Workday in Deal to Use IBM's Cloud Services -- WSJ
August 15 2016 - 3:03AM
Dow Jones News
By Rachael King
Business software provider Workday Inc. on Monday expects to
announce a seven-year deal to use International Business Machine
Corp.'s cloud-computing services for some internal operations.
The deal, in which Big Blue is winning a marquee customer with
solid cloud credentials, comes soon after two recent reports from
analysts raised questions about IBM's ability to compete with
Amazon.com Inc., Microsoft Corp., and Alphabet Inc. in the
contentious market for computing horsepower delivered over the
internet.
Workday, which makes web-based human resources and finance
software, will use IBM's SoftLayer cloud-computing service to test
and develop new programs. Under the terms of the agreement, IBM
will be Workday's primary provider of computing capacity for
software development and testing, providing the majority of
processing power needed for these activities. Previously, in this
area, Workday used a mix of its own data centers and
cloud-computing infrastructure from Amazon. Workday will continue
to use Amazon for some of this work.
The terms of the deal weren't disclosed.
IBM's software hosting services have faced challenges recently.
Last week, Australia's online national census website, which was
hosted by IBM, had to be shut down after a series of cyberattacks
disrupted citizens' ability to enter information.
IBM said in a statement that it "genuinely regrets the
inconvenience that has occurred." The company pointed out that
while hackers had interrupted the census, no data was accessed or
stolen in the attack.
A report from Deutsche Bank in May said that IBM was losing
ground to Amazon and Microsoft in a major segment of the market
known as public cloud infrastructure, and corporate customers
increasingly weren't considering using its services. Gartner Inc.
earlier this month said that IBM was falling behind in the same
segment while Amazon and Microsoft were gaining steam.
Still, Synergy Research Group and other firms that track IBM's
revenue tend to categorize the company in the same league as cloud
services from Amazon, Microsoft and Alphabet Inc.'s Google. IBM
reported substantial cloud revenues that rose 30% to $3.4 billion
during the second quarter from the same period a year earlier.
"There's a lot of noise in the industry on cloud providers,"
said Jim Comfort, chief technology officer of IBM Cloud. Big Blue
is investing billions of dollars in cloud computing, he added.
IBM acquired SoftLayer for $2 billion in 2013. Since then, it
has invested $1.2 billion to expand the service, according to a May
report from Deutsche Bank.
IBM SoftLayer counts a range of large customers including SAP
AG, VMware Inc., Coca-Cola Co. and 1-800-Flowers.com Inc. IBM notes
that most clients don't specify how they use SoftLayer services, so
the company doesn't know how many are, like Workday, using it for
software development and testing.
"With this announcement, we will begin migrating a portion of
those workloads onto the IBM cloud," said David Clarke, Workday's
senior vice president of technology development.
Mr. Clarke said he hopes to make Workday's software development
and testing more productive and efficient by using IBM's cloud
services. Workday may expand its use of SoftLayer into other areas
later, the company said.
SoftLayer offers services from nearly 50 data centers around the
world, so Workday can deliver its services within many countries
while working with a single vendor, IBM said. Some countries
require data to be housed within their borders, and proximity to
users can make applications more responsive. Some rival
cloud-computing providers operate in fewer local areas.
Monday's announcement will build on an existing partnership
between IBM and Workday. IBM offers global Workday Consulting
Services and in 2015 acquired Meteorix, a Workday services partner.
In addition, IBM is a Workday customer, using Workday's Human
Capital Management software to manage its own workforce.
Write to Rachael King at rachael.king@wsj.com
(END) Dow Jones Newswires
August 15, 2016 02:48 ET (06:48 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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