On Tuesday, IBM announced that it is investing $1 billion over the next five years in a hot new area of enterprise tech called "software-defined storage."
This is important and interesting for a whole bunch of reasons — and shows that CEO Ginni Rometty has her competitive game on.
She's got a plan to move her massive 400,000-ish strong workforce from shrinking businesses and towards growth areas, even though it's painful, with a number of quiet layoffs involved.
To understand why this new $1 billion investment is cool, you need to know two things:
- "Software-defined" is a huge trend in the $3 trillion enterprise technology market.
- This is the second big move that IBM has made that puts it on a collision course with storage giant EMC, and the $17 billion storage market that it dominates with about 30% market share, according to IDC as reported by Forbes.
Software is eating the enterprise data center
"Software-defined" is a term that refers to taking expensive hardware, removing the all the fancy features from it that makes it expensive and putting those fancy features into software apps that run on special computers. You still need the hardware, but you need less of it, less expensive varieties and your data center becomes faster, more efficient, and less expensive — important for today's cloud computing needs.
Software-defined networking (SDN) is already happening, forcing market leader Cisco to respond.
It is also coming on strong in storage, forcing EMC to respond. The poster child for this new market is IPO-bound startup, Nutanix, which has raised a whopping $312.2 million from investors and was on track to book $300 million this year when it announced second-quarter growth earlier this month.
EMC has a software-defined storage (SDS) product of its own, ViPR, which is selling well and one of the six areas where EMC is heavily investing, it says.
Second smart move by IBM
IBM's $1 billion commitment is the second big recent move it made to eat EMC's lunch. In December IBM cozied up with Cisco shortly after Cisco divorced its former close partner EMC.
Cisco and EMC had a successful joint venture, called VCE, that was on track to sell $2 billion of equipment from Cisco and EMC in 2014 (EMC said last fall) and is growing by 50% a quarter, (EMC said in January).
VCE makes a product that combined Cisco's popular computer servers with VMware's server software and EMC's storage.
But EMC subsidiary VMware is now trying to take down Cisco with its own "software-defined networking" (SDN) product. Thanks to that, the relationship between EMC and Cisco devolved to the point where they ended the partnership in October, with EMC buying out Cisco (leaving Cisco with a 10% stake).
EMC promptly set about retooling VCE's products to sell the VMware networking product that competes with Cisco's networking products.
Cisco retaliated by firing up a new partnership with EMC's rival IBM for IBM's software-defined storage product.
Both Cisco and IBM have huge and powerful enterprise sales forces and partner networks. Together, the products they develop that combine computer servers, networking, and storage should do well.
Turf wars going on at EMC
All of this comes in the midst of reported internal turmoil going on at EMC in the Advanced Software Division, the unit responsible for the ViPR, according to The Register's Chris Mellor. This unit, and the one responsible for EMC's bread-and-butter classic computer storage systems, are apparently not getting along, although an EMC spokesperson denies such reports.
Internal turmoil or not, software-defined storage is a gift-wrapped opportunity for IBM, which has seen its market share and revenues in the traditional storage market decline in 2014.
And it's tied with a bow – a new partnership with Cisco.
Throwing $1 billion at this opportunity is a smart move.
