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International Business Machines Corp. Aims To Dominate This New Cloud Market

By Tim Brugger - Apr 18, 2016 at 8:00AM

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Video has become a mainstay for “connected” users around the globe, and Big Blue is taking it to the cloud.

Some of the world's largest companies have hedged their respective bets on winning one of the fastest growing markets on the planet: the cloud. Most pundits agree the cloud and related technologies offer tech leaders including IBM (IBM 2.00%), Microsoft (MSFT -0.40%), and a host of other big-time players, a multi-billion dollar opportunity.

IBM has invested well over $5 billion in the past year alone on a host of acquisitions and the development of entirely new divisions to carve out its place in all things cloud-related. One of IBM's core cloud strengths is its analytics via its famed cognitive computing wonder Watson, and that's not going to change.

But there's another piece to the cloud that sometimes flies under the radar: the explosive growth of streaming video. What does online video have to do with the cloud? The answer is a $100 billion plus opportunity, and IBM intends to get its fair share.

Image courtesy of: IBM.

Setting the stage
The investments IBM has committed to its cloud, big data, and deep learning solutions has largely been centered on data-crunching tools. Technology that "learns" as it goes, offering continually enhanced, actionable results is a huge opportunity as the world goes digital, which is why IBM's Watson has piqued the interest of so many.

But one cloud-related effort by IBM may have gotten lost in the Watson, cognitive computing shuffle: its new cloud video division. Three months ago IBM opened the doors to its new unit, and has since made multiple acquisitions to bolster its cloud video solutions including Clearleap, Aspera, and Cleversafe.

IBM recently shared a few significant cloud video "wins" at the National Association of Broadcasters (NAB) gathering that could prove to be a watershed moment in the success of CEO Ginni Rometty's "strategic imperatives," which includes all things cloud, data, analytics, security, and mobile.

Read all about it
Media gurus are familiar with the annual Comic-Con gathering. Comic-Con is an annual event boasting over 100,000 attendees and presenters from the world of movies, TV, and publishing, among others. Comic-Con and a major movie studio recently partnered to deliver a video-on-demand service beginning in May, powered by -- you guessed it -- IBM's new cloud video division. Not a bad win for the "fledgling" IBM unit.

IBM's cloud video division has also struck a deal with AOL, to "serve as the backbone of its new media management platform;" the Canadian Broadcasting Corporation, to provide the platform for its countrywide video streaming service -- ala Netflix, only Canuck-style; and the worldwide streaming of a recent major auto manufacturer's latest vehicle.

What it means
The opportunity for IBM and others in the cloud video market are mind-boggling. By 2019, an estimated 80% plus of Internet traffic will be of the video variety. Already, digital video is the fastest growing cloud-based data type, and with the profusion of Over-The-Top (OTT) streaming services like the aforementioned Netflix, the popularity of the YouTube's of the world, and even the widespread use of video on social media sites, there's an almost limitless upside.

According to data from eMarketer, an estimated 186.9 million Americans -- more than half of the entire U.S. population -- will watch streaming video this year, and that will climb to about 200 million by 2019. It's no wonder the cloud video market is expected to climb to over $100 billion, and it appears IBM has a leg up in what is sure to be a hyper-competitive market.

As it stands, Microsoft's more than $9.4 billion annual revenue run-rate in cloud sales puts it at the head of the class, and speaks to the success of the "cloud-first" pillar of CEO Satya Nadella's two-pronged initiative. IBM's $5.3 billion in annual cloud sales -- up from "just" $3.5 billion a year-ago -- is nothing to sneeze at. And the two tech behemoths will continue to battle for Software-as-a-Service (SaaS) cloud sales for years to come.

That said, while IBM's video cloud business may not be top-of-mind for investors in search of growth opportunities in one of the world's fastest growing markets, it could prove to be IBM's trump card.


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