On October 31, IBM and Tencent announced that they will work together to extend Tencent’s public cloud platform to the enterprise by building and marketing an industry-oriented public cloud.
Don’t be fooled into looking at this move in isolation. With this partnership, IBM is turning to a new page of its transformation in China, responding to the challenges of a stricter regulatory environment, an increasingly consumerized technology landscape, and newly empowered customers. The move is a crucial milestone in IBM’s strategy to localize its vision for cloud, analytics, mobile, and social (CAMS). IBM has had a strategic focus on CAMS solutions and is systematically building an ecosystem on four pillars:
Cloud and social. This is where IBM and Tencent are a perfect match. IBM’s cloud managed service, operated by its partner 21ViaNet, officially went live on September 23. It can support mission-critical applications like ERP and CRM solutions from SAP and Oracle from both the IaaS and SaaS perspective. This could help Tencent target large enterprise customers beyond its traditional base of small and medium-size businesses (SMBs) and startups by adding social value to ERP, CRM, and EAM applications.
Yesterday HP announced that it will be entering into a “non-equity joint venture” (think big strategic contract of some kind with a lot of details still in flight) to address the large-scale web services providers. Under the agreement, Foxcon will design and manufacture and HP will be the primary sales channel for new servers targeted at hyper scale web service providers. The new servers will be branded HP but will not be part of the current ProLiant line of enterprise servers, and HP will deliver additional services along with hardware sales.
The motivation is simple underneath all the rhetoric. HP has been hard-pressed to make decent margins selling high-volume low-cost and no-frills servers to web service providers, and has been increasingly pressured by low-cost providers. Add to that the issue of customization, which these high-volume customers can easily get from smaller and more agile Asian ODMs and you have a strategic problem. Having worked at HP for four years I can testify to the fact that HP, a company maniacal about quality but encumbered with an effective but rigid set of processes around bringing new products to market, has difficulty rapidly turning around a custom design, and has a cost structure that makes it difficult to profitably compete for deals with margins that are probably in the mid-teens.
Enter the Hon Hai Precision Industry Co, more commonly known as Foxcon. A longtime HP partner and widely acknowledged as one of the most efficient and agile manufacturing companies in the world, Foxcon brings to the table the complementary strengths to match HP – agile design, tightly integrated with its manufacturing capabilities.
Although Forrester expects China’s public cloud market to show solid growth through 2020, we have observed that organizations face barriers to adopting public cloud. Survey results indicate that data privacy, residency, loss of control, and security remain the top barriers for organizations adopting public cloud in China. This shows that Chinese customers are getting more knowledgeable about cloud and would like to understand cloud players’ offerings in more detail.
To ease concerns about public cloud usage, in mid-2013 the Chinese government and some leading cloud and data center service providers in China initiated an industry standard to evaluate cloud service offerings. After six months of discussion, they agreed upon version 1.0 of the industry standard, which includes three categories and 16 detailed SLAs: