The cold-sweat scenario for IBM is that it does catch up to Amazon and other cloud providers—only to find that competition has driven margins toward zero. In March a price war broke out among Amazon, Google (GOOG), and Microsoft, as each announced cuts of as much as 35 percent on computing; 65 percent on storage; and 85 percent on other services. Rometty has made two promises to investors: to lead corporate IT into the cloud and to deliver lustrously thick margins. Those goals may be irreconcilable, as long as IBM faces competitors willing to make the cloud a place of ever-diminishing returns. In a March 25 blog post that surely sent shivers through Armonk, Google declared that cloud pricing should follow Moore’s law, falling as the cost of hardware inevitably declines.
via IBM’s EPS Target Unhelpful Amid Cloud Computing Challenges – Businessweek. A good article on some of IBM’s challenges in the cloud – particularly given the loss of a valuable CIA contract to Amazon!