By Charles King, Pund-IT, Inc. January 23, 2019
Technology services have long been critical parts of IT vendors’ portfolios and playbooks, especially those focused on the needs of enterprise customers, like IBM. Not surprisingly, as IT and many other industries have shifted increasingly toward services-based solutions and provisioning, vendors with experience and expertise have enjoyed advantages over those with fewer assets and less exposure.
At the same time, IT services organizations are anything but static. They must adjust to significant changes and successfully accommodate new technologies and developments, or risk being overtaken and left in the dust by nimbler, more adaptable competitors. Again, IBM is a good example of this trend. The company’s latest earnings report noted revenue growth and “continued strong profit margins expansion” in IBM Technology Services, particularly related to hybrid cloud offerings, along with AI, analytics and security engagements.
Two recent deals announced by IBM Services offer insights into those trends, and why the company continues to be the vendor of choice for global enterprises.
BNP Paribas
The larger of the deals is an agreement between IBM and BNP Paribas, France’s largest bank with more than 196,000 employees and a presence in 73 countries. The two companies have worked together since 2003 when they created the IT services company BNP Paribas Partners for Innovation (BP2I) – a joint venture the pair holds equally.
BNP Paribas developed its first private cloud in 2013, and the new agreement enables it to integrate with IBM Cloud solutions hosted in data centers dedicated to the bank. BNP Paribas will also strengthen its hybrid cloud “as a service” capabilities by using IBM Cloud to support the development of new services, including test and applications environments.
This deal also aims to enable BNP Paribas to use IBM Hybrid Cloud solutions to increase its services capabilities across dedicated, public and private cloud environments. That should help improve the integration and optimization of workload management between Cloud infrastructure services. Over time, the bank believes the effort will contribute to acceleration of its digitization strategy, improvement of client services and the creation of new applications.
Vodafone
Similarly, the IBM/Vodafone deal extends and builds upon a long term (2+ decades) relationship between the companies. With the new agreement, IBM and Vodafone Business aim to remove the complexity and barriers business customers face in technology choices and ensure that data and applications flow freely and securely across their organizations.
To achieve this, Vodafone Business customers will have immediate access to IBM’s full portfolio of cloud offerings. Over time, the pair will co-develop new digital solutions, combining the strengths of Vodafone’s leadership in IoT, 5G and edge computing with IBM’s multi-cloud industry expertise and professional services capabilities.
As part of the agreement, IBM will also provide managed services to Vodafone Business’ cloud and hosting unit, an eight-year engagement valued at approximately $550 million (€480 million). According to the companies, Vodafone Business customers will benefit from IBM’s optimization, automation and cognitive capabilities designed to run business effectively in cloud environments.
Final analysis
So, what are we to make of these two deals? How do they compare/contrast?
Let’s first consider the smaller one – Vodafone – though an eight-year agreement worth over half a billion dollars is anything but small. In essence, the deal is designed to offer Vodafone’s business customers immediate access to a host of IBM Cloud’s enterprise-class services. Then, over time, it will develop new solutions that leverage still-emerging IoT, 5G and edge computing technologies.
In short, you could call the IBM/Vodafone agreement a significant strategic partnership and long-term enterprise IT services deal that’s designed to help Vodafone’s business customers adapt to and adopt new technologies as they become fully commercially viable. The position of IBM Cloud as the primary enabling platform casts an interesting light on the agreement, suggesting that enterprise believers are responding to IBM’s hybrid and multi-cloud evangelizing.
While the Vodafone agreement is big, the deal with BNP Paribas is larger still. How big? Though specific numbers weren’t mentioned in the announcement, comparisons with other recent cloud announcements could offer some insight. For example, Microsoft’s services/cloud agreement with the US Department of Defense (DoD) is worth $1.7B over five years. The comparison isn’t perfect since the DoD deal includes software licenses. But it seems reasonable to conclude that eight years of large enterprise cloud and other services would come in at around or somewhat above $2B.
Consider also that while about three quarters of the bank’s near-200k employees are located in Europe, its work in 73 countries defines the company as a very large global enterprise. A significant cloud infrastructure will be required to support the company’s worldwide digital services strategy, and that BNP Paribas is comfortable with IBM’s ability to develop, deliver and support its needs.
That raises another question: what cloud vendors would have been able to fully support the bank’s global requirements? Banking is among the world’s most highly regulated industries, but rules and compliance requirements can vary significantly between countries and regions, meaning that BNP Paribas needs cloud services that are widely deployed, flexible and robust.
At last year’s CEBIT conference, IBM Cloud announced a host of improvements to its global infrastructure, including 18 new availability zones in six major regions in North America (Dallas, Texas and Washington, DC), Europe (Germany and UK) and Asia-Pacific (Tokyo and Sydney), enhanced security features, including global availability of IBM Cloud Internet Services, and previewed its Virtual Private Cloud (VPC) service for expanding network protection.
In other words, IBM is obviously ready, willing and able to support BNP Paribas’s needs, regardless of the location or demands. How many other cloud vendors could really say the same?
A final point to consider is how the deal extends an existing partnership between the two companies—one that began in 2003 with the creation of a joint venture designed to help BNP Paribas adapt to evolving digital technologies. The IT market has obviously changed during the past 15 years and it’s likely that other IT vendors and cloud service providers vied for the bank’s attention. The fact that BNP Paribas decided to stick with IBM suggests a satisfying, successful relationship for both companies.
Overall, the cloud-led services deals with Vodafone and BNP Paribas highlight the clear and often unique value that IBM provides. Though IBM Cloud tends to be ranked below better-known names, like AWS and Microsoft Azure in terms of overall size, the company’s clear focus on meeting the needs of the world’s largest businesses makes it a force in the cloud market’s most valuable sectors.
Though competitors are actively, even aggressively trying to find a place among that same clientele, the strategic deals with Vodafone and BNP Paribas demonstrate why IBM Services and IBM Cloud continue to remain at the top of the enterprise class.
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