
IBM’s Old Playbook - feross
https://stratechery.com/2018/ibms-old-playbook/
======
ilovecaching
I'm really worried about Redhat. IBM is currently a sinking ship, they've laid
off parts of their workforce, they're failing to capture the cloud market, and
the Redhat buy seems to be a ploy to maintain relevance. I'm seriously anxious
about Redhat being drug under during IBM's death throes.

Redhat isn't going to save IBM. They sold because they had an unsustainable
business, and Openshift is still a risky play to run a stable business on. The
container space is starting to get awfully crowded, and cloud providers can
provide better tailored experiences and skip containers altogether with
serverless.

As a long time taker of Redhat certs, I hope they pull through and still look
something like the Redhat I have loved and known.

~~~
stevenacreman
I've been keeping track of the various Kubernetes services and agree the
market is massively crowded right now. AWS, Google and Azure dominate the
cloud market. IBM is a distant joint last place by most metrics.

OpenShift won't compete with the cloud offerings in the long run. Redhat are
currently competing with On-Prem offerings and trying to make a case for
'hybrid'.

Even in this market OpenShift is competing against at least 15 alternatives.
For anyone interested I've been crowd sourcing data for each and trying to
work out key differentiators.

[https://docs.google.com/spreadsheets/d/1nAgDxQZYeAMLwz8iI3_a...](https://docs.google.com/spreadsheets/d/1nAgDxQZYeAMLwz8iI3_aZ6lagDtEPg8X9PFqQvgtEjA/edit?ts=5bd7135b#gid=0)

OpenShift is definitely differentiated in terms of security. They also have
network and storage features that are arguably valuable to enterprise
customers.

Google GKE On-Prem is out soon. I never see Azure Stack mentioned so maybe
Microsoft will look into a Docker acquisition to boost their enterprise
footprint.

The cloud seems like the bigger growth area though so perhaps this On-Prem
container platform land grab will be short lived.

~~~
WorldMaker
> I never see Azure Stack mentioned so maybe Microsoft will look into a Docker
> acquisition to boost their enterprise footprint.

The companies using Azure Stack today are some of the least likely to be
parroting that fact. Microsoft's on-prem is pretty well entrenched,
particularly in "boring enterprise" where pragmatism beats idealism, are quiet
"do the work, don't leak the work" more than proudly proclaim to be chasing
the trends.

That said, Azure Stack (and Azure) already have strong Docker support, without
an acquisition to date.

More interestingly, in my opinion, though, is that right now Azure Functions
is the only "serverless" runtime with a strong open source story, and equally
strong on-prem (both as part of Azure Stack and, increasingly from what I
hear, standalone) as well as Cloud support.

~~~
yebyen
> That said, Azure Stack (and Azure) already have strong Docker support,
> without an acquisition to date.

Maybe I'm confused about what you mean by "Azure Stack", but there was most
certainly an acquisition[1] related to Azure's docker support, the Deis team
(now part of Azure team) were some of the earliest contributors to the Helm
project, and this buyout was widely hailed from what I can remember as
Microsoft's first big investment in Kubernetes.

Many of those people remained with the Azure team, and none of them work on
Deis today. So, instead, they are driving the development of tools like Draft,
AKS, OSBA, and Virtual Kubelet.

And of course MS also made a high-profile acquisition of GitHub, just not sure
that one is relevant to Azure Stack.

[1]: [https://techcrunch.com/2017/04/10/microsoft-acquires-
contain...](https://techcrunch.com/2017/04/10/microsoft-acquires-container-
platform-deis/)

~~~
WorldMaker
It was in reference to an acquisition of Docker, Inc. itself. They've worked
quite closely with Docker, Inc. but (so far?) haven't acquired them.

But correct, there have been related acquisitions.

~~~
yebyen
Interesting, I would say that it's fortunate nobody can buy Kubernetes
(because it only is composed of acceptance and compliance with a conformance
suite, there are dozens of separate implementations and they may all be
Kubernetes.)

To be honest that's a great feature and one reason why I am not terribly
scared about consequences of any news about a RedHat acquisition; that being
so even though I do follow OpenShift with some interest.

I'm sure that Docker is also a target for acquisitions by these bigger
companies but while we're on the subject thanks to Kubernetes and the CRI,
it's pretty darn unlikely that anyone is ever going to totally corner the
market on Linux containers, at least any time in the foreseeable future.

------
wiremine
Most of my experience with IBM has been pretty reliable:

1\. They bring the A players to the sales process 2\. They bring the B players
to manage the account (technically and commercially) 3\. They bring the C/D
players to do the actual work.

Wondering if I'm an outlier or if this is a standard mode of operation for
them? I wonder how this plays in with their OSS strategy? Who works on things
like OpenShift?

~~~
tyfon
Whenever I meet with any of the big(ish) players to to assess a product I
spesifically ask them to send engineers instead of sellers.

If they send sellers after that we usually just ask them to leave and send the
engineers. I've seen quite a few pouts but it's impossible to get accurate
product information out a seller, they just tell you what you want to hear.

I've never been in contact with IBM before but I'm not surprised about your
experience.

~~~
chrisseaton
What do you do when the engineers turn up and know nothing about the prices,
contracts, or anything else like that?

~~~
munchbunny
You can usually negotiate that after you've confirmed that the product will
actually do what you need it to do.

When I took sales calls, I would usually sit through the intro pitch from the
salesperson, and if it seemed in the ballpark, I would cut the call short and
ask to be put in touch with product/engineering by email. And if I liked what
I saw, I'd go back to the salesperson for pricing, etc.

------
roymurdock
A lot of ink spilled to reach these conclusions:

> one of the most important takeaways from the Red Hat acquisition is the
> admission that IBM’s public cloud efforts are effectively dead

> while IBM will certainly be happy to have the company’s cash-generating RHEL
> subscription business, the real prize is Openshift, a software suite for
> building and managing Kubernetes containers

> IBM is betting it can again provide the solution [to cloud lock-in],
> combining with Red Hat to build products that will seamlessly bridge private
> data centers and all of the public clouds

To sum up - IBM lost the hardware cloud wars and is making big bets on cloud
software. The author doesn't answer the key question posed at the end - does
the problem of cloud vendor lock-in actually exist (and the implied question -
if it does, how profitable is it)? I suppose that's the info he wants you to
pay for ;)

~~~
nine_k
> IBM lost the hardware cloud wars

This makes me scratch my head. I heard Power9 is getting more and more
traction in some clouds, notably Google's.

Maybe IBM lost the "bog-standard VM-based cloud" wars, where the "standard" is
what AWS / GCP / Linode / DO, etc offer. But that space is indeed crowded;
doing something where you have little competition makes a lot of sense. (I
wonder if they'll be able to.)

~~~
ALurchyBeast
IBM bought SoftLayer 5 years ago, and was unable to capitalize on their niche
(bare metal). Instead they decided to double down on provisioning VMs, which
SoftLayer was never that great at. The set of features IBM's VM's provides
compared to any other modern cloud is terrible (headed backwards in Gartner
charts). It's barely getting any better, meanwhile Google/AWS/Azure are
gobbing on features.

IBM effectively failed in their integration of SoftLayer. They bought
SoftLayer but failed to modernize them. Why will RedHat be any different?

Take a look at what's left of SoftLayer today. Most folks who had the
necessary skills to keep their ancient php platform relevant have left a long
time ago.

I'm sure IBM is on their 5th iteration of their "next gen" VM provisioning
system by now, due out any quarter...

~~~
rad_gruchalski
Have they fixed their scheduler? For 5 years nothing has improved in the
process of launching VMs. Sometimes it just barfs and goes to hell, requiring
contacting support to terminate provisioning.

No joke, at one of the previous places we’ve implemented a task which would
raise a support ticket via API if provisioning step was hanging for longer
than x minutes. This is the case for years!

According to some people from IBM, the reason why IBM purchased SoftLayer was
so they could tell their customers who were looking to move to the cloud „you
want cloud, we have cloud” ... and keep the hefty support contract runing.

------
skwog
Related reading is Cringely’s long history of writing about IBM

Blog: [https://www.cringely.com/tag/ibm/](https://www.cringely.com/tag/ibm/)

The Decline and Fall of IBM [https://www.amazon.com/Decline-Fall-IBM-American-
Icon/dp/099...](https://www.amazon.com/Decline-Fall-IBM-American-
Icon/dp/0990444422/ref=as_sl_pc_ss_til?tag=icr0c-20&linkCode=w00&linkId=&creativeASIN=0990444422)

~~~
cwyers
I would pay hard money to read Cringely's take on this.

~~~
J-dawg
Looks like he’s written it. It’s surprisingly positive!

[https://www.cringely.com/2018/10/29/red-hat-takes-over-
ibm/](https://www.cringely.com/2018/10/29/red-hat-takes-over-ibm/)

~~~
cwyers
Yeah, wow, not what I expected at all. I don't know if I buy what he's saying?
It seems to rely on things happening that I have my doubts about, like Ginni
Rometty departing.

------
TrevorAustin
More than anything I've read recently, this article makes me bullish on
Microsoft, who are successfully executing the playbook IBM ran to right the
ship in the '90s:

> The problem for IBM is that they are not building solutions for clueless IT
> departments bewildered by a dizzying array of open technologies: instead
> they are building on top of three cloud providers, one of which (Microsoft)
> is specializing in precisely the sort of hybrid solutions that IBM is
> targeting. The difference is that because Microsoft has actually spent the
> money on infrastructure their ability to extract money from the value chain
> is correspondingly higher; IBM has to pay rent

~~~
tguedes
The bearish argument to your bull is that it's fine that Microsoft dominates
the hybrid cloud, but where is the growth after that? New companies are
entirely serverless with no need for a hybrid solution. So where is the growth
after they've converted all their existing Microsoft customers to Azure?

~~~
yuy910616
The bullish argument to your bearish argument...the ( yet to come) generation
of github users growing up using azure cloud

------
013a
I find the directions the cloud space is evolving in completely fascinating. I
suspect we're going to see some major shifts over the next decade.

Primarily: Azure is already super successful and I see it taking a solid #1
over the next few years. The main reason is that Microsoft is doing what they
do best: offering a product in every category. Want Kubernetes? They've got
it. Need issue management? Azure DevOps. Chat? Teams. Email and Office? 365.
Once you're in that ecosystem you're just going to bleed into all of their
products before suddenly you're a Microsoft shop.

Moreover, Microsoft has done an extraordinary job at revitalizing the user
experience of many of their products. Azure DevOps and Teams has its issues,
but they're miles ahead of the products they're replacing, and truly only
maybe 10% behind the 'best in class' of each category.

Compare this positioning to Amazon: AWS still only competes solidly in the
cloud space, without extending out into the rest of "development team support"
that Azure/Microsoft does. They were also _ridiculously_ slow to accept that
Kubernetes won the container war, and even today EKS is a comparatively
garbage product when lined up against AKS/GKE (no managed worker nodes,
$0.20/hour for the control plane, reliance on eksctl to do anything easily
which isn't even an official AWS product, etc).

Amazon will be fine, but I worry about Google Cloud's future. They're industry
leaders when it comes to new technology, no one else is even close, but that
doesn't really matter when its open source and Microsoft is so quick to
implement everything they make directly into Azure. Why isn't Google Cloud
more successful? I think its enterprise support and respect, which isn't
something you can just buy especially with Google's lackluster history in that
domain.

~~~
jacquesm
The really scary thing about Google Cloud to me is that Google has a very long
history of axing projects. I'm just trying to imagine what it would be like to
be totally tied into GC and to receive an email along the lines of 'Dear
customer, to serve you better we have decided to retire GC by the end of this
year, as per your contract you have three months to move'.

~~~
013a
Google takes G-Suite/Enterprise focused products very seriously. I can't think
of many major examples of them axing one of their enterprise products (or
really any, though I'm sure there's one or two fringe examples). In other
words, I think they have an issue of reputation here, but that reputation is
mostly unfounded because it applies to a different class of products.

I also think GCloud is very unique in that all of the capex that Google spends
on it comes back to benefit Google. All of their product offerings need
servers and world class networks behind them. So even if GCloud remains a
solid third/fourth place in the cloud race, I doubt we'll see them go anywhere
just because Google itself is probably using it internally to some degree.

I mostly worry about the scope of investment from management. I want to see
way more products out of them. More managed databases, a better managed NoSQL
database than Firestore, lower prices, more enterprise focused things like
automated security auditing, better support. We're just not getting it;
they're so focused on shiny trivialities like Firebase and Stackdriver while
missing the basics.

~~~
jacquesm
> but that reputation is mostly unfounded because it applies to a different
> class of products

That's not how reputation works. A brand has _one_ reputation. You mess with
that at your peril.

~~~
huhlig
A brand can have a reputation both per audience and per product segment.

~~~
jacquesm
How unfortunate when your audience crosses your carefully laid lines and is
active both as a business user and as a private individual. Screw them on the
one and expect mercy on the other and we'll see how that multiple reputations
theory works out in practice.

------
throwaway5752
_" The best thing going for this strategy is its pragmatism: IBM gave up its
potential to compete in the public cloud a decade ago, faked it for the last
five years, and now is finally admitting its best option is to build on top of
everyone else’s clouds."_

Ouch, but hard to argue against.

~~~
kevin_thibedeau
Too bad that Java thing isn't working out so well.

------
alienreborn
Wow, that revenue graph is pretty shocking and enlightening to me. I know IBM
is a huge behemoth but never knew it had much higher revenue than Microsoft
for most of 2000s.

~~~
maxxxxx
That's the problem with public perception. Everybody talks about the current
superstars and thinks the the older companies are declining. If you have read
news for the last year it would be hard to imagine that Microsoft just
overtook Amazon in terms of valuation.

~~~
airstrike
Microsoft took over Amazon in terms of Market Cap, but not valuation.

    
    
      MSFT
      Market Cap              $839.7
      Less: Net Cash           (59.7)
      Total Enterprise Value  $780.0
    
      AMZN
      Market Cap              $834.5
      Less: Net Cash            (5.6)
      Total Enterprise Value  $828.9
    
    

The discrepancy is all the more evident in terms of multiple (or the "exchange
rate" for investing in these companies). MSFT trades at 21.0x 2019E P/E and
12.5 TEV / 2019E EBITDA while AMZN trades at 60.8x 2019E P/E and 19.5x TEV /
2019E EBITDA multiples.

~~~
maxxxxx
I guess I confused the terms but I think my point still stands.

------
NikolaNovak
Interesting read; I wonder if VMWare is subtly in similar position -
transitioning their company from providing software which ran on bare metal
and essentially managed the datacentre; to trying and not succeeding at their
own cloud offering; to now attempting to provide layer on top of somebody
else's cloud - currently a successful strategy, but perhaps one that'll see
them squeezed out due to costs long term?

~~~
zapita
Yes that is pretty accurate. The difference is that Vmware is further along in
revenue, and has already leveraged their position in compute to diversify into
adjacent markets (storage and networking). Red Hat has failed to do that.

And of course Vmware has already been integrated into EMC years ago, quite
successfully. Although you could argue the ongoing Dell/EMC saga could
jeopardize that... Depending on how well you think it’s going.

~~~
user5994461
VmWare is part of Pivotal/EMC. They sell cloud foundry that is an on premise
cloud directly competing against OpenShift from RedHat.

From what I've seen, they're doing a lot more sales than RedHat.

~~~
zapita
Yes Vmware does a lot more sales than Red Hat.

However Pivotal CloudFoundry is not their best-seller... I doubt it’s even in
the top 5. Vmware’s empire is built on Vsphere/esx (their core business) and,
more recently Vsan (storage) and NSX (networking). The former is the largest.
The latter two are the fastest growing.

Container platforms are a relatively new category, so sales are not huge. In
that category Cloudfoundry might be slightly ahead, but I think Openshift has
more momentum because their early bet on Docker then Kubernetes is paying off.
Pivotal has PKS but it feels half-hearted.

~~~
user5994461
Pivotal is a separate entity and business model from VMWare, I wouldn't
compare them directly. They are both owned by EMC/DELL.

I'm under the impression that cloud foundry is specifically targeting mega
corporation like fortune 100 banks. In that context, it only takes a few sales
to capture the market and a lot of money.

I didn't see OpenShift used anywhere.

------
josephmosby
Another factor that is going to pinch IBM here: they're getting hit from the
other side with professional services firms (McKinsey, Big Four, Booz Allen,
etc.) now jumping into cloud implementation work. Also smaller but legitimate
technical firms like Pivotal who capitalized on IBM dragging their feet in
this marketplace.

So, if IBM's strength was "we can do services from anywhere," that gets busted
by the rest of these players who can now compete at the same logistical level.
And if they aren't hiring the best engineers, they're going to get slammed by
Microsoft who will pay top dollar for them.

~~~
technofiend
Doubly so because their investment into RHEL legitimizes the technology for
anyone still so conservative as to be unsure. _Well if _IBM_ says it 's
legitimate, it must be so._ But really once that barrier to entry is gone (as
you said) anyone with enough credibility can sell the tech because it's open
source. Arguably unsure people may want to buy Red Hat for support but they'll
quickly find it's available elsewhere cheaper and possibly not needed at all.

~~~
user5994461
The support from somewhere else raises the question of from where?

Which raise the risk that IBM could kill CentOS. Once done, there is no choice
for company but to pay for RedHat or migrate to Debian.

~~~
Conan_Kudo
This makes the openSUSE Leap -> SUSE Linux Enterprise supported upgrade
strategy interesting, because if someone started out with openSUSE Leap 15.0,
they can trivially attach a SUSE Linux Enterprise 15 subscription to it and
convert the system, and remain fully supported by SUSE in the process.

So with that available, if SUSE isn't completely stupid on how to go to
market, they'll actually figure out a way to capitalize on that.

~~~
user5994461
Using SUSE in 2018? I don't want to be unfair to SUSE but I would probably put
that in the abandoned OS along Solaris, HP and a few other I forgot the name.

------
adrianmonk
Not necessarily sure it'll work out for IBM, but the article brings up an
interesting parallel.

In its previous comeback, part of its strategy was positioning itself one
layer above the commodity layer. (The article says, "The actual technologies
underlying the Internet were open and commoditized, which meant IBM could form
a point of integration and extract profits, which is exactly what happened.")

Now with open cloud technologies aiming to make cloud providers (Amazon, MS,
Google) into commodities, this new effort also shares that strategy.

Of course the other ingredients are that it must be a value-add that customers
actually need and nobody else offers a better version of. But buying Redhat
seems like a reasonable stab at achieving that. Overall, their strategy seems
to make sense at a very high level.

------
hacknat
As someone who has had to deal with two cloud-phobic industries now (auto and
healthcare). I have to say the hope of the hybrid cloud being a
differentiator, for RedHat/IBM, is misplaced.

Getting these players into the cloud is always hard, but the hybrid cloud
doesn’t really soften the ground internally at most of these compliance heavy
organizations. They are all aware of how awesome and wonderful the cloud is,
it’s always politics that get in the way. Once an organization goes through
the incredibly difficult process of allowing cloud projects (which involves
lawyers, rewriting policies, compliance officers, etc), the organization
usually puts all projects going forward onto the cloud and views the old stuff
as legacy. The idea of trying to bridge the two is rarely considered worth it.

Of course there are exceptions. However where I see hybrid clouds do well is
in organizations that are taking the task of porting everything to the cloud
very seriously, but they know the project will take a while, so it is worth
everybody working off of the same infrastructure playbook until they can shove
everything in the cloud.

The days are dark for the folks that missed the cloud bandwagon over a decade
ago.

------
sjg007
I guess what IBM needs to do is to go talk to its customers.

Server-less is an interesting development. To avoid lock in though we would
need a library API layer. Much like what Kubernetes provides at the
application layer.

~~~
jacques_chester
Both IBM and Red Hat have fulltime participants working on Knative (as well as
Pivotal, SAP, VMWare and Google).

------
jorblumesea
At this point, is IBM anything more than an accenture/infosys/cognizant style
consulting firm with patents? I'm having a hard time understanding why they're
supposedly different compared to any of the big players in that space.

------
watertom
IBM today is Unisys of 1990, it's 2017 did you know that Unisys still sells
Mainframes?

IBM has become completely dependent on consulting, and they did that because
their hardware business has been shrinking. They are only selling hardward to
a captive audience. The only companies buying Mainframes or AS400's are
existing customers, but those customers are also converting portions of their
business to other technologies, but not on IBM hardware, or the IBM cloud. It
appears that IBM is still a technology company but it's an illusion.

IBM is dying and there is nothing that anyone can do about it, they won't
fold, but in 20 years IBM will be as relevant as Unisys is today.

------
whatupmd
I work on IBM clouds all day and what they have been doing for the last
several year(s) is embracing Linux, much the same way that Microsoft has been
embracing Linux with containers, WSL, github, and Azure.

The first thing I thought when I read this news was - good maybe they’ll take
their 360,000 employees, make them all use Linux, and as a consequence
standardise a developer laptop to compete with MacBook.

The second thing I thought was - if there is 360,000 people with Linux laptops
in your enterprise, what sort of creative uses could you come up with for
container orchestration.

The third thing I thought was - I wonder how much they pay in Microsoft
licensing per year.

~~~
nradov
IBM sold their laptop business to Lenovo years ago.

~~~
whatupmd
Not talking about starting a laptop business - talking about a major
corporation with 360K people that are all-in on Linux. Someone needs to
fulfill that hardware requirement - it doesn't have to be IBM. What does that
sort of requirement do to the IT ecosystem.

------
HHalvi
Off topic : Ben's articles on Stratechery were pretty much only becoming about
one or two things only i.e Bundling and Aggregation. I am happy that from the
Instagram's CEO article to this one all of the posts did not disappoint me at
all and are not a unhealthy repeat of the same themes and or theories.

------
ggm
If you force-divested IBM into constituent parts which one(s) would retain the
IBM branding and why?

PowerPC was the last time I was aware of IBM making significant change in the
VLSI market. Before that, it had been definitional in a number of things, not
networking (!) but certainly high density storage.

------
MR4D
IBM just gave Ubuntu (Canonical) the biggest gift it can possibly imagine.

Now, will they be able to capitalize on it?

------
gaius
_consumer technology will obliterate all computer science over the last 20
years_

What does this quote actually mean?

~~~
jimbokun
It means things were not going to go well for IBM with that CEO at the helm.

------
crb002
Missing the key component. IBM mainframe colocated with a big three cloud
provider. That's the secret sauce to shave latency.

------
lobsterloga
"This is where the Red Hat acquisition comes in: while IBM will certainly be
happy to have the company’s cash-generating RHEL subscription business, the
real prize is Openshift, a software suite for building and managing Kubernetes
containers."

Small problem with that. Most of the progressive enterprises are trying to
move AWAY from containers to fully serverless architectures (Lambda, Google
functions, Azure, etc.)

Kubernetes is still hot but the momentum is definitely with Lambda and its
ilk.

~~~
freehunter
I'm a consultant who works with enterprises of all sizes (all sizes that could
still be considered "enterprise" sized at least) and I've only encountered one
that has used anything serverless, and then only in one production
application. And I touch basically every IT application/environment across the
entire business.

Now I don't want to say my experience is perfectly indicative of what big
companies are doing in general, but I certainly haven't noticed this trend.
Even containers are just starting to catch on in the enterprise market, and a
lot of enterprise software doesn't currently support containerization.

~~~
AndyNemmity
I was an enterprise consultant, and I'll vouch for your experiences. It's
moving in that direction, but it's a few years out of what people think.

Like, hdfs is far more common now. Technology starts at the larger companies,
and trickles down over time.

~~~
user5994461
We actually have serverless, that's called cgi scripts. Very stable and proven
technology.

But for some reasons, nobody try to use that anymore or even think of it.

