IBM Signs Two Big Cloud Deals

Not to be outdone by competitor Microsoft's recent cloud computing deal with Walgreens Boots Alliance, International Business Machines (NYSE:IBM) announced two cloud deals of its own this week. A seven-year, $325 million pact with Juniper Networks (NYSE:JNPR) will see IBM integrating cloud solutions with Juniper's existing IT infrastructure, and an eight-year, $525 million agreement with Vodafone (NASDAQ:VOD) will give the telecom's business customers access to all of IBM's cloud offerings.

The watchword for both deals is "multicloud." Around 85% of companies are using more than one cloud environment, according to IBM's Institute for Business Value. That complexity is an opportunity for IBM.

A hybrid cloud environment

Juniper, a networking and cybersecurity company, will tap IBM Services to manage its existing infrastructure, applications, and IT services. The goal of the deal is to reduce costs and "enhance their journey to the cloud."

IBM will make use of the IBM Services Platform with Watson to help manage Juniper's data centers, help desks, and data and voice networks. "A key element of our digital transformation is to manage the complexities of our global operation and to get the most out of our current investments. In working with IBM Services, we will be able to collaborate with them on innovative solutions for our cloud-first business model," said Bob Worrall, Juniper's chief information officer.

While IBM is not a leader when it comes to public cloud computing, the company is a big player in the market for hybrid cloud, where on-premise infrastructure and cloud computing resources work in tandem. IBM's focus on hybrid cloud makes sense, given that the large companies and organizations that make up its customer base are very unlikely to go all-in on public cloud computing.

Managing a hybrid cloud environment can be complicated, especially if multiple public clouds are involved. That's where IBM comes in. "Working with Juniper, we are integrating cloud solutions with their existing IT investments via the IBM Service Platform with Watson. This gives them the opportunity to generate more value from existing infrastructure, along with helping them manage strategic services that are critical to their business," said Martin Jetter, senior vice president of IBM Global Technology Services.

A new venture

IBM's deal with Vodafone, a British telecommunications company, is deeper than the Juniper deal. IBM and Vodafone have entered into a new strategic commercial agreement, building on a relationship that's spanned more than 20 years.

IBM will provide managed services to Vodafone Business' cloud and hosting unit, with customers gaining access to IBM's entire catalog of cloud offerings. The venture, expected to be up and running in the first half of 2019, will also co-develop new digital solutions involving technologies like Internet of Things (IoT), 5G, and edge computing.

IBM gave one example in its press release announcing the deal of how the collaboration between the two companies could drive innovation: "For example, in the past, innovating on an oil rig would have been a challenge due to lack of connectivity and disparate IT systems. Today, thanks to edge computing and IoT technologies from Vodafone working with the latest AI and augmented reality applications from IBM, engineers will be able to pinpoint and resolve faults on equipment in minutes rather than hours, potentially saving millions in lost productivity."

Vodafone CEO Nick Read sees major benefits in combining the companies' areas of expertise: "This strategic venture with IBM allows us to focus on our strengths in fixed and mobile technologies, while leveraging IBM's expertise in multicloud, AI and services. Through this new venture we'll accelerate our growth and deepen engagement with our customers while driving radical simplification and efficiency in our business."

Two of IBM's competitive advantages are its decadeslong customer relationships and the breadth of its technology portfolio. There aren't many other tech companies that could sign a deal like this with Vodafone.

IBM is set to report its fourth-quarter results after the market closes on Jan. 22. These deals won't help the company's numbers, and revenue will in all likelihood decline as the mainframe cycle ages. But IBM may be able to return to growth in 2019, driven by deals like these.

This article originally appeared in the Motley Fool.

Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. Timothy Green owns shares of IBM. The Motley Fool owns shares of MSFT. The Motley Fool has a disclosure policy.