IBM's SoftLayer Takes Flight: Should Partners Prepare For Cloud Turbulence?

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IBM channel partners say the company's July acquisition of SoftLayer puts it on the fast track to cloud success and they are eager to offset sagging hardware sales with new cloud revenue. But while partners are eager, they're also wary. Many say they feel burned by IBM's previous cloud strategy with SmartCloud Enterprise and they're wondering what turbulence awaits them as SoftLayer takes flight.

IBM fumbled its shuttering of SmartCloud Enterprise last week, according to a number of partners, and the rollout of SoftLayer over the past few months has been anything but smooth.

"SoftLayer was a brilliant acquisition. We share the hopes and aspirations of IBM and wait to hear how they are going to map this product into the larger IBM product offering," said Chris Pyle, president and CEO of Champion Solutions Group, a Boca Raton, Fla.-based solution provider and IBM partner, ranked No. 173 on CRN's Solution Provider 500 list. "IBM is going to have to communicate what its cloud strategy is with SoftLayer. What are the go-to-market plans? What are the rules of engagement for selling SoftLayer? How do we make sure IBM's sales force and partners are all on the same page?"

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IBM has nearly finished migrating SmartCloud Enterprise customers over to SoftLayer, according to the company. Armonk, N.Y.-based IBM said it will still support its SmartCloud Enterprise Plus cloud services but will eventually combine that offering with SoftLayer to create one global platform. Going forward, IBM said, SoftLayer will be the basis for its Infrastructure-as-a-Service, Software-as-a-Service and Platform-as-a-Service offerings and is the company's big bet to go head-to-head with Amazon Web Services, Windows Azure, Google Compute Engine and others in the cloud.

SoftLayer Channel Snapshot

Drew Jenkins, SoftLayer channel chief and director of worldwide channel sales for the company, said, "It's my sense that there is a lot of excitement out in the market for SoftLayer. I think the way you need to look at it is that there is a better option with SoftLayer as opposed to thinking of it as SmartCloud wasn't as good as it could have been."

According to SoftLayer, it earned $500 million in revenue in 2013 with 30 percent of sales driven through the channel. Jenkins said he hopes to grow the SoftLayer channel with new IBM partner blood but concedes, "SoftLayer has been predominantly a direct business since its inception in 2005. I can tell you with certainty that SoftLayer and partners will have much bigger opportunities, but how is the channel culture and mix is going change as we bring SoftLayer to the IBM channel? I don't know."

Jenkins said the company is courting 5,000 IBM managed service providers to adopt its cloud infrastructure services, but added that SoftLayer's channel integration with IBM's North American partner community of 36,000 is still in the early stages.

Currently, the SoftLayer partner mix consists of 900 to 1,000 partners with about two-thirds of those partners outside the U.S. SoftLayer said it has 21,000 mostly SMB customers but also counts large firms such as Yahoo’s Tumblr, Yelp and social photo-sharing site Twitpic among its clients.

But many IBM channel partners interviewed by CRN said they have been left in the dark regarding the transition from SmartCloud to SoftLayer. Others added that SoftLayer has been anything but partner-friendly in the past -- a troublesome sign for the future, they argued.

One large IBM Gold partner, who ranks in the top 100 of CRN's Solution Provider 500 list, said when he approached SoftLayer to forge a partnership the company first asked for a credit card to bill services to instead of offering an olive branch and beginning a meaningful discussion. "I laughed and politely said goodbye," said the partner, who asked not to be identified. "That’s the opposite of channel-friendly."

NEXT: IBM's Big Bet On The Cloud

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