? :)
- jacques_chester 13y ago
  Rexx for everybody!
  - mjcohen 13y ago
    Or, even older $ibftc $execute ibjob

ChuckMcM 13y ago

Fun stuff. Remember that IBM got its start by renting you a mainframe with software on it. I've always been struck by how similar IaaS/PaaS type companies are similar to that model. In many ways a data center becomes just a really big mainframe that you're renting out.

mindcrime 13y ago
Remember that IBM got its start by renting you a mainframe with software on it. I've always been struck by how similar IaaS/PaaS type companies are similar to that model. In many ways a data center becomes just a really big mainframe that you're renting out. Good, maybe it's time for me to do something useful with this personalmainframe.com domain I've been sitting on. We just need to get Matt Smith (of Doctor Who fame) to be our spokesperson... I can just picture him standing there, adjusting his bow-tie and saying "Mainframes are cool."
- VLM 13y ago
  "Good, maybe it's time for me to do something useful with this personalmainframe.com domain I've been sitting on." A cloud of Hercules emulators that instantly spin up multiple MVS systems on demand for RJE? I donno what VTAM would think about that. Or a linux on S390 SaaS provider, I guess.
  - mindcrime 13y ago
    I actually have some ideas for a service to develop on that domain, but it's nothing to do with real mainframes. More like "Big Data Processing As A Service" where the "mainframe" bit is just an analogy. I don't have time to work on it right now though, so the idea is just kinda sitting on the backburner ATM.

kmasters 13y ago

This really only strengthens AWS, a self service cloud that anyone can manage. IBM is chasing a dying consulting model "we know best". But they dont. You yourself with the knowledge can outscale IBM using AWS. IBM's business is profiting from enterprise ignorance. Your mileage may vary...or be nonexistent.

angersock 13y ago
Yeah, you're wrong. IBM--if you can afford them--can beat the everliving christ out of problems you throw their way. Consider the Cell chip, or any number of e-commerce platforms they power.

harel 13y ago

I'm not sure if I should start worrying or not... We've just moved our infrastructure to SoftLayer. I'd hate it if they start to change for the worst and I'd hate it even more if I had to move to yet another data centre.

therealbork 13y ago

Nobody else here seeing the obvious reason? Let me take you back a few years. Remember the SCO lawsuit? Their attempts to sell licenses? Well, only one company bought one -- EV1. Who are now part of SoftLayer (via ThePlanet). Clearly IBM is just after said license. :-)

Hawkee 13y ago

I was with ThePlanet for many years before the merger with SoftLayer. Up to that point they were very reasonably priced and offered great service. After the merge the prices nearly doubled and when re-negotiating my contract they basically gave me the impression I'm not a worthy customer due to the prices I was used to. They're after enterprise clients now and this acquisition just furthers that goal. As a small business owner I'm happy to be out and won't be returning to this company again.

codex 13y ago

If SoftLayer sold, I presume they were selling at below cost and couldn't keep up. How does SoftLayer's pricing compare with AWS?