IBM to sink another $1.2 billion in the cloud

IBM announced plans to spend another $1.2 billion to expanding its global cloud computing business.  Some of the money will go toward opening several new cloud data centers in 13 countries.

These new are new points-of-presence that customers are requesting as public cloud computing becomes more important. This year, IBM intends to open 15 new centers in Washington, Hong Kong, London, Toronto, Dallas, and a few cities in Japan, India, China and Mexico, among others.

The newest commitment of cash is designed to help the company reach its goal of $7 billion in annual cloud revenue by 2015.  This includes the $2 billion dollar acquisition of Softlayer last year.

While IBM is on a spending spree that will undoubtedly result in an acquisition spree as well, the profit outlook for IBM is not good.  Indeed, for every dollar they sell in public cloud services, they are likely losing a dollar fifty in profit.

The shift in consumption patterns from traditional to public cloud flies in the face of IBM’s traditional business.  However, at this point, IBM has little choice but to invest heavily in the cloud, even if it means cannibalizing their traditional business.