Forbes Column

July 29, 2020
New IBM Offering Highlights Rise of Specialty Clouds

By Bob O'Donnell

As the cloud computing market continues to mature, several interesting developments have become apparent. First, we’re clearly in a world where multi-cloud—that is the use of multiple public cloud providers—and hybrid cloud—where companies combine the use of typically onsite private clouds with public clouds—have become the norm. In fact, in a survey of over 600 US-based, cloud-focused IT executives hosted by TECHnalysis Research at the beginning of this year, study results found that across medium-size (100-999 employees) and large (1,000+ employees) businesses, the average number or public cloud providers that companies used was 3.1 and nearly 87% of those companies also had a private cloud—and they used an average of 1.6 private cloud platforms. (You can download a free copy of the highlights from the TECHnalysis Research Hybrid and Multi-Cloud Study here.)

While the numbers are certainly interesting in and of themselves, what’s even more fascinating is what they imply. Businesses, educational institutions, non-profits and other large organizations are definitely not relying on a single provider (or platform) for all their cloud computing needs. The reasons for this cloud computing supplier diversity are numerous. In many instances, it’s to keep competitive suppliers honest from a pricing perspective. As the ability to move workloads onto and away from different cloud platforms get easier—a trend that’s gained a great deal of traction over the last 12-18 months—it only makes sense for companies to ensure that they’re getting the best pricing they can from their various cloud partners by threatening to switch providers if they can’t get the terms they want.

In other instances, the use of multiple cloud providers is because of regional limitations, regulatory requirements, governmental regulations, or other factors that simply demand the use of different providers in different places. Increasingly, we’re also starting to see that some cloud computing providers offer special capabilities or unique industry expertise that makes them much better suited for either certain types of workloads or certain types of industry requirements than others.

One of the best examples of this specialization trend is the new IBM Cloud offering designed for financial institutions. Officially launched last week in conjunction with Europe-based BNP Paribas—as well as the previously announced US-based deal with Bank of America—the IBM Cloud for Financial Services is built around a highly focused IBM Cloud Policy Framework for Financial Services. This framework, which was built in conjunction with Bank of America, leverages the decades of expertise and industry experience that IBM has built in working with these financial institutions—often from their mainframe days.

What’s interesting about this latest IBM Cloud offering is that a great deal of it is built around the in-house knowledge of specific regulatory, compliance and security issues for the financial industry (and banks in particular) that IBM has developed in conjunction with its big financial customers over many years. Yes, there are a few interesting technical details about what IBM is doing for this offering that are somewhat differentiated from their larger cloud computing competitors—including “Keep Your Own Key” private encryption—but the reality is that any technical differentiation is likely to be short-lived.

In fact, while nobody in the cloud computing business really wants to talk about this, the rate of innovation and competition catch-up that’s happening amongst public cloud providers is so fast that it’s almost become irrelevant. While some may consider this notion to be sacrilege—and, to be fair, there definitely still are some important technical differences across platforms—it really is getting harder and harder for platforms to distinguish themselves purely on technical capabilities—at least for an extended period of time. The simple truth is—just as we’ve seen in the ridiculously competitive videoconferencing application market—different cloud platforms are leap-frogging each other from a feature and technical capability perspective all the time, making it very challenging for regular users of the technology to keep up.

What remains different, however, is the manner with which different cloud computing platforms target and go after industry-specific solutions. Another important point to remember is that we’re quickly moving past the days of general-purpose cloud computing solutions and headed directly into the world of specialized solutions. As a result, important industry or workload expertise is going to start to matter a lot more going forward. In fact, as IBM’s new Senior VP of IBM Cloud Howard Boville recently wrote in a blog for LinkedIn, important cloud architecture differences will increasingly be driven by this expertise and the trust that it engenders among potential customers.

The other related point to bear in mind is that companies are looking to different types of cloud providers to host different types of workloads. Financial institutions like BofA and BNP Paribas have been using cloud computing for less-sensitive workloads for years, but moving the mission critical core banking applications to the public cloud is a much different issue. It’s here where things like IBM’s Cloud Policy Framework for Financial Institutions, as well as their new Financial Services Cloud Advisory Council and the extensions to their Cloud Security and Compliance Center, as well their IBM Research Cloud Innovation Lab take on more importance.

The notion of industry-specific cloud solutions has been gaining a great deal of momentum at the big three cloud computing providers over the last few years, so more specialized offerings like this new one from IBM are bound to face tougher competition as time goes one. Previous real-world experience with a partner can be a powerful ally, however, so it will be interesting to see how some of the smaller public cloud providers adjust their strategies over time.

In the end, what’s clear is that more than technical differentiation, the ability to speak to different companies’ unique cloud computing needs is going to be an absolutely essential tool in driving growth in this new specialized era of computing in the cloud.

Disclosure: TECHnalysis Research is a tech industry market research and consulting firm and, like all companies in that field, works with many technology vendors as clients, some of whom may be listed in this article.

Forbes columnist Bob O'Donnell is the president and chief analyst of TECHnalysis Research, a market research and consulting firm that provides strategic consulting and market research services to the technology industry and professional financial community.