IBM CEO Ginni Rometty says IBM will become the biggest player in a new cloud computing market that she says will be worth $1 trillion.
Or so Rometty told Maria Bartiromo on "Fox Business Network’s Mornings With Maria" in an interview from Davos, Switzerland.
The market is called hybrid cloud, and Rometty went so far as to call it "Chapter 2" — as in, the next chapter in the rise of cloud computing.
"That’s a $1 trillion market, 'Chapter 2.' We will be number one in what the world calls hybrid cloud. That is 'Chapter 2' and we’ll be number one," Rometty said.
Hybrid cloud computing is where companies use a combination of cloud computing and their own private data centers and want it all to work together.
Rometty described public cloud — the market that Amazon Web Services dominates, with Microsoft Azure in second place — as "Chapter 1." She says that this market, where developers rent functionally unlimited supercomputing power from large-scale data centers, is the "low-hanging fruit."
"I really believe for most enterprises, 'Chapter 1' was easy things that they moved [into the cloud]. Pretty low-hanging fruit, and if you size it, 20 percent is what’s moved to the cloud," she said.
"The other 80 [percent] now becomes not just more complex, it’s got a different complexion," she said. Customers are worried about their most important and sensitive data, she says, and want to keep everything on their own servers.
Rometty could be right
Rometty may be right that the hybrid cloud will become the next trillion-dollar market for enterprises. Companies will spend $3.8 trillion on their tech in 2019, Gartner predicts, including their hardware, software, cloud and consulting services.
Companies like IBM, HP, Oracle, Red Hat and Microsoft who grew up selling hardware and/or software before the cloud computing era love that idea. Hybrid computing means that they can continue to sell hardware and software while also selling cloud services. It's the have-your-cake-and-eat-it-too scenario.
She's also right that its going to be the next big thing.
Even mighty Amazon Web Services, which had no traditional hardware or software business, has begun to go after hybrid computing. It has partnered with VMware to help it reach those companies who aren't ready to put everything into the cloud and unplug their data centers.
And in November, Amazon even announced its first-ever hardware device that companies can run in their own data centers to help them do hybrid computing.
Rometty also explained that the pending $34 billion acquisition of Red Hat, expected to close later this year, was done to help IBM capture this new trillion-dollar hybrid market, she said. Red Hat's software, especially its flagship Red Hat Enterprise Linux operating system, is popular both in the data center and in clouds like Amazon's or Microsoft's. With Red Hat in its portfolio, IBM will have a foothold in both worlds, and can help customers bridge the divide.
A new vision for IBM
Whether Rometty paid too much or not for Red Hat is a matter of debate, but she couldn't afford to take the risk of IBM being shoved aside in the hybrid computing market.
"Chapter 1," to use Rometty's language, hurt traditional hardware and software companies like IBM. Some didn't survive as standalone companies at all, as seen in Dell's mega-acquisition of EMC.
IBM has spent most of the last seven years watching its annual revenues shrink as its customers bought less software, hardware and consulting services for their own data centers, and opted to use clouds like AWS or Microsoft Azure.
Rometty became CEO in 2012, which means the company has basically been shrinking during entire her reign — although sometimes that reduction was deliberate as she's ditched underperforming business units while turning the venerable company towards new, growth markets instead.
Earlier this week, Rometty finally enjoyed a moment of triumph when the company reported it's first annual revenue growth since 2011.
But, deliberate or not, the shrinking IBM also means she's spent the last seven years talking about painful turnarounds, and reinvention, while also trying to evangelize a new vision for the company.
Her declaration about IBM's position in hybrid computing maybe prescient, or it may be bravado. After all, Microsoft is the acknowledged second-place player in cloud computing after Amazon, and its claim to fame is hybrid computing, too, not to mention the Office 365 cloud productivity suite.
But with a year of growth finally under her belt, she's certainly earned a moment to plant her flag for what's come next.
