What does IBM’s New Cloud Financing Policy Mean for Customers?

What does IBM’s New Cloud Financing Policy Mean for Customers?

“The number one thing leaders can do to facilitate balance is to support flexibility and understand the needs of your people.”
– Jim Mitchell (1946-2002), Irish politician.

Now, the above words may have been spoken in a context far removed from Information Technology (IT), but it outlines one of the most important requirements of a Chief Technology Officer (CTO) and his staff – flexibility.

Flexibility is one of the crucial requirements of business today when information changes at the drop of a hat and critical decisions have to be taken at a moment’s notice. The flexibility to ramp up or wind down capacity, the flexibility to choose from multiple data sources (avoiding compromised sources), the flexibility to pay for only what you use, the flexibility to access information from anywhere – all these are required to sustain competitive advantage. And cloud computing can provide all these.

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However, often, cloud computing suffers from some lack of flexibility – in spite of the low upfront investment required, even that poses a challenge for small companies, especially startups. Also, it’s a known business fact that customer payments often don’t come in time. Therefore, for a company depending on sales revenue to pay its cloud computing vendor, the situation is a little dicey.

However, IBM has now come up with a flexible pricing and financing plan that can help resolve these issues. This plan is being unveiled at its Impact 2011 conference in Las Vegas in front of some 8,000 attendees, including about 1,000 channel partners.

There are two separate components to this initiative. The first is new financing programs specifically designed for IBM Business Partners looking to go on the cloud. IBM will offer low cost to 0% financing and deferred payments up to 6 months on its technology and services. Consequently, qualifying partners will have the opportunity to avoid large up-front costs as they start their cloud businesses.

The second component of the initiative is targets Independent Software Vendors (ISV) who sell SaaS applications built on IBM middleware, and gives them new monthly rental pricing of IBM software. This allows ISVs to deliver their products with IBM software and scale up or down the software licenses needed every month, thereby complementing the flexible manner they bill clients for their SaaS applications.
The partner ecosystem is a very important part of our cloud strategy,” said Dave Mitchell, director of strategy for ISV and developer relations. “Two months ago, we launched cloud specialty program, with five partner models, each having core products and enablement road maps. What we are announcing today comes from that ……Our partners have been asking for this.”

He mentioned how cloud computing is an area of major focus at IBM. “Cloud computing is a major focus area for IBM, and one of the four growth areas on our 2015 road map. We project it will be a $7 billion business by then.” Similar optimism has been expressed by IBM CEO Sam Palmisano earlier. (See: IBM expects to generate $7 billion in cloud computing revenues by 2015: CEO).

Looking specifically at start-ups as potential clients is not a new strategy (See: Why is Rackspace targeting Startups?). By including ISVs in an extended strategy seems to be a shrewd move on IBM’s part to capture a large market. Perhaps that $7 billion targeted revenue figure may not be that difficult after all.

By Sourya Biswas

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