Hardware vendors are switching from kit to services, but who has the best proposition? IAN CAMPBELLreports

WITH DELL’S plans to invest $1 billion in a global cloud strategy, and last month’s declaration by HP of its commitment to cloud services, the big hardware vendors have shown their cards and signalled their intentions to grab a piece of the fastest-growing segment in the IT market.

A recent report by research company IDC predicts that while global IT spend will increase by 6 per cent in 2011, spending on public cloud computing services will grow five times faster. But which of the vendors will benefit most from the sea change?

Right now, it’s hard to say. Any business contemplating a move away from running applications and kit on premises may find that the various offerings blur into each other. There are a lot of “me too” messages from vendors who all want to move away from pushing hardware to selling cloud-based services.

Laurent Lachal, a senior analyst at Ovum, has been watching them jockey for position.

“IBM was well ahead but lost momentum; HP is trailing but trying to be more aggressive; and Dell is trotting behind realising it has to do something,” he said

Brian Jones, Dell’s European marketing director, said the company was driven to make its move by customers facing an explosion of data and devices with fewer resources.

“The volume of data and its consumption is creating challenges for IT executives. Servers, storage and networking can no longer be managed as single entities. Convergence is the key challenge,” he said.

Dell’s investment in 10 next-generation data centres, strategically positioned in the “big countries”, will offer customers cloud environments to alleviate their pain. Fitting them up with bundled kit that combines servers, storage and network connectivity is part of the plan, a neat idea but not new. Dell’s vStart is its version of vBlock, the preconfigured stack from EMC, Cisco and VMware.

The copycat approach is hardly surprising, according to Lachal. “You cannot differentiate yourself that dramatically until you have established yourself. Dell is clearly in catch-up mode, more so than HP. It is doing the right thing and pushing the right buttons, but it is still a hardware company trying to become a service company. Its approach to the cloud is very product-centric.”

For Dell to be successful as a cloud provider, he said it has to quickly reinvent itself. “They are aware of the issue but they think they have time. They don’t; cloud innovation is moving fast.”

IBM was the first large vendor to go the services route and extend its competencies to help with business transformation, a move that plays nicely into the cloud.

“It’s harder for the technology vendors that don’t have the process management experience to get their clients to real business value,” said Kevin Leahy, IBM’s global strategist for cloud computing. “Customers are revaluating choices and looking at ways of getting more value faster and obviously we think that’s a huge advantage for IBM.”

Despite being a frontrunner in the cloud, Lachal believes IBM lost momentum that it is only just starting to recover. Unsurprisingly, Leahy disagrees. “You could think we have not been as visible as some of the others, but we have been focusing on how to make the cloud ready for business,” he said.

“A lot of the hype around the cloud has been about the Amazons of this world, but enterprise clients are not interested in a model that you pay for with a credit card.”

The growing consensus is that most organisations will adopt a hybrid approach, mixing public cloud offerings – such as Salesforce.com and Amazon Web Services – with a private cloud that allows them to retain control over key infrastructure and applications.

Existing hardware vendors are making a big play for the private cloud, partly because they have to protect their interests having already lost some business to the public cloud and software-as-a-service providers. They also see a role for themselves in integrating the two types of cloud offering.

IBM’s Leahy sees companies determining the split by the value of the process to the business. “Everything that is revenue producing will be private cloud and everything else will be software-as-service. Then they have to figure out how to put the pieces together.”

Analysts warn that the private part of the strategy is some way behind public cloud services that have been available for some time.

“There are technological challenges but the cultural and process challenges are much greater with the private cloud,” said Lachal. “At all levels there are problems. Line of business manager are not comfortable sharing resources and executives want to have software customised rather than standardised.”

Leahy acknowledges there is a big challenge. While technology is a critical enabler, he believes the ability to “wean out processes” is the way to see real value in the cloud. He said IBM had more than 2,000 successful engagements under its belt and was the only leading provider to run SAP successfully from a private cloud.

Mastering the complexity of SAP’s ERP system is always an indicator of IT maturity and even more so when delivered from the cloud.

The other problem with private cloud is that organisations risk getting stuck with one provider. Despite all the talk of a more open and flexible infrastructure, there is a lack of shared standards.

“Lock-in is a concern,” said Leahy. “People are worried about how it’s all going to work together and integrate. They might need to be able to switch between cloud providers, from one in China to another in Germany, for example.”

IBM and other vendors have taken steps towards open standards and cross-vendor integration, but it’s an issue that’s still up in the air. A cloud hanging over the cloud.