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IBM Invests in New Datacenter

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International Business Machine (IBM - Free Report) continues to expand in the cloud and recently announced an investment of $17 million for a new data center in Bogota, Colombia.

The new state-of-the-art facility will provide Colombian companies with advanced Cloud Computing and Big Data services, thus providing them a competitive edge. In fact, IBM had earlier invested $8 million in a Colombian data center in 2011.

Per Colombian Superintendency’s report, 80% of the top 100 Colombian companies are IBM customers. The company’s client base in this region includes companies from the banking, healthcare, food, insurance and oil & gas industries, which need good cloud computing infrastructure to improve efficiency.

Vision Growth Consulting, a consulting firm in Colombia, forecasts data center outsourcing to increase 15.3% in 2013. We believe IBM is set to capitalize on this opportunity.

Moreover, IBM is striving to make its presence felt in Latin America. In April 2013, the company launched a new data center in Chile, designed for infrastructure services and solutions, which include big data analytics and cloud computing.

Moreover, the investments made by IBM in Latin America, since 2009, indicate its commitment to strengthen its position in the data center business in the region. Starting 2009, IBM has invested billions of dollars in Latin America, which include the opening of nine service centers located in Brazil, Mexico, Costa Rica, Argentina, Chile, Colombia, Peru and Uruguay. The company has a target of opening 400 data centers in the region.

According to IDC, worldwide spending on public IT cloud services is expected to reach $100 billion in 2016 growing at a compound annual growth rate (CAGR) of 26.4% during 2012-2016. This is approximately five times the overall growth rate of the IT industry, as organizations are increasingly taking to the cloud services model for IT consumption.

We believe that this is a win-win situation for IBM and local Colombian companies. IBM will continue to benefit from its new initiatives like cloud computing, smarter planet, business analytics and optimization over the long term.

However, stiff competition from a number of companies, including Hewlett Packard Co. (HPQ - Free Report) , Microsoft Corp. (MSFT - Free Report) , and Oracle Corp. (ORCL - Free Report) and sluggish IT spending remain major concerns going forward. 

IBM has a Zacks Rank #3 (Hold).

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