IBM Turnaround Strategy: Revenues Grow Slightly
IBM delivered stronger-than-expected revenue and profit figures for Q1 2021 as CEO Arvind Krishna strives to reinvent the technology giant for hybrid-cloud and multi-cloud business opportunities.
Among the Q1 2021 highlights:
- Revenue was $17.7 billion, up 1 percent from $17.6 billion in Q1 of 2020.
- Total cloud revenue was $6.5 billion, up 21 percent.
- Red Hat revenue rose 17 percent.
- Cloud & Cognitive Software up 4 percent.
- Net income was $955 million, down from $1.175 billion in Q1 of 2020 — though the Q1 2021 net income figure exceeded Wall Street’s expectations.
IBM’s quarterly revenues had been sliding in recent years. Under former CEO Ginni Rometty, the IBM Cloud was a laggard vs. fast-growth rivals like Amazon Web Services, Microsoft Azure and Google Cloud Platform (IBM). Critics suggest that IBM, under Rometty’s leadership, perhaps focused too long on share buybacks rather than an aggressive shift to cloud services and recurring revenue.
What is IBM’s Hybrid Cloud Strategy?
IBM accelerated its business pivot around the time that Arvind Krishna succeed Rometty as CEO in April 2020. Instead of competing head-on in the public cloud services market, IBM shifted to a hybrid cloud strategy — acquiring Red Hat just ahead of the CEO transition. Krishna is widely considered the architect of the Red Hat acquisition — which involved a lofty $34 billion price tag.
IBM’s various software components increasingly integrate with IBM Cloud Pak for Business Automation, and run atop Red Hat OpenShift. The OpenShift software allows IBM’s automation packages to run on any public, private cloud or hybrid cloud.
After buying Red Hat, IBM has made multiple tuck-in acquisitions to address cloud, artificial intelligence and IT consulting opportunities. Here is a list of IBM acquisitions under CEO Arvind Krishna.
IBM Spinning Off MSP Business Named Kyndryl
Next up, IBM plans to spin off Kyndryl — a managed infrastructure services business — before the end of 2021. Kyndryl CEO Martin Schroeter will lead the business as an independent company.
Kyndryl, essentially a massive MSP, has relationships with 4,600 customers and a backlog of more than $60 billion. Key services will include hosting and network services, services management, infrastructure modernization, and migrating and managing multi-cloud environments.
Among the wildcards: It’s a safe bet both IBM and Kyndryl will need to offer some overlapping services — particularly managed security services. We’ll be watching to see how both companies navigate the IT services market — cooperating on many fronts while likely competing on a few of them.’