IBM: The huge new cloud we built for the Army is bigger than the New York Stock Exchange

Ginni romettyREUTERS/Albert GeaIBM Chairwoman and CEO Ginni Rometty

IBM wants the world to stop thinking of the massive $US120 billion cloud computing market as being a three-way race between Amazon, Microsoft, and Google.

So on Wednesday it started talking about a huge cloud it built for the US Army that processes more transactions than the New York Stock Exchange.

Sources close to the company tell Business Insider that this cloud is part of a bigger $US60 million contract IBM won from the Army, awarded in December.

The Army hired IBM in 2014 to build what’s known as a “hybrid” cloud to run its logistics system, which conducts more than 40 million transactions a day. It makes sure that people and equipment are where they are supposed to be and is accessed by 65,000 users and 150 of the army’s suppliers around the world.

With the cloud now up and running, IBM says that this system is saving the army 50% on what it cost to run its logistics system prior to using this type of “hybrid” cloud.

A “hybrid” cloud is when an organisation splits the work between the servers and software it owns in its own data center and a rented cloud hosted elsewhere.

IBM wants to own this hybrid market — and it points to a report from market research company Synergy Research that shows it does lead this market, though it is still a distant No. 3 in the overall cloud market behind Amazon and Microsoft.

A hybrid cloud is the best of all worlds for a company like IBM, that makes billions of dollars selling computer hardware and software. It allows IBM to straddle the line between old school business models — selling the technology services to install/maintain it — and the newer cloud model, where businesses rent tech, often hosted elsewhere and pay only for what they use.

IBM’s relationship with the Army isn’t new either. The Army awards IBM hundreds of millions of dollars in multi-year contracts for a lot of its tech needs and has a whole team dedicated to supporting the Army’s cloud computing contracts. That said, IBM certainly doesn’t win them all.

But you’ll be hearing IBM talk more about its big cloud project wins. For instance, earlier this week, IBM also announced a multi-million cloud project with Coca-Cola Amatil (the Australian bottler of Coke).

IBM is going through a rough transition, shedding shrinking business units, laying off thousands of workers, and replacing them with areas it wants to grow (hiring thousands of new workers for those units).

Cloud computing is one of those “strategic initiatives,” areas where it it investing heavily to jump start its growth again. Others include big data/analytics, enterprise mobile/social, computer security.

In February, CEO Ginni Rometty promised to grow these businesses from $US25 billion in revenue last year (27% of of the company’s revenue) to $US40 billion in combined annual revenue by 2018, or a promised 40% of the company’s expected total revenue by then.

In 2015 her bonus, as well as the bonuses for the whole senior team, will depend more heavily on how these initiatives do. IBM changed its executive bonus metrics in 2015 to de-emphasise the company’s overall revenue growth and focus on growth of revenue in these business units (which is weighted 20% of her bonus, according to analyst from USB’s Steven Milunovich). Her bonus also depends on operating profit (weighted 40%) and increasing cash flow (40%), Milunovich reports.

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