SoftLayer As Foundation for IBM's Cloud Investment?

IBM (IBM) is betting big on cloud by investing $1.2 billion to expand its global cloud footprint, which should bring it into closer competition with Amazon Web Services and other major competitors in the cloud space. With the newly announced investment, IBM’s real secret weapon is SoftLayer, which is likely to become the backbone for much of Big Blue’s cloud infrastructure.

Included in the big cloud investment is a network of new data centers. IBM will maintain 40 data centers from different points around the globe this year. Currently, the company has 13 SoftLayer and 12 IBM data centers, but with the investment, IBM will add 15 new data centers to its roster. Locations include spots in China; Washington, D.C.; Hong Kong; London; Japan; India; Toronto; Mexico City; and Dallas.

Additionally, IBM hopes to continue that expansion in 2015, with new data centers opening in the Middle East and Africa.

“IBM is continuing to invest in high-growth areas,” said Erich Clementi, senior vice president of IBM Global Technology Services, in a prepared statement. “Last year, IBM made a big investment adding the $2 billion acquisition of SoftLayer to its existing high value cloud portfolio. Today’s announcement is another major step in driving a global expansion of  IBM’s cloud footprint and helping clients drive transformation.”

The SoftLayer acquisition is critical to IBM’s cloud strategy today and going forward. And according to Technology Business Research (TBR) industry software analyst Matthew Casey, much of the revenue growth IBM is expecting from these investments will come from SoftLayer.

Don’t expect all that new revenue to emerge immediately. Casey wrote in an alert to media that the most recent IBM investment, as well as the big investment in Watson, is a big upfront investment to see returns in the second half of 2014. But SoftLayer’s technology and strategy is key.

“SoftLayer helped fill two delivery gaps for IBM, broadening its public cloud infrastructure capabilities with 13 globally dispersed data centers, as well as extending IBM’s go-to-market capabilities with an established route to market in the SMB space,” Casey wrote.

Casey also noted that the increased cloud footprint will provide a “more defined barrier against competitors such as AWS.” The two are more indirect competitors in the public cloud space, but the gap is closing and the competition is slowly heating up.