05/17/2013 04:35 pm ET Updated Jul 17, 2013

IBM Rises Through the Vertical Cloud: Dual Interviews with the CIO Office

In the same week, IBM put out two press releases on cloud analytics. Who would have thought that possible a few years ago? Did the big, rigid, and smart IBM of mainframe, Deep Blue, and Watson fame really migrate to the cloud?

Yes. They did it not just once, but twice.

First, internally with a secret and successful project called 'Blue Insight,' which IBM launched five years ago with great foresight from the CIO's office to cull waste, duplication, and inefficiencies, while deliver data analytics to all of IBM's business units and hundreds of thousands global employees. Then externally, IBM tailored its cloud solution offerings for industry-specific customers, with announcements this week on L'Oreal USA and the healthcare system of Saudi Arabia.

To paraphrase Martin Sheen's character in Apocalypse Now, "If you're going to get of the boat, you gotta go all the way."

And all the way into cloud computing IBM has moved with some surprising dexterity for a multinational corporation. Perhaps such nimbleness was due to IBM having been there before at the threshold of change, from the 1980s mainframe era to the client server decade of the 1990s.

With the chronic pain of shifting with the fast changing technology paradigm, IBM had experienced the biggest annual loss in U.S. corporate history of $5 billion in 1992. By the following spring, its stock price plummeted to $35 a share--today it's a robust $202 (NYSE: IBM). Back then IBM had 300,000 employees worldwide. Over the past two decades, IBM has grown to 434,000 employees.

The biggest business lesson: IBM not only had learned from its own history, but it put its 'money where its mouth' is and bet on cloud analytics.

What has driven the Fortune 20 computer giant to push that deep into cloud computing?
IBM needed to solve its own workflow problems, as well as that of their customers. Imagine two ambitious, separate scopes of work for projects with different business and analytics needs that, yet, must have shared some of the same systems underpinnings and database architecture. What a fortuitous transition.

IBM Insight Across any Business Spectrum
The bridge between IBM's internal and external cloud is the third generation of Software-as-a-Service (SaaS), which is all about integrated solutions that solve vertical-specific tasks and problems. The first two generations of SaaS were aligned horizontally across all industries--first Quickbooks and Salesforce and then in IT, with such cloud service providers as Amazon's AWS.

It's the next evolution with the vertical SaaS that will transform businesses large and small. It will do it in concert with two powerful technologies of mobile and big data. Call that the karma of good timing.

For IBM, Blue Insight meant breaking down the siloed walls of dozens of business units where, "They had their own sales database, marketing database, and many other databases, and merged them into one common private database delivered in a shared infrastructure," said Ric Telford, VP of Cloud Services, who I interviewed by telephone.

For a breakdown of what Blue Insight provides its 45,000 daily IBM users, with 70 percent of IBM's entire workforce signed up, in a separate interview, Steven Wright, VP of Enterprise Solutions and Web-Enablement, said, "The foundational services of Blue Insight has brought many IBM services together. Value services, shared services, digital, search content management, and whole digital role capability into one cloud environment. Blue Insight eliminated duplicate services and now is the analytics-backed, missioned-enabling, self-service platform."

"How far along is IBM on completing the task of eliminating duplicate services?" I asked.

"I would say approximately 90 percent," Mr. Wright answered.

He went on to explain: "First, IBM Inventory identified fifty business insight tools, SaaS, mapped what is in the current environment, where they were geographically focused, and consolidated all of them into a single, self-service analytics platform with the capability of managing 500 different projects that span all kinds of user requirements, some predictive analytics, some in the analytic stack, while showcasing IBM technology at the same time."

Mr. Wright emphasized, "Blue Insight manages four different environments. First, the availability service level. Next, the sandbox. Third, the finance community. And fourth, security with access outside the firewall."

Over the course of five years, Blue Insight has saved IBM $25 million--or money that was used to pay for the new cloud infrastructure.

"It has accelerated the speed of value in digital marketing with better analytics, better customer insight, and better customer facing tools. And with better email marketing, we have seen 32 percent first-time customers connecting with IBM. Outbound emails, which targets customers with better insight and campaign effectiveness, has seen a 127 percent increase in campaign responsiveness," said Mr. Wright.

All of that correlates into real ROI for IBM. No wonder they moved into the cloud with its own employees, business units, and divisions.

Evolution of SaaS in the Cloud
According to IBM some key attributes of Blue Insight: "Human resources uses Blue Insight to evaluate skills capabilities in IBM's services business against emerging needs of customers. We have better headlights on what we'll need and can fill in skills shortages much further in advance than in the past."

The next point: "Finance uses Blue Insight to make revenue projections and evaluate risk in a given country. So if we see a country trending negative in currency, liquidity, etc., we can take steps to reduce our exposure in the country and contain risk. In all of these projects, tasks that formerly took weeks or longer to accomplish can now be done in hours or less."

As Ric Telford sees it, "IBM is focused not just in the cost savings of the cloud, but capital equipment, which the last few years cloud helped differentiate business while add business value in a new, rapid way, with higher level services."

On May 15, IBM announced, "L'Oreal USA gains purchasing power with IBM services and cloud analytics."

The release went on to read: "The major three-year agreement with L'Oreal USA is for expert procurement services using an advanced cloud analytics solution that will transform the way L'Oréal USA buys from its network of North American suppliers. The new services will enable the company to bring beauty products to consumers more quickly and efficiently."

Ric Telford added, "For the L'Oreal USA procurement SaaS, IBM cloud analytics focused on business process outsourcing, insight into their procurement process, how well they are sticking to their guidelines. Then the analytics component provided real-time incidence for real-time operations and greater efficiency. Cloud helps it by getting it up and running in a combination of cloud, analytics, and industry-specific SaaS solutions.

IBM's Disease Management Cloud in Saudi Arabia
In another announcement, "Healthcare gets visualized through IBM healthcare cloud in disease management," Mr. Telford said. "IBM setup the healthcare cloud across Saudi Arabia's private cloud that makes a service, shares the data, with end points of network connectivity. Vast improvements of efficiency and reduced errors with 1,200 employees up and running, recording the immunization of 180,000 people in the kingdom in the last seven months."

Like Blue Insight, all of the healthcare data is stored in one master data set and run by the Saudi Arabia Ministry of Health.

"For Blue Insight, IBM's business value focuses on three concepts," Mr. Telford said. "Horizontal SaaS is a key building block that crosses all business units and social spaces. Then, we have commerce analytics for media and government verticals with very specific solutions. And finally, IBM's business process outsourcing (BPO) services, such as mortgage origination and expense reporting. BPO is the intersection of BPaaS--or Business Process-as-a-Service--with IBM running processes around your business."

One of IBM's key 2012 acquisitions was Kenexa, which provides staffing in the BPO space, with standardized assets at the core surrounded by people SaaS applications for hiring.

Why has IBM's own internal transition with Blue Insight gone so well? As Steven Wright recalls, "Blue Insight was a key point with senior executive sponsorship from each business unit. They needed to provide a foundation with strong senior support."

More legacy computer companies can learn from IBM: A whale in the right environment can be quite adept and nimble, and not only change with the times but lead.