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BLOG: If IBM cloud-washed its earnings results, it's likely not alone

David Linthicum | Aug. 26, 2013
SEC is investigating claims that IBM misled investors with use of 'cloud' term, but its fuzzy nature, well, clouds the issue

I hate cloud-washing, the practice of repositioning traditional technology so that it's sold as cloud computing technology. In many cases, this is done by large companies that initially pushed back hard against cloud computing, to the point that they would not allow me to mention the "C word" when speaking at their conferences years back.

These days, they've changed their minds. Now that cloud computing is all that and a bag of chips, cloud-washing your technology can increase the value of the company, not to mention your overall cool factor. Today, it's difficult to find a technology company without some sort of cloud focus.

IBM was recently called on the carpet by the SEC for, in essence, cloud-washing in its 10-Q report, an investor document the feds scrutinize to make sure nothing misleading or false is said. The SEC has raised a question around accounting for what's cloud computing and what's not. Did IBM succumb to the temptation to spin some of its technology into the cloud category when perhaps it's not truly cloud?

It's getting trickier for IBM. As reported by Doug Henschen at InformationWeek, "IBM's cloud computing revenues are smaller and less 'cloud-intensive' than customers and Wall Street analysts might think. That's the claim of a former IBM employee who backed up more than a few critical assessments of the vendor's cloud prowess with a number of confidential internal documents shared with InformationWeek."

The documents provided state IBM's 2012 "cloud-related" revenue is $2.26 billion, which IBM does not confirm. Moreover, in 2011, IBM stated it will hit $7 billion in annual cloud revenue by 2015. The much lower figure of $2.26 billion in 2012 raises doubts about whether the company can leap $4.74 billion in three years. "IBM also said in 2011 that only $3 billion of that total would come from net-new business, suggesting that $4 billion would be tied to cloud-based ways of delivering its current hardware, software, and services," InformationWeek reported.

I'm not sure I feel sorry for IBM, but it is not alone. If you look into the accounting and reporting methods for most larger enterprise technology providers, I suspect their claims of what constitutes cloud computing would leave you scratching your head.

But are they doing anything wrong? Cloud computing as a concept is so widely defined and abused that it's not surprising the term is often misapplied. Perhaps legal action wll create new clarity around the term, and IBM could become the poster child for how to account for cloud computing revenue.


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