Why IBM Will Win the War With Amazon Web Services

Amazon dominates the cloud, but IBM, strengthened by its SoftLayer acquisition, has unleashed a marketing campaign that fires on all cylinders. Whether IBM's cloud is, in fact, better may matter less than Amazon's ability to challenge a company that's made many competitors crumble over the past 102 years.

By Rob Enderle
Fri, November 08, 2013

CIO — Amazon Web Services represents perhaps the most disruptive threat faced by the traditional set of enterprise vendors — and IBM is stepping up to address the AWS threat with a vengeance.

IBM knows how to deal with threats like this. The company has more than a century of experience fighting off disruptive competitors. Most of them are long gone, while IBM is still with us, so the firm's approach has historically been very successful.

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IBM is gearing up for war. Since Amazon is mucking around in IBM's space, the folks in Armonk should have the positional advantage. I focus here on IBM's strengths compared to Amazon's weaknesses largely because Amazon isn't fundamentally an IT solutions provider. Rather, Amazon is a successful retailer that found a low-cost way to provide services through their retail model to IT. Typically, these efforts don't survive; in the face of focused competition, they aren't adjacent to the firm's core business (retail, in Amazon's case). IBM is honed in, once again, on proving this well tested theory.

Amazon Lacks a Deep Relationship With IT

As with Apple and Samsung, Amazon is exposed to marketing that disparages its offerings. It lacks the longevity in market to have the kind of loyalty and brand trust that companies such as IBM enjoy. This means Amazon's voice simply isn't as credible or influential in the space. Like Apple of old, Amazon hasn't yet developed the skills needed to defend against a marketing campaign that disparages it.

Worse, Amazon is light with marketing execution in general. This suggests that another vendor could take control of its brand image and do significant damage. (Look at what Apple did to Microsoft when the latter lacked the skills and the interest in protecting its brand during the Vista years.) The wife of CEO Jeff Bezos showcased this when she stepped in to discredit an unauthorized biography on the company and her husband. All this did was increase interest in the book. Amazon hasn't resourced the task of protecting its image. IBM will execute against this strategic weakness.

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Amazon offsets this by bypassing IT and selling directly to employees. However, IT retains the responsibility for compliance; given enough ammunition, IT generally can block access to any vendor seen as unreliable or unsecure. Expect IBM to start providing IT with the evidence to provide this block and with cost-effective alternatives that IT can use instead.

Without a deep relationship with IT, Amazon isn't well-positioned to counter this strategy. If IBM can get close enough on price and ease of use, it should be able to displace Amazon as it has so many other challengers — Digital, NEC, Fujitsu, Compaq, AT&T and so on — which were even better positioned than Amazon is now.

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