IBM to Acquire Cloud Services Company SoftLayer
Financial terms are not being disclosed. It has been owned by GI Partners, a private equity firm based in Palo Alto, Calif.
I took a meeting with SoftLayer CEO Lance Crosby in New York last year. At the time, he said he was in town to meet with Wall Street bankers in order to explore a possible initial public offering. And, indeed, the company had made some moves that indicated it was interested in an IPO: It hired a CFO from Leap Wireless last year.
Since then, talk about SoftLayer has focused not on a possible IPO, but on a buyout. This deal has been in the rumor mill for a few months. Reuters reported in March that EMC and IBM were both interested in a deal that would value SoftLayer in the $2 billion range, though there’s at least one educated guess valuing the deal as high as $2.5 billion. (Update: Sources close to the company are describing the price as “slightly below” the $2 billion mark.)
Rackspace, a cloud outfit based in San Antonio, Texas, has also been the target of recurring buyout speculation and, in fact, one school of thought had it that IBM would buy one or the other. Rackspace shares fell by more than 2 percent in pre-market trading after the IBM news was announced.
SoftLayer has 21,000 customers and 13 data centers in the U.S., Asia and Europe.
For its part, IBM has more than 5,000 of what it calls “engagements” in its private cloud business, which is very much like a public cloud, but which is operated on the customer’s premises. Earlier this year, it also threw its weight behind OpenStack, an open-source cloud computing platform, a move seen as giving the platform a big shot of technology cred, and which allows customers to mix and match cloud vendors more easily.
Cloud services are one of IBM’s big growth bets. It reported that cloud revenue grew by 80 percent in 2012, and says it is on track to reach $7 billion in revenue derived from the cloud by 2015.
Here’s IBM’s original announcement:
IBM to Acquire SoftLayer to Accelerate Adoption of Cloud Computing in the Enterprise
IBM to Form New Cloud Services Division
ARMONK, N.Y., 4 June 2013: IBM (NYSE: IBM) today announced a definitive agreement to acquire SoftLayer Technologies, Inc., the world’s largest privately held cloud computing infrastructure provider. The acquisition will strengthen IBM’s leadership position in cloud computing and will help speed business adoption of public and private cloud solutions. Financial terms were not disclosed.
“As businesses add public cloud capabilities to their on-premise IT systems, they need enterprise-grade reliability, security and management. To address this opportunity, IBM has built a portfolio of high-value private, public and hybrid cloud offerings, as well as software-as-a-service business solutions,” said Erich Clementi, Senior Vice President, IBM Global Technology Services. “With SoftLayer, IBM will accelerate the build-out of our public cloud infrastructure to give clients the broadest choice of cloud offerings to drive business innovation.”
IBM is acquiring SoftLayer to make it easier and faster for clients around the world to incorporate cloud computing by marrying the speed and simplicity of SoftLayer’s public cloud services with the enterprise grade reliability, security and openness of the IBM SmartCloud portfolio.
SoftLayer accelerates IBM’s ability to integrate public and private clouds for its clients, with flexibility that provides deployment options that enable a faster, broader transformation for small, medium and large businesses with a range of performance and security models.
Headquartered in Dallas, Texas, SoftLayer serves approximately 21,000 customers with a global cloud infrastructure platform spanning 13 data centers in the U.S., Asia and Europe. Among its many innovative cloud infrastructure services, SoftLayer allows clients to buy enterprise-class cloud services on dedicated or shared servers, offering clients a choice of where to deploy their applications. These clients will benefit greatly as new enterprise grade functionality from IBM emerges for SoftLayer customers, who will then have a unique opportunity to incorporate it as their business grows.
“SoftLayer has a strong track record with born-on-the-cloud companies, and our move today with IBM will rapidly expand that footprint globally as well as allow us to go deep into the large enterprise market,” said Lance Crosby, CEO of SoftLayer. “The compelling opportunity is connecting IBM’s geographic reach, industry expertise and IBM’s SmartCloud breadth with our innovative technology. Together SoftLayer and IBM expand their reach to new clients – both born-on-the-cloud and born-in-the-enterprise.”
Already one of the world’s leading cloud providers, IBM expects to reach $7 billion annually in cloud revenue by the end of 2015. IBM offers more than 100 SaaS solutions to help marketing, procurement, ecommerce, customer service, human resources, city management, and other professionals make better decisions and better serve their customers. IBM also offers Watson solutions such as Client Engagement Advisor in the cloud, superior solutions such as IBM PureSystems and SmartCloud Enterprise+, as well as mission critical cloud services for SAP.
IBM is a leader with enterprise customers based on its vertical industry expertise delivered from 10 cloud computing centers on five continents. The acquisition of SoftLayer will complement IBM’s existing SmartCloud portfolio, providing enterprises with easy access to a broader range of choices that transform their workloads while continuing to innovate with SoftLayer to meet the needs of born-on-the-cloud firms.
New IBM Cloud Services Division
Recognizing the importance of cloud to global clients, IBM today is announcing the formation of a new Cloud Services division. Following the close of the acquisition of SoftLayer, which is expected in 3Q 2013, this new division will combine SoftLayer with IBM SmartCloud into a global platform. The new division will provide a broad range of choices to both IBM and SoftLayer clients, ISVs, channel partners and technology partners. SoftLayer’s services will complement the existing portfolio with its focus, simplicity and speed. The division will report to Erich Clementi, Senior Vice President, IBM Global Technology Services.
“Our clients are telling us they want to realize the transformative benefits of cloud today — not just for individual applications, but across their entire enterprise,” said Clementi. “SoftLayer is a perfect fit for IBM. It will help us smooth the transition of our global clients to the cloud faster, while enabling IBM to more efficiently offer them its broad portfolio of open IT infrastructure and software services.”
IBM intends to expand SoftLayer cloud offerings to include OpenStack capabilities, consistent with its entire SmartCloud portfolio and historic commitment to open standards such as Linux. Given that most companies will mix public and private cloud services, clouds need to interoperate. In that way, firms can better leverage cloud to run their social, mobile and Big Data applications.
IBM will also support and enrich the SoftLayer cloud-centric partners and ecosystem and its performance capabilities for Big Data and analytics. IBM will provide go-to-market and customizable resources for its expanding cloud ecosystem.
The Value of SoftLayer
Among its many innovative cloud infrastructure services, SoftLayer allows clients to buy enterprise-class cloud services on dedicated or shared servers, offering clients a choice of where to deploy their applications. By building out a cloud with IBM and SoftLayer, a client can choose the work that belongs on a dedicated or a shared computing resource — thereby tailoring the privacy, data security and overall computing performance to the client’s needs. Importantly, this level of reliability and scale is critical for cloud-centric companies.
SoftLayer provides the infrastructure for cloud-centric, performance-intensive applications in the areas of mobile, social media, gaming and analytics. The growing number of businesses incorporating mobile computing is helping drive SoftLayer growth.
· In the last two quarters, more than 60 new gaming companies have moved to the SoftLayer global platform, frequently migrating from commodity cloud platforms because of problems with cost, latency, availability and raw performance.
· SoftLayer’s architecture provides superior technical capabilities such as a software definable environment critical to a cloud infrastructure, programmable interfaces, and hundreds of hardware and network configurations. This is designed to deliver a higher level of flexibility — mixing virtual and dedicated servers to fit a variety of workloads — automation of interfaces and hybrid deployment options.
· SoftLayer’s automated networking infrastructure supports public, private and data center-to-data center architectures, and is designed to provide maximum flexibility and control for clients. The SoftLayer IT infrastructure connectivity enables connections with leading global network providers and Internet access networks.
· IBM SaaS solutions for Smarter Cities, Smarter Commerce and other applications will be made available via SoftLayer over time, providing line-of-business clients improved time to value and new innovation across an increasingly integrated portfolio of solutions that accelerate business process innovation, provide analytics at the point of impact, and connect collaborative business networks within and across organizations.
The acquisition is expected to close following customary closing conditions including regulatory clearances.
SoftLayer, whose majority shareholder is GI Partners of Menlo Park, Calif., operates a global cloud infrastructure platform built for Internet scale. Spanning 13 data centers in the United States, Asia and Europe and a global footprint of network points of presence, SoftLayer’s modular architecture provides unparalleled performance and control, with a full-featured API and sophisticated automation controlling a flexible unified platform that seamlessly spans physical and virtual devices, and a global network for secure, low-latency communications. With 100,000 devices under management, SoftLayer is the largest privately held Infrastructure-as-a-Service (IaaS) provider in the world with a portfolio of leading-edge customers from Web startups to global enterprises.
About IBM Cloud Computing
IBM has helped thousands of clients adopt cloud models and manages millions of cloud- based transactions every day. IBM assists clients in areas as diverse as banking, communications, healthcare and government to build their own clouds or securely tap into IBM cloud-based business and infrastructure services. IBM is unique in bringing together key cloud technologies, deep process knowledge, a broad portfolio of cloud solutions and a network of global delivery centers. For more information about cloud offerings from IBM, visit http://www.ibm.com/smartcloud. Follow us on Twitter at http://www.twitter.com/ibmcloud and on our blog at http://www.thoughtsoncloud.com.