IBM to Acquire SoftLayer, Form New Cloud Division

IBM (IBM) will acquire privately-held cloud computing infrastructure provider SoftLayer in a deal that Big Blue says will strengthen its leadership position in cloud computing and speed business adoption of public and private cloud. Here are the details.

First, some background. SoftLayer, founded in 2005 in Dallas, Texas, currently employs 700 people and runs 13 data centers on three continents, North America, Asia and Europe. The company claims 21,000 customers. One of its major differentiators is that it offers bare metal server implementations in the cloud, executives said during a conference call with analysts and press. Talkin’ Cloud first reported talks between IBM and SoftLayer earlier this year.

IBM says the deal will marry the speed and simplicity of SoftLayer’s public cloud services with enterprise-grade reliability. It will also accelerate IBM’s ability to integrate public and private clouds for its clients. Executives said that deployment  options will include multi-tenant public cloud, single tenant public cloud and single tenant bare metal. IBM’s Erich Clementi, senior VP of Global Technology Services, said that SoftLayer’s services do not compete with Amazon, Google or Rackspace. IBM has always focused on serving a higher-end niche rather than a commodity, and the SoftLayer integration will follow that same vision. 

Reports are placing the deal size in the $2 billion range, but IBM and SoftLayer executives declined to comment during a conference call on either the price or on SoftLayer’s revenues.  SoftLayer will become part of IBM’s Smart Cloud operations and will support a range of implementations including OpenStack, CloudStack and VMware, according to Jim Comfort, general manager of IBM SmartCloud Services.

SoftLayer’s CEO: Born-on-the-Cloud

SoftLayer CEO Lance Crosby offered the following description of his company during today’s conference call: “SoftLayer entered the market in 2006 with platform that didn’t exist at time: IT services that could be purchased on-demand and by the drink.” He said early customers included Internet-centric businesses such as social gaming companies.

“We were built by engineers for engineers.”  Crosby said that the company has a track record of serving born-on-the-cloud companies and the IBM deal will help it move into the enterprise market.  

IBM will form a new Cloud Services division once the SoftLayer deal closes, expected in 3Q 2013. The new division will combine SoftLayer with IBM SmartCloud into a global platform and report to Clementi. 

IBM said in a statement that it expects to reach $7 billion annually in cloud revenue by the end of 2015. The company has invested heavily in the cloud. IBM currently offers more than 100 SaaS solutions for a range of functions and verticals, IBM Watson solutions such as Client Engagement Advisor in the cloud, IBM PureSystems and SmartCloud Enterprise+, as well as cloud services for SAP.