IBM breaks latest revenue losing streak as cloud revenue shows modest growth

For IBM, much of the last 8 years simply posting positive revenue growth was a challenge. In fact, the company had a period between 2013 and 2018 when it experienced an astonishing 22 straight quarters of negative revenue growth. So when Big Blue reported yesterday that revenue was up slightly, I’m sure the company took that as a win. Investors appear to be happy with the results with the stock up 4.73% this morning as of publication.

Consider that over the last 8 quarters encompassing FY2019 and FY2020, the company had only one positive revenue quarter when it was up 0.1% in Q42019. It had had five losing quarters prior to that one. When you look at yesterday’s report in that light, and combine it with growth in the Cloud and Cognitive Services group, it adds up to a decent quarter for IBM, one it badly needed after another negative report in the prior quarter.

Looking back at the January report, the company reported Cloud and Cognitive Services revenues down 4.5% at $6.8 billion, which was a big blow considering the company has been betting much of its future on those very areas, fueled in large part by the $34 billion Red Hat acquisition in 2018.

Its most recent quarterly report proved much better with the company reporting Cloud and Cognitive Services revenues of $5.4 billion, up 3.8% YoY. Interestingly quarter-on-quarter revenue for the segment was down, but rose on a year-over-year basis. Perhaps a year-end enterprise revenue push could account for the difference between Q4 2020 and Q1 2021.

At any rate, IBM CEO Arvind Krishna saw today’s report as a positive sign that his attempts to push the company toward a future focused on hybrid computing and AI were starting to take root. He also saw enough in the report to predict some growth this year.

“In our last call, we shared our financial expectations for the year, revenue growth and $11 billion to $12 billion of adjusted free cash flow. While it’s still early in the year and a lot remains to be done, we are confident enough to say that we are on track,” Krishna said in the earnings call with analysts yesterday.

The company has made a number of smaller acquisitions over the last year including a couple of consulting companies, which should help as they try to work with customers around the transition to hybrid computing and artificial intelligence, both of which tend to require a lot of hand-holding to get done.

At the same time of course, the company is continuing apace with its spin out of the legacy infrastructure services division, which it announced last year. The plan at this point is to rename the company Kyndryl (an unfortunate choice) and complete the spin out by year’s end.

CFO Jim Kavanaugh also sees the modestly positive quarter as something the company can build on. “…in fact we are even more confident in the position we put in place with regards to our two most important measures, one, revenue growth, and second, adjusted free cash flow, which is going to provide the fuel for the investments needed for us to capture that hybrid cloud $1 trillion TAM,” Kavanaugh said in the earnings call with analysts.

All of this is being pushed by Red Hat, which grew revenue 15% in the most recent quarter, something the company is banking will continue to advance it deeper into positive territory throughout the rest of 2021.

Krishna is not looking for booming growth by any means. He just wants growth, and even sustained single digit top line expansion will make him happy. “Our systems if I take a two-year to three-year view kind of flattish, but in any given year it might increase or decrease but not by a whole lot. It doesn’t impact the topline a lot and that’s how sort of we get to the mid-single-digit sustainably,” Krishna said in the call.

The CEO simply wants to bring some long-term stability back to the company it has been sadly lacking in recent years. Of course, it’s hard to know if this quarter was a temporary upward blip on IBM’s earnings chart, one of those fluctuations up or down he spoke of, or if it is the corner the company has been looking to turn for years. Only time will tell whether IBM can sustain the modest revenue goals Krishna has set for the organization, or if it will fall back into the revenue doldrums that have plagued the company for the last eight years.


By Ron Miller

IBM transformation struggles continue with cloud and AI revenue down 4.5%

A couple of months ago at CNBC’s Transform conference, IBM CEO Arvind Krishna painted a picture of a company in the midst of a transformation. He said that he wanted to take advantage of IBM’s $34 billion 2018 Red Hat acquisition to help customers manage a growing hybrid cloud world, while using artificial intelligence to drive efficiency.

It seems like a sound enough approach. But instead of the new strategy acting as a big growth engine, IBM’s earnings today showed that its cloud and cognitive software revenues were down 4.5% to $6.8 billion. Meanwhile cognitive applications — where you find AI incomes — were flat.

If Krishna was looking for a silver lining, perhaps he could take solace in the fact that Red Hat itself performed well with revenue up 18% compared to the year-ago period, according to the company. But overall the company’s revenue declined for the fourth straight quarter, leaving the executive in much the same position as his predecessor Ginni Rometty, who led IBM during 22 straight quarters of revenue losses.

Krishna laid out his strategy in November telling CNBC, “The Red Hat acquisition gave us the technology base on which to build a hybrid cloud technology platform based on open-source, and based on giving choice to our clients as they embark on this journey.” So far the approach is simply not generating the growth Krishna expected.

The company is also in the midst of spinning out its legacy managed infrastructure services division, which as Krishna said in the same November interview should allow Big Blue to concentrate more on its new strategy. “With the success of that acquisition now giving us the fuel, we can then take the next step, and the larger step, of taking the managed infrastructure services out. So the rest of the company can be absolutely focused on hybrid cloud and artificial intelligence” he said.

While it’s certainly too soon to say his transformation strategy has failed, the results aren’t there yet, and IBM’s falling top line has to be as frustrating to Krishna as it was to Rometty. If you guide the company towards more modern technologies and away from the legacy ones, at some point you should start seeing results, but so far that has not been the case for either leader.

Krishna continued to build on this vision at the end of last year by buying some additional pieces like cloud applications performance monitoring company Instana and hybrid cloud consulting firm Nordcloud. He did so to build a broader portfolio of hybrid cloud services to make IBM more of a one-stop shop for these services

As retired NFL football coach Bill Parcells used to say, referring to his poorly performing teams,”you are what your record says you are.” Right now IBM’s record continues to trend in the wrong direction. While it’s making some gains with Red Hat leading the way, it’s simply not enough to offset the losses and something needs to change.


By Ron Miller

IBM snags Nordcloud to add multi-cloud consulting expertise

IBM has been busy since it announced plans to spin out its legacy infrastructure management business in October, placing an all-in bet on the hybrid cloud. Today, it built on that bet by acquiring Helsinki-based multi-cloud consulting firm Nordcloud. The companies did not share the purchase price.

Nordcloud fits neatly into this strategy with 500 consultants certified in AWS, Azure and Google Cloud Platform; giving the company a trained staff of experts to help as they move away from an IBM -centric solution to choosing to work with the customer however they wish to implement their cloud strategy.

This hybrid approach harkens back to the $34 billion Red Hat acquisition in 2018, which is really the lynchpin for this approach, as CEO Arvind Krishna told CNBC’s Jon Fortt in an interview last month. Krishna is in the midst of trying to completely transform his organization, and acquisitions like this are meant to speed up that process.

“The Red Hat acquisition gave us the technology base on which to build a hybrid cloud technology platform based on open-source, and based on giving choice to our clients as they embark on this journey. With the success of that acquisition now giving us the fuel, we can then take the next step, and the larger step, of taking the managed infrastructure services out. So the rest of the company can be absolutely focused on hybrid cloud and artificial intelligence.”

John Granger, senior vice president for cloud application innovation and COO for IBM Global Business Services says that IBM’s customers are increasingly looking for help managing resources across multiple vendors, as well as on premises.

“IBM’s acquisition of Nordcloud adds the kind of deep expertise that will drive our clients’ digital transformations as well as support the further adoption of IBM’s hybrid cloud platform. Nordcloud’s cloud-native tools, methodologies and talent send a strong signal that IBM is committed to deliver our clients’ successful journey to cloud,” Granger said in a statement.

After the deal closes, which is expected in the first quarter next year subject to typical regulatory approvals, Nordcloud will become an IBM company and operate to help continue this strategy.

It’s worth noting that this deal comes on the heels several other small recent deals including acquiring Expertus last week and Truqua and Instana last month. These three companies provide expertise in digital payments, SAP consulting and hybrid cloud applications performance monitoring respectively.

Nordcloud, which is based in Helsinki with offices in Amsterdam, was founded 2011 and raised over $26 million, according to Pitchbook data.

 


By Ron Miller

As IBM shifts to hybrid cloud, reports have them laying off 10,000 in EU

As IBM makes a broad shift in strategy, Bloomberg reported this morning that the company would be cutting around 10,000 jobs in Europe. This comes on the heels of last month’s announcement that the organization will be spinning out its infrastructure services business next year. While IBM wouldn’t confirm the layoffs, a spokesperson suggested that there were broad structural changes ahead for the company as it concentrates fully on a hybrid cloud approach.

IBM had this to say in response to a request for comment on the Bloomberg report, “Our staffing decisions are made to provide the best support to our customers in adopting an open hybrid cloud platform and AI capabilities. We also continue to make significant investments in training and skills development for IBMers to best meet the needs of our customers.”

Unfortunately, that means basically if you don’t have the currently required skill set, chances are you might not fit with the new version of IBM. IBM CEO Arvind Krishna alluded to the changing environment in an interview with Jon Fortt at the CNBC Evolve Summit earlier this month when he said:

“The Red Hat acquisition gave us the technology base on which to build a hybrid cloud technology platform based on open-source, and based on giving choice to our clients as they embark on this journey. With the success of that acquisition now giving us the fuel, we can then take the next step, and the larger step, of taking the managed infrastructure services out. So the rest of the company can be absolutely focused on hybrid cloud and artificial intelligence.”

The story has always been the same around IBM layoffs, that as they make the transition to a new model, it requires eliminating positions that don’t fit into the new vision, and today’s report is apparently no different, says Holger Mueller, an analyst at Constellation Research.

“IBM is in the biggest transformation of the company’s history as it moves from services to software and specialized hardware with Quantum. That requires a different mix of skills in its employee base and the repercussions of that manifest itself in the layoffs that IBM has been doing, mostly quietly, for the last 5+ years,” he said.

None of this is easy for the people involved. It’s never a good time to lose your job, but the timing of this one feels worse. In the middle of a recession brought on by COVID, and as a second wave of the virus sweeps over Europe, it’s particularly difficult.

We have reported on number of IBM layoffs over the last five years. In May, it confirmed layoffs, but wouldn’t confirm numbers. In 2015, we reported on a 12,000 employee layoff.


By Ron Miller

Cloudbolt announces $35M Series B debt/equity investment to help manage hybrid cloud

Cloudbolt, a Bethesda, MD startup that helps companies manage hybrid cloud environments, announced a $35 million Series B investment today. It was split between $15 million in equity investment and $20 Million in debt.

Insight Partners provided the equity side of the equation, while Hercules Capital and Bridge Bank supplied the venture debt. The company has now raised over $61 million in equity and debt, according to Crunchbase data.

CEO Jeff Kukowski says that his company helps customers with cloud and DevOps management including cost control, compliance and security. “We help [our customers] take advantage of the fact that most organizations are already hybrid cloud, multi cloud, and/or multi tool. So you have all of this innovation happening in the world, and we make it easier for them to take advantage of it,” he said.

As he sees it, the move to cloud and DevOps, which was supposed to simplify everything has actually created new complexity, and the tools his company sells are designed to help companies reduce some of that added complexity. What they do is provide a way to automate, secure and optimize their workloads, regardless of the tools or approach to infrastructure that they are using.

The company closed the funding round at the end of last quarter and put it to work with a couple of acquisitions — Kumolus and SovLabs — to help accelerate and fill in the road map. Kumulos, which was founded in 2011 and raised $1.7 million, according to Crunchbase, really helps Cloudbolt extend its vision from managing on premises to the public cloud.

Solvlabs was an early stage startup working on a very specific problem creating a framework for extending VMware automation.

Cloudbolt currently has 170 employees. While Kukowski didn’t want to get specific about the number of additional employees he might be adding to that in the next 12 months, he says that as he does, he thinks about diversity in three ways.

“One is just pure education. So we as a company regularly meet and educate on issues around inclusion, social justice and diversity. We also recruit with with those ideas in mind. And then we also have a standing committee within the company that continues to look at issues not only for discussion, but quite frankly for investment in terms of time and fundraising,” he said.

Kukowski says that going remote because of COVID has allowed the company to hire from anywhere, but he still looks forward to a time when he can meet face-to-face with his employees and customers, and sees that as alway being part of his company’s culture.

Cloudbolt was founded in 2012 and has around 200 customers. Kukowski says that the company is growing between 40 and 50% year over year, although he wouldn’t share specific revenue numbers.


By Ron Miller

IBM CEO Arvind Krishna wants to completely transform his organization

When IBM announced it was spinning out its infrastructure services business last month, it was surely a sign that the company was going all in on hybrid cloud. Today in an interview with Jon Fortt at the CNBC Evolve summit, IBM CEO Arvind Krishna made it clear that his whole focus is going to be on transforming his organization into a hybrid cloud management vendor moving forward.

That means that instead of trying to primarily sell its own infrastructure or software services — although it will continue to do that — it will concentrate on leveraging Red Hat, the company it bought for $34 billion in 2018, to help customers manage their hybrid environments regardless of location. That could be on prem or it could be with any of the public cloud providers or anything in between.

Krishna sees this acquisition as a key part of the transition strategy to capture what he estimates is a trillion dollar opportunity in the hybrid cloud management market, and he believes his company is well positioned to grab a piece of that. “The Red Hat acquisition gave us the technology base on which to build a hybrid cloud technology platform based on open source, and based on giving choice to our clients as they embark on this journey. With the success of that acquisition now giving us the fuel, we can then take the next step, and the larger step, of taking the managed infrastructure services out. So the rest of the company can be absolutely focused on hybrid cloud and artificial intelligence,” Krishna told CNBC.

While he recognizes that Microsoft and Amazon are powerful players in the public cloud, he doesn’t see them as competitors, so much as partners in this new approach. In fact, mixing in a broad variety of third party partners is a big part of this.

“I look at both Microsoft and Amazon as likely partners in this journey, not as being the one and two [in market share]. In the hybrid world the question is where does the client want to decide where the workload runs? They could run it on Amazon. They can run on Microsoft. They can run it on IBM or they can run it on premises,” he said.

He believes that Red Hat can be the glue to hold this environment together and let customers have a single way of managing this complexity. The key question for IBM is whether customers see IBM and by extension Red Hat, as the key vendor for this role.

He recognizes that this isn’t just about adding and subtracting technology pieces. When it comes to transforming the way you do business in this way, it requires a massive cultural shift, one we saw Satya Nadella pull off when he took over as CEO at Microsoft in 2014. Much like Nadella, Krishna was promoted from within. He understands how things operate and that he needs to change the way things have traditionally been done at Big Blue if he’s going to succeed.

“I’ve talked a lot internally about a growth mindset, and about being much more entrepreneurial. And we can be entrepreneurs, even within large companies. But it comes from having extreme focus. So when we provide the focus of being focused on hybrid cloud and artificial intelligence, which I believe are the two fundamental forces, then you say how do you unlock everybody being able to go after that,” he said.

That’s going to be the big key for him moving forward as transforming a company the size of IBM is going to be a tremendous challenge for him as a leader. As Fortt pointed out, IBM salespeople are used to focusing on IBM products. This approach means they have to look at the market much more broadly, and that requires a new mindset. It will be up to Krishna to lead the way and make sure that his employees are on the same page about this. The success of this approach depends on that.


By Ron Miller

As IBM spins out legacy infrastructure management biz, CEO goes all in on the cloud

When IBM announced this morning that it was spinning out its legacy infrastructure services business, it was a clear signal that new CEO Arvand Krishna, who took the reins in April, was ready to fully commit his company to the cloud.

The move was a continuation of the strategy the company began to put in place when it bought Red Hat in 2018 for the princely sum of $34 billion. That purchase signaled a shift to a hybrid-cloud vision, where some of your infrastructure lives on-premises and some in the cloud — with Red Hat helping to manage it all.

Even as IBM moved deeper into the hybrid cloud strategy, Krishna saw the financial results like everyone else and recognized the need to focus more keenly on that approach. In its most recent earnings report overall IBM revenue was $18.1 billion, down 5.4% compared to the year-ago period. But if you broke out just IBM’s cloud and Red Hat revenue, you saw some more promising results: cloud revenue was up 30 percent to $6.3 billion, while Red Hat-derived revenue was up 17%.

Even more, cloud revenue for the trailing 12 months was $23.5 billion, up 20%.

You don’t need to be a financial genius to see where the company is headed. Krishna clearly saw that it was time to start moving on from the legacy side of IBM’s business, even if there would be some short-term pain involved in doing so. So the executive put his resources into (as they say) where the puck is going. Today’s news is a continuation of that effort.

The managed infrastructure services segment of IBM is a substantial business in its own right, but Krishna was promoted to CEO to clean house, taking over from Ginni Rometti to make hard decisions like this.

While its cloud business is growing, Synergy Research data has IBM public cloud market share mired in single digits with perhaps 4 or 5%. In fact, Alibaba has passed its market share, though both are small compared to the market leaders Amazon, Microsoft and Google.

Like Oracle, another legacy company trying to shift more to the cloud infrastructure business, IBM has a ways to go in its cloud evolution.

As with Oracle, IBM has been chasing the market leaders — Google at 9%, Microsoft 18% and AWS with 33% share of public cloud revenue (according to Synergy) — for years now without much change in its market share. What’s more, IBM competes directly with Microsoft and Google, which are also going after that hybrid cloud business with more success.

While IBM’s cloud revenue is growing, its market share needle is stuck and Krishna understands the need to focus. So, rather than continue to pour resources into the legacy side of IBM’s business, he has decided to spin out that part of the company, allowing more attention for the favored child, the hybrid cloud business.

It’s a sound strategy on paper, but it remains to be seen if it will have a material impact on IBM’s growth profile in the long run. He is betting that it will, but then what choice does he have?


By Ron Miller

Qumulo scores $125M Series E on $1.2B valuation as storage biz accelerates

Qumulo, a Seattle storage startup helping companies store vast amounts of data, announced a $125 million Series E investment today on a $1.2 billion valuation.

BlackRock led the round with help from Highland Capital Partners, Madrona Venture Group, Kleiner Perkins and new investor Amity Ventures. The company reports it has now raised $351 million.

CEO Bill Richter says the valuation is more than 2x its most recent round, a $93 million Series D in 2018. While the valuation puts his company in the unicorn club, he says that it’s more important than simple bragging rights. “It puts us in the category of raising at a billion plus dollar level during a very complicated environment in the world. Actually, that’s probably the more meaningful news,” he told TechCrunch.

It typically hasn’t been easy raising money during the pandemic, but Richter reports the company started getting inbound interest in March just before things started shutting down nationally. What’s more, as the company’s quarter closed at the end of April, they had grown almost 100% year over year, and beaten their pre-COVID revenue estimate. He says they saw that as a signal to take additional investment.

“When you’re putting up nearly 100% year over year growth in an environment like this, I think it really draws a lot of attention in a positive way,” he said. And that attention came in the form a huge round that closed this week.

What’s driving that growth is that the amount of unstructured data, which plays to the company’s storage strength, is accelerating during the pandemic as companies move more of their activities online. He says that when you combine that with a shift to the public cloud, he believes that Qumulo is well positioned.

Today the company has 400 customers and over 300 employees with plans to add another 100 more before year’s end. As he adds those employees, he says that part of the the company’s core principles includes building a diverse workforce. “We took the time as an organization to write out a detailed set of hiring practices that are designed to root out bias in the process,” he said.

One of the keys to that is looking at a broad set of candidates, not just the ones you’ve known from previous jobs. “The reason for that is that when you force people to go through hiring practices, you open up the position to a broader, more diverse set of candidates and you stop the cycle of continuously creating what I call ‘club memberships’, where if you were a member of the club before you’re a member in the future,” he says.

The company has been around since 2012 and spent the first couple of years conducting market research before building its first product. In 2014 it released a storage appliance, but over time it has shifted more towards hybrid solutions.


By Ron Miller

IBM confirms layoffs are happening, but won’t provide details

IBM confirmed reports from over night that it is conducting layoffs, but wouldn’t provide details related to location, departments or number of employees involved. The company framed it in terms of replacing people with more needed skills as it tries to regroup under new CEO Arvind Krishna.

IBM’s work in a highly competitive marketplace requires flexibility to constantly remix to high-value skills, and our workforce decisions are made in the long-term interests of our business,” an IBM spokesperson told TechCrunch.

Patrick Moorhead, principal analyst at Moor Insights & Strategy says he’s hearing the layoffs are hitting across the business. “I’m hearing it’s a balancing act between business units. IBM is moving as many resources as it can to the cloud. Essentially, you lay off some of the people without the skills you need and who can’t be re-educated and you bring in people with certain skill sets. So not a net reduction in headcount,” Moorhead said.

It’s worth noting that IBM used a similar argument back in 2015 when it reportedly had layoffs. While there is no official number, Bloomberg is reporting that today’s number is in the thousands.

Holger Mueller, an analyst at Constellation Research, says that IBM is in a tough spot. “The bets of the past have not paid off. IBM Cloud as IaaS is gone, Watson did not deliver and Blockchain is too slow to keep thousands of consultants occupied,” he said.

Mueller adds that the company could also be feeling the impact of having workers at home instead of in the field. “Enterprises do not know and have not learnt how to do large software projects remotely. […] And for now enterprises are slowing down on projects as they are busy with reopening plans,” he said.

The news comes against the backdrop of companies large and small laying off large numbers of employees as the pandemic takes its toll on the workforce. IBM was probably due for a workforce reduction, regardless of the current macro situation as Krishna tries to right the financial ship.

The company has struggled in recent years, and with the acquisition of Red Hat for $34 billion in 2018, it is hoping to find its way as a more open hybrid cloud option. It apparently wants to focus on skills that can help them get there.

The company indicated that it would continue to subsidize medical expenses for laid off employees through June 2021, so there is that.


By Ron Miller

Incoming IBM CEO Arvind Krishna faces monumental challenges on multiple fronts

Arvind Krishna is not the only CEO to step into a new job this week, but he is the only one charged with helping turn around one of the world’s most iconic companies. Adding to the degree of difficulty, he took the role in the midst of a global pandemic and economic crisis. No pressure or anything.

IBM has struggled in recent years to find its identity as technology has evolved rapidly. While Krishna’s predecessor Ginni Rometty left a complex legacy as she worked to bring IBM into the modern age, she presided over a dreadful string of 22 straight quarters of declining revenue, a record Krishna surely hopes to avoid.

Strong headwinds

To her credit, under Rometty the company tried hard to pivot to more modern customer requirements, like cloud, artificial intelligence, blockchain and security. While the results weren’t always there, Krishna acknowledged in an email employees received on his first day that she left something to build on.

“IBM has already built enduring platforms in mainframe, services and middleware. All three continue to serve our clients. I believe now is the time to build a fourth platform in hybrid cloud. An essential, ubiquitous hybrid cloud platform our clients will rely on to do their most critical work in this century. A platform that can last even longer than the others,” he wrote.

But Ray Wang, founder and principal analyst at Constellation Research, says the market headwinds the company faces are real, and it’s going to take some strong leadership to get customers to choose IBM over its primary cloud infrastructure competitors.

“His top challenge is to restore the trust of clients that IBM has the latest technology and solutions and is reinvesting enough in innovation that clients want to see. He has to show that IBM has the same level of innovation and engineering talent as the hyper scalers Google, Microsoft and Amazon,” Wang explained.

Cultural transformation


By Ron Miller

Volterra announces $50M investment to manage apps in hybrid environment

Volterra is an early stage startup that has been quietly working on a comprehensive solution to help companies manage applications in hybrid environments. The company emerged from stealth today with a $50 million investment and a set of products.

Investors include Khosla Ventures and Mayfield along with strategic investors M12 (Microsoft’s venture arm), Itochu Technology Ventures and Samsung NEXT. The company, which was founded in 2017, already has 100 employees and more than 30 customers.

What has attracted these investors and customers is a full stack solution that includes both hardware and software to manage applications in the cloud or on prem. Volterra founder and CEO Ankur Singla says when he was at his previous company, Contrail Systems, which was acquired by Juniper Networks in 2012 for $176 million, he saw first-hand how large companies were struggling with the transition to hybrid.

“The big problem we saw was in building and operating application that scale is a really hard problem. They were adopting multiple hybrid cloud strategies, and none of them solved the problem of unifying the application and the infrastructure layer, so that the application developers and DevOps teams don’t have to worry about that,” Singla explained.

He says the Volterra solution includes three main products, VoltStack​, VoltMesh and VoltConsole to help solve this scaling and management problem. As Volterra describes the total solution, “Volterra has innovated a consistent, cloud-native environment that can be deployed across multiple public clouds and edge sites — a distributed cloud platform. Within this SaaS-based offering, Volterra integrates a broad range of services that have normally been siloed across many point products and network or cloud providers.” This includes not only the single management plane, but security, management and operations components.

Diagram: Volterra

The money has come over a couple of rounds, helping to build the solution to this point, and it required a complex combination of hardware and software to do it. They are hoping to help organizations that have been looking for a cloud native approach to large-scale applications such as industrial automation will adopt this approach.


By Ron Miller

With $34B Red Hat deal closed, IBM needs to execute now

In a summer surprise this week, IBM announced it had closed its $34 billion blockbuster deal to acquire Red Hat. The deal, which was announced in October, was expected to take a year to clear all of the regulatory hurdles, but U.S. and EU regulators moved surprisingly quickly. For IBM, the future starts now, and it needs to find a way to ensure that this works.

There are always going to be layers of complexity in a deal of this scope, as IBM moves to incorporate Red Hat into its product family quickly and get the company moving. It’s never easy combining two large organizations, but with IBM mired in single-digit cloud market share and years of sluggish growth, it is hoping that Red Hat will give it a strong hybrid cloud story that can help begin to alter its recent fortunes.

As Box CEO (and IBM partner) Aaron Levie tweeted at the time the deal was announced, “Transformation requires big bets, and this is a good one.” While the deal is very much about transformation, we won’t know for some time if it’s a good one.

Transformation blues


By Ron Miller

Yellowbrick Data raises $81M Series C for hybrid data warehouse

There’s lots of data in the world these days, and there are a number of companies vying to store that data in data warehouses or lakes or whatever they choose to call it. Old school companies have tended to be on prem, while new ones like Snowflake are strictly in the cloud. Yellowbrick Data wants to play the hybrid angle, and today it got a healthy $81 million Series C to continue its efforts.

The round was led by DFJ Growth with help from Next47, Third Point Ventures, Menlo Ventures, GV (formerly Google Ventures), Threshold Ventures and Samsung. New investors joining the round included IVP and BMW i Ventures. Today’s investment brings the total raised to a brisk $173 million.

Yellowbrick sees a world that many of the public cloud vendors like Microsoft and Google see, one where enterprise companies will be living in a hybrid world where some data and applications will stay on prem and some in the cloud. They believe this situation will be in place for the foreseeable future, so its product plays to that hybrid angle, where your data can be on prem or in the cloud.

The company did not want to discuss valuation in spite of the high amount of raised dollars. Neither did it want to discuss revenue growth rates, other than to say that it was growing at a healthy rate.

Randy Glein, partner at DFJ Growth, did say one of the things that attracted his company to invest in Yellowbrick was its momentum along with the technology, which in his view, provides a more modern way to build data warehouses. “Yellowbrick is quickly providing a new generation of ultra-high performance data warehouse capabilities for large enterprises. The technology is a step function improvement on every dimension compared to legacy solutions, helping modern enterprises digest and interpret massive data workloads in a fraction of the time at a fraction of the cost,” he said in a statement.

It’s interesting that a company with just 100 employees would require this kind of money, but as company COO Jason Snodgress told TechCrunch, it costs a lot of money to build out a data warehouse. He’s not wrong. Snowflake, a company that’s building a cloud data warehouse, has raised almost a billion dollars.


By Ron Miller

AWS remains in firm control of the cloud infrastructure market

It has to be a bit depressing to be in the cloud infrastructure business if your name isn’t Amazon. Sure, there’s a huge, growing market, and the companies behind Amazon are growing even faster. Yet it seems no matter how fast they grow, Amazon remains a dot on the horizon.

It seems inconceivable that AWS can continue to hold sway over such a large market for so long, but as we’ve pointed out before, it has been able to maintain its position through true first-mover advantage. The other players didn’t even show up until several years after Amazon launched its first service in 2006, and they are paying the price for their failure to see the way computing would change the way Amazon did.

They certainly see it now, whether it’s IBM, Microsoft or Google, or Tencent and Alibaba, both of which are growing fast in the China/Asia markets. All of these companies are trying to find the formula to help differentiate themselves from AWS and give them some additional market traction.

Cloud market growth

Interestingly, even though companies have begun to move with increasing urgency to the cloud, the pace of growth slowed a bit in the first quarter to a 42 percent rate, according to data from Synergy Research, but that doesn’t mean the end of this growth cycle is anywhere close.


By Ron Miller

Red Hat and Microsoft are cozying up some more with Azure Red Hat OpenShift

It won’t be long before Red Hat becomes part of IBM, the result of the $34 billion acquisition last year that is still making its way to completion. For now, Red Hat continues as a stand-alone company, and is if to flex its independence muscles, it announced its second agreement in two days with Microsoft Azure, Redmond’s public cloud infrastructure offering. This one involving running Red Hat OpenShift on Azure.

OpenShift is RedHat’s Kubernetes offering. The thinking is that you can start with OpenShift in your data center, then as you begin to shift to the cloud, you can move to Azure Red Hat OpenShift — such a catchy name — without any fuss, as you have the same management tools you have been used to using.

As Red Hat becomes part of IBM, it sees that it’s more important than ever to maintain its sense of autonomy in the eyes of developers and operations customers, as it holds its final customer conference as an independent company. Red Hat executive vice president and president, of products and technologies certainly sees it that way. “I think [the partnership] is a testament to, even with moving to IBM at some point soon, that we are going to be  separate and really keep our Switzerland status and give the same experience for developers and operators across anyone’s cloud,” he told TechCrunch.

It’s essential to see this announcement in the context of both IBM’s and Microsoft’s increasing focus on the hybrid cloud, and also in the continuing requirement for cloud companies to find ways to work together, even when it doesn’t always seem to make sense, because as Microsoft CEO Satya Nadella has said, customers will demand it. Red Hat has a big enterprise customer presence and so does Microsoft. If you put them together, it could be the beginning of a beautiful friendship.

Scott Guthrie, executive vice president for the cloud and AI group at Microsoft understands that. “Microsoft and Red Hat share a common goal of empowering enterprises to create a hybrid cloud environment that meets their current and future business needs. Azure Red Hat OpenShift combines the enterprise leadership of Azure with the power of Red Hat OpenShift to simplify container management on Kubernetes and help customers innovate on their cloud journeys,” he said in a statement.

This news comes on the heels of yesterday’s announcement, also involving Kubernetes. TechCrunch’s own Frederic Lardinois described it this way:

What’s most interesting here, however, is KEDA, a new open-source collaboration between Red Hat and Microsoft that helps developers deploy serverless, event-driven containers. Kubernetes-based event-driven autoscaling, or KEDA, as the tool is called, allows users to build their own event-driven applications on top of Kubernetes. KEDA handles the triggers to respond to events that happen in other services and scales workloads as needed.

Azure Red Hat OpenShift is available now on Azure. The companies are working on some other integrations too including Red Hat Enterprise Linux (RHEL) running on Azure and Red Hat Enterprise Linux 8 support in Microsoft SQL Server 2019.


By Ron Miller