Filing reveals IBM knows its current cloud is weak, intends to match AWS on price next year
IBM has played the sue-card at Jeff Smith, its former chief information officer, because he’s trying to go to work for Amazon Web Services.
Big Blue filed a complaint in a US district court in New York last week that says Smith “threatens to violate his one-year non-competition agreement by going into direct competition with IBM as a senior executive of Amazon Web Services, one of IBM’s main competitors in cloud computing.”
The complaint also alleges Smith has already revealed some information to AWS CEO Andrew Jassy, violated directives not to retain presentations about IBM’s new cloud, and then wiped his company-issued phone and tablet before leaving the IT giant, “making it impossible for IBM to detect other communications with Jassy or determine if he transferred any other IBM information.”
The complaint says Smith is one of “only a dozen” executives involved in top-level decision-making about IBM’s next-generation cloud platform, has insider knowledge of IBMs security posture and was involved at the very highest level of internal discussions on IBM’s transformation plan. If AWS can pick Smith’s brains on any of those matters, IBM worries the cloud colossus will get an unfair advantage.
The filing says Smith’s knowledge of its future cloud is critical, because those plans will “help IBM evolve beyond its current status as a hosting-scale provider, making it more viable for IBM to match the cost economics of the market leaders.” The filing adds that AWS is considered the market leader on cost and that IBM needs to be match it.
That document’s assertion that IBM’s current cloud can’t go toe-to-toe with others accords with analyst firm Gartner’s recent assessment that it is “SMB-centric, hosting-oriented and missing many cloud IaaS capabilities required by midmarket and enterprise customers.”
That may soon change, as the filing says IBM’s new cloud is “set to be launched in the coming year”. Yet Gartner also warned its customers that history suggests Big Blue will struggle to deliver its next-gen cloud on time.
Perhaps that’s why Smith was willing to go from being CIO of world-girdling IBM, a gig that’s a big step up from his previous jobs in Australia. to being a mere vice-president of AWS. New York attorney general Eric T. Schneiderman last year criticised non-compete agreements, saying that “Unless an individual has highly unique skills or access to trade secrets, non-compete clauses have no place in a worker’s employment contract.”
IBM alleges Smith has plenty of access to trade secrets, so it will be fascinating to see how the State’s courts interpret the agreement.