For any tech segment, the top 3 vendors are the centre of attention. When it comes to the cloud, we have heard many times in analyst reports that AWS, Microsoft Azure and Google Cloud Platform are the leading cloud companies. But there is contention (and perhaps confusion) for the third spot. 

Google’s cloud revenue in the last quarter stood at $2.6B, and they made $8.9B for the previous year. On the other hand, IBM accounted for $6.8B for the last quarter and $21.2B for the year, which is more than twice for Google’s cloud revenue. 

If we consider that market leadership is recognised by revenue, and mainly cloud revenue, IBM announced that it makes more money than Google by a noteworthy margin. Yet, analyst reports put IBM below Google, which is quite baffling — given the former is historically one of the most reputed companies in the cloud market.

What Analysts Consider

IBM specifies the cloud segment in a broader fashion than what analysts do. Analysts say every cloud business has its individual interpretation of cloud, and IBM may be publishing revenue estimates that stretch beyond traditional descriptions. Analysts prioritise on a sheer public cloud model also known as Infrastructure as a Service (IaaS), which provides customers to rent servers, manage computing and storage capacity with an on-demand and customised pay what you use subscription basis. In fact, almost all of AWS’s $35 billion in cloud sales emanates from core cloud revenue for IaaS. We know that about a part of IBM’s published cloud revenue actually came from core public cloud offerings. Google Cloud itself consists of G Suite, which includes things such as Gmail and Google Docs; and Google Cloud Platform, or GCP. 

Where Is IBM Making Its Cloud Money?

IBM’s foothold is a long list of clients with legacy IT infrastructure. Many of such clients, including the largest banks, aviation and health companies, still trust IBM in-house servers for their cloud infrastructure (mainly private and hybrid cloud). This is perhaps the area where analysts think IBM may not be a big cloud player as it lags in public cloud customers as compared to other vendors like AWS, Azure and GCP. The question is whether there is a need to review how the cloud market is measured so as to assure cloud businesses truly reveal where customers are allocating their funds. 

While IBM only has a smaller public cloud revenue play compared to AWS, Azure and GCP, it surpasses other cloud vendors when it comes to on-prem servers (private cloud), cloud-related services, including software, hosting services and consulting to assist client firms in migration the cloud. Apart from private and public cloud services, the revenue also includes Cloud & Data Platforms, which includes Red Hat; Cognitive Applications; and Transaction Processing Platforms. 

A Renewed Cloud Market

In the past, analysts have reported Infrastructure as a Service (IaaS) as a significant factor for their cloud rankings, a segment where IBM may not do as well as the other three. The infrastructure-as-a-service battle is considered won by Amazon Web Services, Microsoft Azure, and Google Cloud Platform. But, does that mean IBM should not be counted among the top three leading cloud vendors on that basis, given its cloud segment revenue is better than GCP?

IBM certainly wants to emphasise on the cloud, which is also highlighted by their Red Hat mega acquisition worth $34 billion. Red Hat has been the leader of hybrid cloud services business and given many legacy firms would prefer hybrid over pure public cloud platforms, the acquisition will help IBM become one of the leaders in this market. Like Microsoft, and Amazon, for IBM cloud services, are central to their new market model, with previous cloud head Arvind Krishna becoming the new CEO. 

Also Read: IBM To Double Down On Data, AI and Cloud Services In 2020

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