International Business Machines Corp. (IBM) announced a $38 million investment to build a new IBM Asia-Pacific Cloud Computing Data Center in Singapore to exploit the potential of cloud computing through its comprehensive solutions and services.
The new facility in Singapore will extend IBM’s globally-integrated cloud delivery network that includes centers in Germany, Canada and the United States. The company also has 13 global cloud labs, of which seven are based in Asia-Pacific countries namely China, India, Korea, Japan, Hong Kong, Vietnam and Singapore.
The new data center, expected to start operations in April, will make IBM’s comprehensive cloud services and technology portfolio available via its cloud delivery infrastructure. The services are designed to help clients during business and IT restructuring, increase their flexibility and agility, reduce costs and accelerate time to market. Moreover, it will help businesses increase security and compliance within the public cloud environment.
The investment in Singapore signifies the growing demand for cloud solutions and services in the Asia-Pacific region and keeping that in mind, IBM has further focused on delivering the desired service to its clients (both public and private) to cater to their infrastructural requirements.
Moreover, the Asia-Pacific market for cloud computing is set to grow 40% per annum through 2014 to $4.9 billion, according to IDC Asia/Pacific. IBM is well positioned to take advantage of this growth by establishing regional data centers that will provide the necessary infrastructure for growth of key cloud computing areas.
The IBM Asia-Pacific Cloud Computing Data Center includes IBM’s infrastructure as a Service cloud portfolio, which provides rapid access to security-rich, enterprise-class solutions in virtual server environments. The data center is well suited for development and test activities and management of other dynamic workloads.
Additionally, the IBM software group and third party companies will provide clients a variety of payment models designed for mid-size and large enterprises, as well as independent software vendors (ISVs).
IBM remains a heavyweight in the cloud computing market and its strong cash balance will help it acquire companies with high intellectual property (IP), which will drive further growth in the upcoming quarters. We have a long-term Neutral recommendation on IBM due to currency fluctuations, European weakness, increasing competition, decreased service contract signings and slower-than-expected IT spending growth remain headwinds.
IBM faces stiff competition from Oracle Corp. (ORCL), Hewlett Packard Co. (HPQ), Microsoft Corp (MSFT) and EMC Corp (EMC) in the cloud computing market.
We currently have a Zacks #3 Rank for IBM, which translates into a Hold rating over the short term.
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