On October 8, 2020, IBM, which has a history of 109 years, announced the first split in history: splitting the IT infrastructure management services of the company’s global information technology service department to form a new independent listed company (called "NewCo "), while the split IBM company will focus on the trillion-dollar hybrid cloud market. This is also the first major move by Arvind Krishna, the tenth CEO of IBM in its 100-year history, since taking office in April this year.
The big split of IBM Century has aroused great concern in the industry. Behind IBM's split this time, it has spotted a trillion-dollar market opportunity, which is the hybrid cloud market. So, what exactly is the hybrid cloud market IBM is focusing on? How big is this hybrid cloud market? In fact, different companies and organizations have different views. According to the market research firm Flexera's 2020 Global Cloud Market State Survey Report, currently 93% of enterprises have adopted a multi-cloud strategy and 87% have adopted a hybrid cloud strategy. According to Gartner's latest 2020 global IT spending forecast, the entire enterprise IT market will reach 3.5 trillion US dollars, of which the scale of IT services and enterprise-level software will be around 1.5 trillion US dollars.
Simply understand, the hybrid cloud pointed to by IBM is the hybrid cloud and IT market composed of enterprise-level software and services (including consulting and IT services) and systems. This is a growing market; and NewCo focuses on In the enterprise IT enterprise architecture management service market, this is a mature and stable market.
Hybrid cloud container: leading the next generation of enterprise application standards
What is the hybrid cloud in IBM's eyes? In other words, the trillion-dollar enterprise IT market dominated by hybrid cloud, including the hybrid cloud and IT market composed of enterprise-level software, services (including consulting and IT services) and systems, will exist in what kind of IT form? This must mention the current open source container Docker and its orchestration cluster management platform Kubernetes, which has become the standard for hybrid cloud and IT industries. This is also an important reason for Krishna's leading IBM's $34 billion acquisition of Red Hat.
Prior to this, the main form of enterprise IT infrastructure was virtual machines. Virtualization technologies such as IBM, Microsoft, and VMware dominated a whole generation of enterprise IT industry standards. In the era of cloud and containers, new container technologies represented by Docker and Kubernetes have become new enterprise virtualization technologies. Container and microservice architecture have become as important enterprise virtualization technologies as virtual machines, especially for enterprise applications. New "base". Containers do not require Hypervisor or Guest Operating System like virtual machines, but directly share the operating system kernel, and at the same time package all required system dependencies into a "container", which greatly reduces application migration in different environments Complexity.
According to the Flexera 2020 Global Cloud Market State Survey Report, current enterprises use an average of 3.4 public clouds and 3.9 private clouds, and up to 55% of enterprise applications on the cloud have become "islands", a hybrid cloud that spans multiple clouds, data centers, and edge nodes And IT management has become a current pain point for enterprises, not to mention hybrid cloud application development. On the other hand, containers have become mainstream-65% of enterprises have adopted Docker, 14% plan to adopt Docker, 58% of enterprises have adopted Kubernetes, and 22% plan to adopt Kubernetes.
Therefore, Docker container engine and container orchestration cluster management platform Kubernetes has become the de facto standard for the next generation of enterprise applications. In this regard, the Red Hat-IBM combination has great advantages. In the latest "Forrester Wave Multi-cloud Container Development Platform, 2020Q3" evaluation, Red Hat-IBM is the best and leading leader in the market. The Red Hat-IBM platform is very important for developers and operation and maintenance personnel. They are all very advanced technology platforms.
Openshift is a container cloud platform based on container technology. The bottom layer of OpenShift is driven by Docker as the container engine and Kubernetes as the container orchestration engine component. It provides development languages, middleware, automated process tools and interfaces. It is a complete container-based application cloud platform. Docker, as an open source project, only focuses on runtime containers, while OpenShift, as a commercial container cloud platform, includes both runtime containers and REST API, coordination and web interface to deploy and manage each container.
Forrester pointed out that Red Hat OpenShift, a multi-cloud container platform based on container technologies Docker and Kubernetes, is the most widely deployed multi-cloud container platform, providing a powerful development experience and a consistent operation and maintenance experience across multiple public clouds and enterprise local IT environments. Since IBM acquired Red Hat, IBM has made a huge investment in OpenShift, combining its own multi-cloud management, data and AI services, integrated API, etc. with OpenShift, and is committed to achieving "one-time development, anywhere deployment." Users surveyed by Forrester pointed out that Red Hat-IBM is an ideal platform for cloud-native enterprises and large enterprises with complex traditional applications.
McKinsey’s research points out that 94% of enterprises are currently in a hybrid cloud environment, involving public and private clouds. The IBM Business Research Institute's research shows that 80% of enterprise workloads still exist in non-public cloud environments, especially key business loads that mainly span enterprise local IT and private cloud environments. What prevents most enterprise workloads from moving to the public cloud? IBM believes that this is mainly a requirement for corporate compliance and security, and 60% of the hybrid cloud market opportunities lie in highly regulated industries such as banking, government, telecommunications, and healthcare. This requires an open, secure, and manageable hybrid cloud platform. And the software based on the platform and professional services that promote the journey to hybrid cloud.
IBM after the split: building a hybrid cloud platform economy
As the container-based hybrid cloud and IT market is booming, the 2020 global new crown epidemic has further intensified this trend. IBM announced the split of the century on October 8, 2020. At the investor’s online briefing on October 8, Krishna stated that IBM had established a solid foundation for the trillion-dollar hybrid cloud market in the past few years, and the acquisition of Red Hat further established IBM’s hybrid cloud platform Leadership. The previous IBM CEO Luo Ruilan invested more than US$120 billion in emerging enterprise-level technologies such as cloud, big data, and AI. These technology investments have now further consolidated the market position of the Red Hat OpenShift platform.
Krishna emphasized that due to the continuous adoption of hybrid cloud technology by enterprises and the acceleration of digital transformation, customer needs are changing rapidly: for the procurement and use of infrastructure and application services, different procurement cycles, obviously different selection criteria, and different Decision makers. Therefore, IBM decided to spin off the business of enterprise infrastructure management services in GTS (except for IBM public cloud) to establish a new listed company, which is responsible for managing the service business of those customers' own infrastructure. The new IBM will undertake assets such as IBM public cloud, Red Hat, mainframe and enterprise systems, GBS, GTS (excluding IT hosting services), AI and data analysis software, and will focus on the trillion-dollar hybrid cloud market. Said to be focused on establishing the industrial status of the IBM hybrid cloud platform.
Prior to this, Krishna issued an open letter at the beginning of his tenure, pointing out that hybrid cloud is IBM's next more durable platform after mainframes, services, and middleware, and it will "live longer" than the first three platforms. IBM's expectation for hybrid cloud is to establish the next industrial platform for enterprise IT:
First of all, Linux is the de facto standard operating system for the entire enterprise IT. Red Hat Linux, along with containers and Kubernetes, provides the next-generation enterprise IT "operating system", which will trigger the architectural transformation of the entire enterprise IT; and OpenShift can span local and public ownership The complete enterprise IT infrastructure such as cloud, private cloud, IBM Z mainframe and Power server, coupled with IBM's design for enterprise-critical business and highly regulated workloads, can meet the complete needs of enterprises for next-generation IT.
Secondly, on top of the enterprise IT infrastructure is IBM's middleware, and IBM's long-established middleware has been fully containerized. The new IBM Cloud Paks can be extended by cloud-ready open source software packages integrated into OpenShift. Capabilities, including data, automation, applications, integration, multi-cloud management, security, etc. Now, companies can run their own applications wherever OpenShift is deployed. OpenShift's good scalability saves companies a lot of time, and at the same time allows companies to develop and use application software in a new way through consistent development, security, and operation and maintenance flexibility.
Thirdly, GBS, the global business consulting service department of IBM Services, can provide deep industry knowledge to help customers modernize applications, migrate applications, build cloud native applications, or manage applications in a hybrid cloud environment. As more and more customers continue to adopt IBM's hybrid cloud platform, IBM is building a huge hybrid cloud ecosystem, including the market’s top ISVs, mainstream system integrators, cloud service providers, leading management service providers and Leading industry customers.
As a persistent platform and industrial platform, IBM will naturally establish a corresponding platform economy. The "hybrid cloud platform economy" has become Krishna's "crown". The trillion-dollar opportunities of Krishna's so-called hybrid cloud include: 300 billion cloud transformation service market, involving IBM's application modernization service and OpenShift Everywhere service; 450 billion USD cloud Software and platform, involving Red Hat software and Marketplace, Cloud Paks, enterprise-ready AI applications, etc.; $230 billion cloud infrastructure, involving IBM LinuxOne with Openshift on Z and IBM industry public cloud.
The platform opportunities based on Red Hat DevOps and the open hybrid cloud platform mean that every dollar of revenue generated by the platform will drive the underlying infrastructure revenue of 1-2 dollars (involving IBM system hardware and IBM public cloud ), the software revenue on it is 3-5 US dollars (involving IBM data and AI, supply chain and asset management applications, and IBM middleware), and the top-level cloud transformation service is 6-8 US dollars (involving IBM services). In other words, the platform's $1 collection will bring upstream and downstream revenue of $10-15.
IBM hybrid cloud platform and its extensive ecosystem: the future IT architecture choice for enterprises
The market consulting company WIKIBON believes that IBM’s opportunity lies in spreading Red Hat OpenShift to IBM’s vast customer base to increase Red Hat’s market share, and OpenShift itself has already occupied a certain market share and is also accepted in the open source community. So as long as IBM spreads OpenShift to all public cloud, private cloud, enterprise local data center, edge data center and other enterprise computing environments, it can connect these computing environments. In this process, IBM can obtain and realize huge commercial value.
When talking about the split, Alain C. Benichou, CEO of IBM Greater China, said that the current digital transformation of enterprises has four major challenges. The first is the headache of multi-vendor infrastructure operation and maintenance support; the second is the complexity of microservice management in the hybrid cloud environment; the third is the increase in cloud computing costs and the risk of vendor lock-in; the fourth is the lack of IT skills and IT inelasticity And agility, slow application time to market. Bao Zhuolan emphasized that enterprises need a unified and integrated hybrid multi-cloud architecture, which is also an environment that most customers do not have.
(Bao Zhuolan, CEO of IBM Greater China)
The good news is that IBM has a solution. IBM's hybrid multi-cloud solution is an open hybrid multi-cloud platform based on OpenShift developed after the acquisition of Red Hat. Bao Zhuolan emphasized that this is also the only cloud platform that can realize seamless movement of containers between different cloud platforms and onsite environments. It can be said that not only IBM's own public cloud is supported by this platform, but AWS and Aliyun have also been certified on this platform.
Miao Keyan, vice president of IBM and general manager of cloud computing and cognitive software in Greater China, emphasized when talking about this spin-off that IBM's hybrid cloud platform and its extensive ecosystem are the IT architecture choices for the future of enterprises. Prior to the acquisition of Red Hat, IBM had enterprise-level infrastructure such as IBM systems, IBM public clouds, edge computing, Cloud Paks cloud-based middleware and extended PaaS and AI applications in the hybrid cloud field, as well as IBM cloud transformation services; After the acquisition of Red Hat, the Red Hat OpenShift open hybrid cloud container platform was added between the infrastructure layer and the software layer to form a complete IBM hybrid cloud platform and expand the IBM hybrid cloud ecosystem to other public clouds and infrastructure, Third-party ecosystem partners and global system integrators.
November 2020 is the first anniversary of IBM Cloud Paks listing in China. Since its release last year, Cloud Paks has 74 customers in the Greater China region, and they have all embarked on the hybrid cloud journey. In the fourth quarter of 2019, IBM launched the Cloud Paks enterprise-level containerized solution, which includes six applications, including application, data, integration, automation, multi-cloud management, and security. A research report on the overall impact of Cloud Paks released by Forrester shows that the three-tier framework delivery method of OpenShift+Cloud Paks+ upper-layer application software can provide enterprises with three-fold enhanced capabilities at half the operating cost, and provide customers with cross-cutting capabilities. Consistency and seamless experience of multiple scenarios.
It is worth mentioning that the newly spun-off company (NewCo) will become the world's leading infrastructure management service provider as soon as it is established. It has established cooperative relationships with more than 4,600 strictly regulated technology-intensive customers in 115 countries or regions around the world, including more than 75% of the Fortune 100 companies with a business value of 60 billion U.S. dollars. The scale is ranked More than twice as much as the second competitor.
Ending: Two companies will emerge after IBM's split of the century-IBM focusing on hybrid cloud and artificial intelligence solutions, and a new company focusing on infrastructure management services. Without the bondage of customers, IBM will be able to pursue and explore trillion-dollar hybrid cloud market opportunities more openly and freely, and establish itself as a platform for the new century of enterprise IT. For the majority of industry vendors and ecosystem partners, now is the time to think about how to reshape their core competitiveness around the IBM hybrid cloud platform, so as to jointly develop the big future of the trillion-dollar hybrid cloud market with IBM. (Text/Ningchuan)