Growing demand for cloud services helps boost revenue at IBM

IBM classifies customers beyond its top 200 enterprise customers as commercial
IBM has over 1,000 customers using IBM Public Cloud, which largely caters to mid-market businesses

IBM Corp. has seen double-digit revenue growth in commercial cloud services with rising public cloud adoption, a senior executive at the American technology leader said.

IBM classifies customers beyond its top 200 enterprise customers as commercial. The company has over 1,000 customers using IBM Public Cloud, which largely caters to mid-market businesses.

“Our cloud integration platforms over the past two-three years have been very successful. In the commercial space, IBM’s focus has been on new customer acquisition and we are seeing double-digit revenue growth in this space, with public cloud gaining traction,” Vikas Arora, vice-president, cloud and cognitive software and services, IBM India and South Asia, said in an interview.

Within the commercial business, security as a portfolio has seen robust growth in the last year, Arora said, with many small banks strengthening their security infrastructure. IBM acquired open-source software maker Red Hat in a $34 billion deal last year, opening up a $1.2 trillion hybrid cloud opportunity for 2020.

A public cloud is a platform that uses the standard cloud computing model to make resources, such as virtual machines, applications or storage, available to customers over the internet (for example, Google cloud, Amazon Web Services and Microsoft Azure). Public cloud services may be free or offered through a variety of subscription or on-demand pricing schemes, including a pay-per-usage model.

Clients using data cloud and artificial intelligence for pilots and proofs of concept for specific use cases have moved up in the last four to five years, Arora said. “There are still many customers at the early stage, but in enterprise, the conversation has become mature with a focus on security, data privacy and managed cloud services with businesses keen on exploring public cloud,” said Arora.

Public cloud deployments in India are projected to expand at a compounded annual growth rate of 25% from $3 billion in 2018 to $8 billion in 2023, according to a new report by Google Cloud and Boston Consulting Group (BCG). The report said public cloud deployments in India have the potential to contribute approximately $100 billion in gross domestic product (GDP) cumulatively from 2019 to 2023.

Currently, only 15-20% of the Indian cloud market is on public clouds, Arora said, as mission-critical work is not kept on public cloud, especially in case of regulated industries such as banks and telecom. So, the client discussions are about figuring out the strategy to move them to public clouds.

Arora added that the focus of mature cloud businesses have moved more towards return on investments (RoI) compared to sectors like manufacturing which have started their cloud journey recently.

“There is always a very strong focus on RoI through IT spends. Across sectors, some have matured earlier than others like banks and telecom. They accomplished automation several years ago. So, they are looking to unlock new revenue streams by increasing customer stickiness in terms of cloud spends,” said Arora.

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