IBM looks to become a cloud-first company
IBM looks to become a cloud-first company

IBM Goes All-In on the Cloud

3037 0

With its $19.5-billion enterprise cloud being pretty much the only growth driver across its massive products and services landscape, IBM is restructuring its strategy and operations to become a cloud-first company in preparation for the final approval of its acquisition of Red Hat later this year.

IBM has been quite vocal about its huge cloud business for the past 8-10 quarters. And the company made the cloud-first positioning quite explicit earlier this week in its Q1 earnings call.

As I’ll show in a moment via some comments from CFO Jim Kavanaugh, IBM has:

  • melded its AI (in IBM language, “Cognitive”) operations with its Cloud unit;
  • refocused its huge Global Business Services unit around its cloud offerings;
  • intensified the cloud’s positioning within its Global Technology Services unit, where cloud now makes up 35% of its backlog; and
  • reshaped its overall integrated offerings around helping customers with their “digital re-inventions.”
IBM Goes Cloud-First: In Context

This is a much-needed new approach for IBM. The company for a while has tried to juggle its traditional positioning with the unmistakably rising importance of its cloud business, which by revenue makes IBM the third-largest cloud vendor in the world.

So IBM is now making clear to the world that it’s a cloud-first company. All of its wide-ranging business units will focus on helping customers aggressively weave cloud technologies and services into their existing digital estates.

From IBM’s April 16 earnings call, here are some compelling comments from CFO Kavanaugh that underscore in IBM’s own words its new and essential commitment to the cloud:

  • Global Business Services: “We had another quarter of strong growth in consulting as we help clients with their digital re-invention.”
  • Software group: “Growth was driven by our hybrid cloud offerings” as well as security and solutions.
  • Global Technology Services: “We’re continuing to help our clients to implement and manage hybrid multi-cloud environments. This is evidenced in the increasing share of our backlog that is now cloud.” Kavanaugh later said cloud now makes up 35% of the GTS backlog.
IBM’s “Next Cloud Chapter”

Kavanaugh spoke to the company’s new focus on helping customers shift “mission-critical work to the cloud and optimizing everything from supply chain to core banking systems.”

  • End-to-end cloud: “So we have been reshaping our business to address this opportunity by investing heavily to build capabilities across our business including IBM Cloud, IBM Cloud Private, IBM Cloud Private for Data, the IBM Multi-Cloud Manager.” IBM is also investing in cloud-migration services, cloud-optimized hardware in the Systems unit, and “cloud garages” to engage more closely with entrepreneurs and developers.
  • A “framework” to help customers move to the cloud: “It is designed to help our clients across the four key stages of their cloud-transformation journey: advise, move, build and manage. These offerings span our Cloud and Cognitive, Software, Global Business Services and Global Technology Services, leveraging the integrated value of IBM.”
  • The great expectations for Red Hat: “Together, we will be ideally positioned to help our clients shift their business applications to hybrid cloud while also addressing portability, management consistency, cybersecurity, and remaining open to avoid vendor lock-in. This will not only enhance the growth of the Red Hat business after the deal closes but for all of IBM as well.”
IBM Cloud: Looking Ahead

All of these moves make great sense and will perhaps trigger higher rates of growth for IBM’s cloud business. As noted earlier this week in IBM’s Huge Cloud Business Falls Behind Competitors in Growth Rate, I feel IBM must find ways to accelerate its growth. Otherwise, it will be unable to maintain its share in the face of much-higher growth rates in the cloud from Microsoft, Amazon, Accenture, and a greatly rejuvenated Google Cloud.

I certainly applaud this move by IBM. But I also hope the company regards it as only the beginning of a new initiative rather than as the completion of something big.


Disclosure: at the time of this writing, IBM was a client of Evans Strategic Communications LLC.


Subscribe to the Cloud Wars Newsletter for in-depth analysis of the major cloud vendors from the perspective of business customers. It’s free, it’s exclusive, and it’s great!