Cloud computing opportunity Challenges: compromising IBM's traditional business

Lead: Foreign media writes today that while cloud computing is popular in the industry, IBM's latest earnings highlights the potential risks of the business: it could pose a threat to the traditional package solution business. The following is the full text of the article: for IBM, Cloud computing is an opportunity and risk coexistence. The risk of the business has been reflected in the latest earnings--the company's quarterly earnings did not reach analysts ' expectations. IBM's opportunity is to be a potential arms supplier for cloud computing vendors to help governments, large and medium-sized enterprises, Web developers and managed service providers by selling customized hardware and software. This September, IBM began selling cloud computing services to midsize enterprises, challenging market leaders such as Amazon and Salesforce. IBM's third-quarter cloud computing business achieved double-digit growth, but did not disclose the revenue component in detail. The risk for IBM is that cloud computing may threaten traditional software and related consulting services, which can help finance, human resources, and supply chain management. Many companies are no longer buying expensive programs, then paying companies such as IBM to install, run, and connect with other systems, but increasingly opt to lease cheap software via cloud services providers such as Salesforce, NetSuite and Workday. Workday recently had a successful IPO. On the analyst conference call, Loughridge, IBM's CFO, Mark Lafrich 6% of the company's global Business services division into a "more traditional package of apps". IBM's software revenue has also fallen 1%, due to weak performance in large infrastructure projects that are helping to run traditional applications. The disappointing performance led to a 5% per cent fall in IBM's share price in Wednesday, posing a pressure on the market. Sanford Bernstein analyst Tony Sakonagy, an investment bank, said in a October 17 study that weakness in traditional software could reflect the migration of the entire market to cloud computing, driving down the opportunities for services and consolidation of business. "If so, we may see only the tip of the iceberg of the decline in the traditional package of apps, which has contributed most of the revenue to IBM's global business services sector." "he wrote. For IBM and other large technology companies, this is a typical innovator's dilemma. IBM, Hewlett-Packard, Dell, Microsoft and other commercial technology providers are aware of the importance of cloud computing, but at the same time, these companies are also trying to protect their traditional software business. The challenge for IBM is that the size of cloud computing services is too small for its highly---self-respecting sales team to be reluctant to promote such businesses. "They have to transform their business and not make the traditional income too much of a impact." "This is a revenue transformation for IBM," said Ed Anderson, a market research firm Gartner analyst Aide Anderson. Cloud Computing's sales are much smaller.That is the dilemma they face. The income of all the big manufacturers will be greatly impacted. "In the analyst question and answer session of the earnings conference call, Lafrich added:" The problem that really scratches our head is the challenge of the traditional package solution, mainly the third party's human resources, supply chain and enterprise resource planning software. "IBM should have done better in these areas," Lafrich said. To address the problem, the company will rebuild its capabilities in the fourth quarter and 2013, and is expected to get more business through more people and resources. IBM's emerging cloud-computing rivals will not face the same dilemma. They don't need to protect the traditional business, so they can focus on cloud computing and gain an edge. "The reality is that IBM has not honoured its commitments. "They have been looking at other things, including professional services and outsourcing," said Salesforce CEO Mark Benniof (Marc Benioff). "As the cloud grows faster, investors may also be concerned about the benefits and drawbacks of the business to the big technology giants," he said. (PEI)