25 November 2021

Protocol: “How IBM lost the cloud”

If there’s one common thread through the experiences of multiple current and former IBM employees, including those who didn’t work for the cloud division, it’s the power that current customers had over everything IBM did.

Over and over again during the last decade, IBM engineers were asked to build special one-off projects for key clients at the expense of their road maps for building the types of cross-customer cloud services offered by the major clouds. Top executives at some of the largest companies in the country — the biggest banks, airlines and insurance companies — knew they could call IBM management and get what they wanted because the company was so eager to retain their business, the sources said.

Genesis would never ship. It was scrapped in 2017, and that team began work on its own new architecture project, internally called NG, that ran in parallel to the GC effort.

For almost two years, two teams inside IBM Cloud worked on two completely different cloud infrastructure designs, which led to turf fights, resource constraints and internal confusion over the direction of the division. The cancellation of Genesis forced IBM to write off nearly $250 million in Dell servers (a bitter irony, in that IBM sold its own server group just before acquiring SoftLayer) that had been purchased for that project, according to one source.

And the two architectures — which IBM had intended to be compatible but due to subtle design differences, were not — became generally available within four months of each other in 2019. IBM continued to maintain two different cloud architectures until earlier this year, according to one source, when the GC effort was scrapped.

Tom Krazit

A classic tale of disruption and internal corporate disfunctions. While IBM was spending their resources on customized orders for existing customers, Amazon, free from prior commitments and legacy systems, was building AWS from the ground up. And when IBM attempted to refocused on this emerging market, the size and complexity of their business, competition between departments, and conflicting visions have stalled their progress. To be fair, these sort of problems become more prevalent the larger a company gets – another classic example in tech is the messaging mess at Google, and Facebook could be headed in that direction as well as it’s trying to merge together three separate messaging products, two of which inherited from the acquisitions of Instagram and WhatsApp.

A SoftLayer data center in Dallas, Texas
A SoftLayer data center in Dallas, Texas. Photo: Bloomberg / Contributor

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