IBM Buying SoftLayer in Cloud-Computing Wars

IBM announced Tuesday it is acquiring Dallas-based SoftLayer, which will serve as the keystone for its new cloud service division, along with IBM’s SmartCloud franchise.

Terms of the deal were not disclosed, but published estimates speculate it was a $2 billion purchase price. The acquisition comes as the Armonk, NY-based computing giant seeks to buttress its cloud arsenal in its battle with Amazon Web Services, which has begun to dominate businesses that IBM wants for itself.

The stakes are certainly high. Analyst firm Gartner says that the public cloud services market is forecast to grow 18.5 percent this year to total $131 billion worldwide, up from $111 billion in 2012.

“As businesses add public cloud capabilities to their on-premise IT systems, they need enterprise-grade reliability, security and management,” Erich Clementi, senior vice president of IBM Global Technology Services, said in a press release. “With SoftLayer, IBM will accelerate the build-out of our public cloud infrastructure to give clients the broadest choice of cloud offerings to drive business innovation.”

Founded in 2005, SoftLayer has become a $400 million business and has more than 700 employees, according to the Dallas Morning News. The firm serves about 21,000 customers with a global cloud infrastructure platform spanning 13 data centers in the U.S., Asia, and Europe. Among its cloud infrastructure services, SoftLayer offers enterprise-class cloud services on dedicated or shared servers. SoftLayer’s customers include Kixeye, a big gaming company, and Cloudant, a database-as-a-service startup.

As Barb Darrow at GigaOm puts it: “IBM is not just competing with age-old hardware and software rivals like Oracle and HP, but also … will butt heads more with Google and Microsoft, which have staked big claims in public cloud infrastructure.”

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