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Executive Corner: Interview with Mike McCarthy, Vice President of Cloud Computing for IBM Global Technology Services

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Vasfi Gucer and I recently interviewed Mike McCarthy, Vice President of Cloud Computing for IBM Global Technology Services to get his thoughts regarding IBM’s cloud strategy. Mike discussed various IBM cloud offerings, general challenges for IBM, and aspects about customers who are transitioning into cloud. You will find a summary of this interview below. 

Sunil:      Good morning, Mike. Thank you so much for taking time to talk with me. Cloud started with an infrastructure as a service (known as IaaS) offering and the addition of a platform as a service (known as PaaS) offering is gaining momentum. What are our customers asking from IBM in regards to cloud offerings?

Mike:      In general, our clients are very interested in our cloud offerings, but a couple of topics are currently at the forefront of our discussions.

First, clients want to know how they can best use the cloud and, more importantly, how can IBM help them with cloud.

I think the reason that we’re hearing these kinds of questions is because our customers are intrigued by the messages that they hear from IBM and other cloud providers. Generally, these messages center around cost reduction, agility, better utilization of assets, and other critical customer needs. But customers are often unsure of where to go, what steps to take, where to get the value, and so forth. So, the bottom line is that customers are very intrigued by the value proposition that they hear in the marketplace, but they are not sure how to take advantage of it.

IBM has a very broad portfolio, but we provide clients with strategy workshops and assessments to help them understand where they can get value from IBM and the road map that they can follow to take advantage of our cloud offerings.

In these workshops and assessments, we look at the client’s applications and workloads and the characteristics of the applications and workloads with regard to performance and infrastructure requirements, networking, security, compliance, and other such characteristics. We take a very comprehensive view of the client’s environment and then recommend where the client can start, where to go to get the most value, and how to build a road map to realize an increased value.

Another topic that remains critical in discussions is that clients who inquire about an IaaS or PaaS solution are more frequently asking about the applications within that solution and want a higher value from the cloud beyond just the infrastructure.

This topic is equally important for IBM. From our perspective, we’re not just selling an infrastructure or platform as a service. We view these services as enablers for the higher value cloud capabilities that clients want.

So, in summary, the two topics that we hear about rather frequently are clients who are looking for assistance in starting with a cloud solution and clients who are most interested in the applications within the solution.

Sunil:      Okay. I asked that question because there’s a lot of talk about development and test and about providing an infrastructure and platform for development and R&D efforts. Lowering the costs might enable enterprises to invest in these areas.

But, when we talk about moving up the stack from IaaS to PaaS and then to software as a service (known as SaaS), customers do tend to lose more control over their architecture and the platforms that they happen to use. Is that okay?

What is your sense of this issue? What do customers feel in that result? Because moving up the stack and using more services from IBM or anybody else definitely takes control away from the customer, say for example in terms of enterprise architecture.

Mike:      This is an excellent question, and it really gets to the heart of what cloud is all about. Cloud is about a standardized delivery model. So, I’m hesitant to use the phrase that “clients lose control.” Instead, I see it as clients always have the option of engaging with IBM or anybody in the marketplace about providing a customized environment for them, whether it’s an infrastructure, platform, or application.

In addition, IBM can customize any kind of an environment that the client might need, which is needed in many cases today. The cloud offers an alternative by providing a standardized environment, which doesn’t mean that there’s no flexibility. We certainly have flexibility around the size of the virtual machines, the operating systems, and the hypervisors, and we increasingly are adding options and flexibility for clients.

However, it is still a standardized environment. There is a menu. But if a client is willing to accept that standardized environment, they will realize agility and other economic benefits as a result. So our clients have to evaluate whether this is the correct path for them. In some cases, the client might have applications that need a customized environment that wouldn’t be a good candidate for cloud. But there are others cases where the standardized environment without much change to the application or operating model might represent a better economic model for the client.

So yes, you might lose a little control, but it’s a business decision that the client will need to make.

Sunil:      Right, okay, that makes sense. What types of businesses or enterprises are going for the easiest option to move into the cloud?

Mike:      Although this question is kind of a difficult to answer, let me make a couple of points here. First, cloud offerings at the application or business process layer are more vertically oriented, as opposed to an infrastructure and platform as a service, which tends to include horizontal solutions.

Now, we do see requirements for compliance or regulations for healthcare, banking, and other industries, but generally I wouldn’t point to any particular industry and say, “Wow, manufacturing is really a good target for cloud because it tends to be a more horizontal type opportunity.”

The second thing is that we see opportunity for enterprises and mid-markets here. Clients might have different interests in different needs and different reasons why a cloud might be attractive. For example, a mid-market client might find the cloud an attractive resource. Perhaps they don’t have the capital that is required to get access to the kind of capacity and technology that they can get through cloud. Or perhaps  they don’t have access to the skilled resources that are necessary to deploy, manage, and operate their own IT infrastructure to the level that other clients with bigger IT budgets might be able to do. This is definitely opportunity for mid-market and, not surprisingly, a huge opportunity for enterprises of all sizes as well.

So there’s not a particular size-oriented option that’s easily obtained. We see a big focus for ISVs as a particular segment. Why is that? Well, I mentioned before that clients increasingly are evaluating applications from a cloud perspective. So, they’re going to these ISVs and saying, “Hey, do you offer your application in an SaaS model?” That’s forcing ISVs to look at this type of delivery model.

I talked to a number of ISVs. I have a colleague whose focus is exclusively at our ecosystem, who talks to ISVs all the time. And I can tell you that it is rare when we talk to an ISV who’s not trying to figure out how to deliver their application in an SaaS model.

So this area is a really important focus area for IBM, which is an easily obtained area. Other things that come to mind, as you mentioned before, Sunil, is development and test.

For new technologies, clients often want to look at a low-risk entry point, or what they would perceive as a low-risk entry point. In addition, a lot of clients view development and test as a low-risk entry point. We see desktop virtualization as another easily obtained option. So, these are just a few topics that come to mind.

Sunil:      What strategies does IBM have in place to move existing strategic outsourcing customers to cloud offerings? Do we have architectural assessment practices or methodologies in place for doing that?

Mike:      As I mentioned before, we have a set of assessment services that works well for strategic outsourcing customers. That service helps them to evaluate from their inventory of applications the applications that are most suitable for the cloud as it is today. This service also provides a road map for using the cloud to deliver those applications and workloads.

So, from an assessment perspective, this is a service that we offer. It’s not just for strategic outsourcing, but it certainly applies to strategic outsourcing.

Secondly, we learned in our early stage infrastructure-related services and their life cycle that existing applications, that is heritage-type applications, are frequently designed with an architecture that demands an underlying infrastructure that is highly resilient and managed. If you look at many of IBM’s initial cloud offerings, including IBM SmartCloud Enterprise, these offerings were designed for low cost, providing the flexibility to the client to build any level of resiliency and management above the hypervisor that is needed at the application level.

We realize that that offering alone might not be sufficient to address some of the requirements for existing applications. Thus, we recently announced IBM SmartCloud Enterprise Plus, which is more highly resilient, provides a high degree of management above the hypervisor, and is specifically designed for these existing applications that we often see in strategic outsourcing accounts.

So we’ve got an assessment service, and we now have multiple options or additional options of our infrastructure to allow us to address a broader set of strategic outsourcing clients and other enterprise-type applications. We also have a set of migration service capabilities that allows us to assist clients in moving applications to the cloud, including strategic outsourcing clients and other types of enterprise clients.

So if you have existing applications, there are certain things that IBM can help you do, such as looking at the architecture of the application, the level of disaster recovery and resiliency built into it, the degree to which it’s optimized for a virtualized environment, and the security profile. We look at all of this information, and we help the client migrate that service in order to operate at a high level of efficiency and productivity in a cloud environment. Our assessment service, IBM SmartCloud Enterprise Plus, and a set of migration services are the key things we’re doing there.

Sunil:     How are clients reacting to moving their applications into IBM premises? What case studies do we have in place to ease clients into IBM premises offerings?

Mike:      Well for starters, clients running applications on IBM premises is not a new phenomenon. We have thousands of clients who are using applications that are running on IBM infrastructures on IBM premises. So we have a lot of experience and expertise in this particular area.

Clients come to IBM and operate in that model because they know they can trust that IBM has a proven operational and security model that make this kind of delivery something they can count on.

In addition, we’re not trying to move everything onto a cloud on IBM premises. As I mentioned previously, some applications are not suitable for the cloud today. As clouds continue to mature, you’ll see additional capabilities added that will allow us to address a broader set of these existing applications. But not everything is moving to the cloud today.

So, IBM is not trying to move clients to the cloud who are not ready for this move. The combination of making intelligent decisions about what to move and having expertise and experience in supporting these kinds of decisions for clients is what makes our clients comfortable.

Sunil:      What is the market for IBM SmartCloud Enterprise? Given the number of players already capturing the IaaS space and now trying to move up the stack of cloud offerings, how can IBM differentiate in the market place?

Mike:      Well, as I mentioned before, you have to break up an infrastructure to consider existing applications versus applications that we might term as “born on the cloud.” IBM SmartCloud Enterprise is targeted, in particular, at existing applications that need a high level of resiliency in management.

This market for moving existing applications into the cloud is a more than $10 billion market in 2012, growing to over $20 billion in 2015. We believe that IBM is highly differentiated in this market. Most of the IaaS offerings in the market today are geared more toward the “born-on-the-cloud” kinds of applications. And, I think IBM stands uniquely alone in providing the level of resiliency in management in IBM SmartCloud Enterprise+ that you won’t find in other offerings.

Vasfi:      What is beyond cloud? IaaS is more or less becoming a commoditized offering, as will PaaS by 2013 to 2014. What is the IBM road map beyond that?

Mike:      Well, I actually don’t buy the assertion that IaaS is commoditized. This type of service is still in its early stage, especially if you look at most of the analysts’ discussions around this topic. Certainly, a lot of clients are using IaaS. But it has not reached a level of commoditization. I think the road map is really all about the workloads.

So, IBM’s view is that infrastructure and platform as a service provides an application environment, both physically and logically, and this environment will drive the cloud over time. IBM’s focus, now and going forward, is really about driving use through the application and business process, or SaaS and PaaS kinds of capabilities, which is a combination of work that IBM is already doing.

In fact, IBM has about 200 different teams right now using the IBM cloud as a development and test platform, with probably about half of these teams doing early stage development, late stage development, and proof-of-concept tasks around SaaS and PaaS offerings that would eventually run on the cloud. In addition, in parallel, IBM is working with a large community of ISVs to develop and run applications in a SaaS model that runs on top of IBM cloud offerings.

Sunil:      The cloud is said to be a disruptive phenomenon. What consideration should customers take into account from technology, personnel, and a work culture perspective, before moving into cloud?

Mike:      Well, I think there are a couple of things, one of which I alluded to previously. First, there are cultural issues that revolve around clients wanting a customized environment, and second is the concept of standardization.

When most lines of business need a customized environment, they turn to their IT team for production and deployment of an application. The LOBs give IT the requirements, and then a customized environment is put in place.

It is difficult for many LOBs to get past this common response and consider ways to adapt the application to use what the infrastructure has to offer, rather than adapting the infrastructure to meet their needs. Adapting the application rather than implementing a custom environment allows the client to take advantage of rapid deployment and an agile model, which provide for a better cost basis for the delivery of that infrastructure.

With the second issue, standardization, there is some level of technology disruption; however, with the cloud, there’s not a lot of new technology. Technologies such as virtualization, automation, self-service portals, and other technologies are not new. It’s really more of a business model change to use these technologies in the cloud.

For example, when clients are looking at running in a hosted or public cloud as opposed to an on-premises private cloud, they have new considerations to take into account, such as networking and security and compliance. In addition, they have to look at the projected utilization of the service by looking at peaks and valleys to determine how much capacity is needed. They might also need to look at how the applications are designed. So, for example, the IBM cloud has a set of APIs that allow an application request to use incremental capacity when needed.

These types of features and capabilities need to be considered and built in to the application for it to take full advantage of the cloud and for dynamic expansion and capacity.

Vasfi:      Once in the cloud, how can customers evaluate the ROIs or success of their implementations? What measures are relevant and how can IBM help customers with those measurements?

Mike:      There are a couple of things that we typically talk to clients about with regard to identifying the value of an investment in the cloud: Cost and quality of service.

IBM provides tools for IBM cloud offerings that help clients estimate their costs upfront. IBM also provides a framework for clients on the back end of the process so that they can validate the costs. As a result, there is a higher degree of utilization of assets. Clients can either avoid additional capacity or capital expenses or reduce the number of licenses of software because there are fewer machines.

So, cost reduction is one of the key metrics that our clients look at. And IBM helps them on the front end of the process and provides a framework for them on the back end of the process also.

The second dimension revolves around quality of service. Quality of service is obviously a very broad topic, but it can be measured in lots of different ways.

We have learned that clients are frequently concerned with provisioning times. For example, if a client has a highly dynamic environment with many constituents that request capacity frequently, the client can measure how long it takes for that capacity to be provided in a self-service cloud model versus a traditional model, where a request must go through the IT organization and be provisioned manually.

Clients are also concerned with availability of the service. Is the service up and running as they expected? Is it giving them the service level that they expected? Clients evaluate the ease of use in their self-service model. For example, how frequently does a user have to call the help desk to get assistance when trying to use the self-service portal?

Clients also consider other aspects, such as system and application performance, and compare how those components work in a cloud model versus running in a physical environment or in a virtualized environment but not a full cloud environment.

Sunil:      What are some of the biggest challenges today for IBM in the cloud marketplace?

Mike:      I think one of the biggest challenges is harvesting and utilizing all the IBM technology and to understand how we have used it. It is amazing when we look at an enhancement of an existing cloud offering, the development of a new cloud offering, and how much IBM research and technology has likely already been done in this area. So, it’s almost like we’re a kid in a candy store.

The research teams and brand groups within IBM to determine the capabilities that we have and need. Often, IBM already has technologies that can be applied to the cloud offerings. It can be a challenge, but IBM has the advantage because we can tap into our large research and development organization.

Additionally, I think another key challenge is ensuring that IBM provides our clients with a consistent approach from every group within IBM and within the delivery of our cloud services. There is a tremendous demand and interest cloud offerings among our clients. This is a huge opportunity, as well as a challenge, to continue to lead and to listen to our clients.

We recently have had a number of Cloud Advisory Board meetings with clients. IBM is focused on having a market-driven approach that allows us to be deeply involved with clients, making sure that we stay in touch with their needs, because the cloud market changes so rapidly and dynamically.

Sunil:      Thank you so much, Mike. We really appreciate your time this morning; it was very beneficial.

Mike:      You’re welcome and thank you both.

About Mike McCarthy
Mike McCarthy is Vice President of Cloud Computing for IBM Global Technology Services.  He joined IBM in 1986 and has held a variety of positions, including: Director of Market Management for IBM TotalStorage Open Software, Director of Strategy for IBM Tivoli Software, and Vice President of GTS Middleware Services.  Mike has a bachelor’s degree in computer engineering from Michigan State University and a master’s degree in business administration from Duke University.

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