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IBM Invests Another $1 Billion in Its Cloud Business

Big Blue adds to its bet on the cloud.

Re/code photo illustration

IBM today made another significant financial commitment to its cloud computing service SoftLayer, promising to spend $1 billion to enhance the service’s software capabilities.

It’s the second billion-dollar investment by IBM in as many months. In January, Big Blue committed to spend $1.2 billion to add 27 new data centers to SoftLayer’s existing 13.

IBM has bet heavily on the cloud as its traditional hardware and software businesses have declined in recent years. More companies are skipping the process of buying computing hardware and simply renting computing capacity from services like Amazon Web Services. They’re also replacing traditional software with cloud offerings like and Workday. IBM says it expects to do $7 billion in cloud-related revenue by next year.

The company says it will bring its portfolio of enterprise software products to SoftLayer. It also launched a service called BlueMix intended to allow developers to build applications using its portfolio of existing software, including its Watson cognitive computing platform, as well its marketing, commerce and security software platforms, all newly cloud-enabled.

In a related announcement, IBM said it will acquire Cloudant, a privately held company that supplies database software as a cloud service. It will be integrated into BlueMix. Terms of the deal were not disclosed.

The moves are intended to bolster IBM’s cloud capabilities and give it a stronger competitive position against Amazon Web Services, the cloud services unit within Web retail giant Amazon. BlueMix will compete with Amazon’s Elastic BeanStalk and’s Heroku.

IBM has been making a significant bet on the cloud under CEO Ginni Rometty. Last month it made Watson, the computer system that gained fame for beating humans at the TV game show “Jeopardy,” a cloud service. And last year it spent about $2 billion to acquire SoftLayer, a Texas-based company that delivers cloud computing services. It now claims that in 2013 its cloud business generated $4.4 billion in revenue, though that’s a debatable number that depends on an IBM-specific definition of the word “cloud.”

Meanwhile it has been selling off some of its traditional computing and other business units. Last month it sold its x86 server business to China-based Lenovo for $2.3 billion, and it is now exploring the sale of its software-defined networking business.

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