5 ms·

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.
  - j-kidd 13y ago
    That bit is definitely wrong for EC2, which is notoriously slow in dropping the prices. The web hosting business has always been cut-throat, where price cutting and overselling are the norm. And since we started to have fast enough CPUs several years ago, the price has been dropping ever faster, as the CPUs continue to work after the initial costs have been recouped. For example, nowadays there are a lot of deals for dedicated servers with Xeon L5420, a quad core 2.5Ghz processor released in Q1 2008, before EC2 went public. The sad part about EC2 is that it doesn't shy away from overselling while keeping the same high price. The micro instance with its meager CPU allocation would be the poster child of overselling. There are some naive crowds here who believe EC2 doesn't oversell. Well, just ask Netflix: http://blog.sciencelogic.com/netflix-steals-time-in-the-cloud-and-from-users/03/2011 http://blog.sciencelogic.com/netflix-steals-time-in-the-clou...
- thereallurch 13y ago
  IBM has had private clouds for a few years now. It's not like AWS where anyone can click and spin up an instance. It's geared towards very large companies. These companies have been reluctant to use AWS, or have specific requirements (hardware requirements, licensing issues, corporate policies). So it's incorrect to say IBM cant build a cloud. IBM's cloud isnt a public facing entity.
- vidarh 13y ago
  In 2000, Telia got a single IBM G6 mainframe hosting 1500 virtual Linux images. You'll note that's a tiny, "ancient" model. IBM currently quotes ability to present "thousands" of virtual Linux images on a single current zSeries mainframe. These servers have virtualised storage IO, virtualised network interfaces etc. and management interfaces older than most of the developers on the hipper cloud platforms. So to claim IBM "can't build a cloud of their own" is quite ridiculous - they can deliver single mainframes with more capabilities than most smaller cloud providers entire infrastructure for many types of workloads, and have decades of experience aggregating workloads on collections of servers like this (and single system image clustering across up to 32 zSeries mainframes - some simple math should indicate you're then in the tens of thousands of VM images managed as one single system - this with software originally introduced in 1990....), as well as decades of experience building super-computing clusters with accompanying orchestration and management. Heck, they have a separate division doing integrated service management software. Claiming they can't build a consumer level / low end cloud solution would be more believable, and would explain the SoftLayer acquisition. But there's far more to this market than going for startups who order a handful of vm's. > When all you have is hosting, you can't lose money on hosting. That might have become an issue for SoftLayer in the long run if they remained independent. But IBM is a services company. And one that is an expert in extracting money from customers by building very deep and far reaching client relationships when you can afford them. They could lose money on hosting for the next century if they like, and still see it as a cheap foot in the door for their sales team if it helps them reach new customer segments. > 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. Amazon at least is priced ludicrously high compared to providers like Softlayer that can offer hybrid "dedicated + cloud" solutions. If Amazon can compete on price in that market, they've so far not demonstrated any will to do so. Amazon is priced well for the batch "bring up ten servers for two hours" market, though.
  - josh2600 13y ago
    Perhaps it was facetious to say that IBM can't build clouds. A more realistic viewpoint is that they don't have significant expertise building large commodity infrastructures. There are definitely places where IBM plays well, but commodity clouds aren't one of them, at least to my mind. If you need a high-end computing cluster that's bigger than the max Amazon instances, that would definitely be a place where IBM could play, it's just not a place I see SoftLayer playing. You're right though; There is more than one way to skin a cat or a cloud.

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.
- j-kidd 13y ago
  That bit is definitely wrong for EC2, which is notoriously slow in dropping the prices. The web hosting business has always been cut-throat, where price cutting and overselling are the norm. And since we started to have fast enough CPUs several years ago, the price has been dropping ever faster, as the CPUs continue to work after the initial costs have been recouped. For example, nowadays there are a lot of deals for dedicated servers with Xeon L5420, a quad core 2.5Ghz processor released in Q1 2008, before EC2 went public. The sad part about EC2 is that it doesn't shy away from overselling while keeping the same high price. The micro instance with its meager CPU allocation would be the poster child of overselling. There are some naive crowds here who believe EC2 doesn't oversell. Well, just ask Netflix: http://blog.sciencelogic.com/netflix-steals-time-in-the-cloud-and-from-users/03/2011 http://blog.sciencelogic.com/netflix-steals-time-in-the-clou...
thereallurch 13y ago
IBM has had private clouds for a few years now. It's not like AWS where anyone can click and spin up an instance. It's geared towards very large companies. These companies have been reluctant to use AWS, or have specific requirements (hardware requirements, licensing issues, corporate policies). So it's incorrect to say IBM cant build a cloud. IBM's cloud isnt a public facing entity.
vidarh 13y ago
In 2000, Telia got a single IBM G6 mainframe hosting 1500 virtual Linux images. You'll note that's a tiny, "ancient" model. IBM currently quotes ability to present "thousands" of virtual Linux images on a single current zSeries mainframe. These servers have virtualised storage IO, virtualised network interfaces etc. and management interfaces older than most of the developers on the hipper cloud platforms. So to claim IBM "can't build a cloud of their own" is quite ridiculous - they can deliver single mainframes with more capabilities than most smaller cloud providers entire infrastructure for many types of workloads, and have decades of experience aggregating workloads on collections of servers like this (and single system image clustering across up to 32 zSeries mainframes - some simple math should indicate you're then in the tens of thousands of VM images managed as one single system - this with software originally introduced in 1990....), as well as decades of experience building super-computing clusters with accompanying orchestration and management. Heck, they have a separate division doing integrated service management software. Claiming they can't build a consumer level / low end cloud solution would be more believable, and would explain the SoftLayer acquisition. But there's far more to this market than going for startups who order a handful of vm's. > When all you have is hosting, you can't lose money on hosting. That might have become an issue for SoftLayer in the long run if they remained independent. But IBM is a services company. And one that is an expert in extracting money from customers by building very deep and far reaching client relationships when you can afford them. They could lose money on hosting for the next century if they like, and still see it as a cheap foot in the door for their sales team if it helps them reach new customer segments. > 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. Amazon at least is priced ludicrously high compared to providers like Softlayer that can offer hybrid "dedicated + cloud" solutions. If Amazon can compete on price in that market, they've so far not demonstrated any will to do so. Amazon is priced well for the batch "bring up ten servers for two hours" market, though.
- josh2600 13y ago
  Perhaps it was facetious to say that IBM can't build clouds. A more realistic viewpoint is that they don't have significant expertise building large commodity infrastructures. There are definitely places where IBM plays well, but commodity clouds aren't one of them, at least to my mind. If you need a high-end computing cluster that's bigger than the max Amazon instances, that would definitely be a place where IBM could play, it's just not a place I see SoftLayer playing. You're right though; There is more than one way to skin a cat or a cloud.