Kyndryl: 10 Things to Know About IBM MSP Spin-Out Completion
Kyndryl has spun out from IBM as an independent managed infrastructure services provider (MSP) business, IBM confirmed on November 3. Here’s everything you need to know about the Kyndryl MSP business.
Martin Schroeter, CEO, Kyndryl
Starting on November 4, Kyndryl will trade on the New York Stock Exchange under the symbol KD. In a prepared statement, IBM CEO Arvind Krishna said:
“The separation of Kyndryl is one of many actions we are taking to sharpen our focus on hybrid cloud and AI, leverage a portfolio clearly focused on technology and consulting, and achieve our growth objectives. We look forward to our partnership with Kyndryl as it moves forward as an independent company.”
Updated November 4, 8:00 a.m. ET: Here’s a statement from Kyndryl CEO Martin Schroeter:
“We are thrilled that Kyndryl is today an independent company — with 90,000 of the best and brightest professionals, a strong balance sheet and a path to growth. There is a large and growing need for digital transformation services, and our unrivaled global expertise in creating, managing and modernizing mission-critical information systems positions us well in a market that will expand to more than $500 billion by 2024. We look forward to the path ahead, with a flatter and faster company that is at the heart of progress for our customers and for the world.”
Here are additional details about the spin-out.
1. Managed IT Services Portfolio: Kyndryl has six global managed services practices that span:
- Cloud
- Applications, Data & AI
- Security & Resiliency
- Core Enterprise & zCloud
- Network & Edge
- Digital Workplace
2. Advisory and Implementation Services Practice: This includes a “group of senior business and technology executives who can advise Kyndryl customers on best-in-class digital environments and the adoption and integration of advanced technologies.”
3. Customer Base: Kyndryl has relationships with 4,600 customers and a backlog of more than $60 billion.
4. Headcount: The MSP has roughly 90,000 employees.
5. Executive Leaders: Key executive team members include:
- Martin Schroeter, CEO
- Harsh Chugh, Chief Operations Officer
- Nelly Akoth, Chief Transformation Officer
- Michael Bradshaw, Chief Information Officer
- Maryjo Charbonnier, Chief Human Resources Officer
- Elly Keinan, Group President
- Vineet Khurana, Controller
- Una Pulizzi, Global Head of Corporate Affairs
- Rick Ruiz, Strategic Markets President
- Edward Sebold, General Counsel
- Antoine Shagoury, Chief Technology Officer
- Maria Bartolome Winans, Chief Marketing Officer
6. Global Leaders: Kyndryl has a global leadership model for key markets representing more than three-fourths of the MSP’s revenue. The key leaders, announced July 1, 2021, include:
- Tosca Colangeli, President of Kyndryl United Kingdom and Ireland
- Xerxes Cooper, President of Kyndryl Canada
- Paolo Degl‘Innocenti, President of Kyndryl Italy
- Luis Roca Fernandez, President of Kyndryl Spain and Portugal
- Markus Koerner, President of Kyndryl Germany
- Matt Milton, President of Kyndryl United States
- Kerry Purcell, President of Kyndryl Australia and New Zealand
- Philippe Roncati, President of Kyndryl France
- Lingraju Sawkar, President of Kyndryl India
- Takashi Uesaka, President of Kyndryl Japan
- Also, Rick Ruiz will become Kyndryl’s Strategic Markets President and will lead Kyndryl’s activities in all other countries.
7. IBM and Kyndryl Competitive Overlap: The two companies will surely cooperate — but they could also wind up competing on some fronts. For instance, IBM since June 2020 has acquired the following companies:
- May 2021: Catalogic for data protection technologies.
- May 2021: Waeg for Salesforce cloud consulting expertise.
- April 2021: Turbononic for hybrid cloud automation.
- April 2021: myInvenio for business automation.
- January 2021: Taos, a Top 250 Public Cloud MSP as ranked by ChannelE2E.
- January 2021: 7Summits for Salesforce cloud consulting expertise.
- December 2020: Nordcloud for cloud consulting, migration and transformation capabilities.
- November 2020: SAP software developer & IT services partner TruQua Enterprise.
- November 2020: Application performance monitoring (APM) software company Instana.
- June 2020: WDG for robotic process automation (RPA) software expertise.
- June 2020: Spanugo for cloud cybersecurity posture management solutions.
It’s retained those acquisitions amid the Kyndryl spin-out, ChannelE2E believes. But Kyndryl may also need some of its own hybrid cloud consulting expertise in order to manage customers’ modernized hybrid cloud infrastructures, ChannelE2E believes.
Also, both IBM and Kyndryl offer cybersecurity services. IBM has a Top 250 MSSP business unit, as tracked by MSSP Alert. And Kyndryl will need to offer security baked into its MSP services for customer infrastructure, ChannelE2E notes.
8. Kyndryl Stock Market Valuation: To be determined.
9. Kyndryl Stock Ticker: KD, once the spin-off occurs.
10. Kyndryl Quarterly Revenues and Net Loss:
- Kyndryl Revenues: Kyndryl generated $4.751 billion in revenue for the three months ended June 30, 2021, compared to $4.737 billion for the corresponding quarterly in 2020.
- Kyndryl Net Loss: Kyndryl’s net loss was $393 million for the three months ended June 30, 2021, compared to a net loss of $373 million in the corresponding quarter the previous year.
11. Bonus – Kyndryl Annual Revenues and Net Loss:
- Kyndryl Annual Revenues: Kyndryl generated annual revenue of $19.352 billion in 2020, down from $20.279 billion in 2019 and $21.796 billion in 2018.
- Kyndryl Annual Net Loss: Kyndryl had a net loss of $2.011 billion in 2020, $943 million in 2019 and $980 million in 2018.
12. Bonus – Key Kyndryl Competitors: The list of potential Kyndryl competitors and alternatives, according to ChannelE2E, includes Accenture, Atos, Capgemini, Cognizant, Deloitte, DXC Technology, Ernst & Young (EY), Infosys, HCL, KPMG, NTT, PwC, Tata Consultancy Services, and Wipro, among others.
13. Bonus – Board of Directors: Kyndryl announced these board members on September 28, 2021:
- Martin Schroeter expands from CEO to Kyndryl board chairman.
- Stephen Hester, lead independent director and former CEO of RSA Insurance Group.
- Dominic J. Caruso, former CEO, Johnson & Johnson.
- John Harris, former VP of business development, Raytheon.
- Shirley Ann Jackson, president, Rensselaer Polytechnic Institute.
- Janina Kugel, former chief human resources officer, Siemens AG.
- Denis Machuel, CEO.
- Rahul Merchant, senior executive VP of client service and technology, Teachers Insurance and Annuity Association of America-College Retirement Equities Fund (TIAA).
- Jana Schreuder, former executive VP and chief operating officer, Northern Trust Corporation.
- Howard Ungerleider, president and CFO, Dow.
Blog originally published July 1, 2021. Updated regularly thereafter with new Kyndryl business information.
will Kyndryl employees lose their IBM seniority and benefits?
Hi James: I don’t know the answer to your inquiry, but will ask Kyndryl representatives that question. If/when I receive a reply we’ll post perspectives in our Kyndryl-related coverage.
-jp
Hey Joe, I bought ibm after it announce the red hat purchase and reinvested my dividends. My gut tells me to sell the spin off company and reinvest in ibm. What are your thoughts on how to handle the split?
Daniel: I certainly don’t offer buy, sell or hold recommendations on stock. But in terms of IBM and Kyndryl, I’ll offer these basic business observations.
1. IBM: Red Hat offers a solid platform-as-a-service (PaaS) strategy across multi-cloud and on-premises systems. But IBM has largely missed the more lucrative IaaS opportunity (vs AWS and Azure) and SaaS opportunity (vs. Microsoft 365, Salesforce, Workday & the list goes on). Also, Watson never quite lived up to its AI hype, and the Watson AI software was late to the multi-cloud as-a-service model.
Under CEO Arvind Krishna, IBM has acquired multiple businesses to strengthen IBM’s multi-cloud, AI and automation software strategies. But most of the acquisitions involved small IT consulting companies that support cloud migrations & cloud development — rather than true as-a-service software companies.
Meanwhile, global IT consulting firms such as Accenture have been far more aggressive buying digital, cloud, cybersecurity and IT consulting companies. Bottom line: IBM’s overall business is in better shape today vs. the PC and client-server crisis that the company faced in the early 1990s. But beyond the expensive Red Hat acquisition, IBM’s latest acquisitions are relatively small deals in highly competitive IT consulting markets…
2. Kyndryl: The managed IT infrastructure business, ahead of the spin-off from IBM, has been shrinking while the overall MSP market has been growing at least 8 percent per year. Moreover, IBM itself has been acquiring IT consulting companies that may ultimately compete vs. Kyndryl. I will be curious to see if/how Kyndryl management drives top-line revenue growth and bottom-line profitability after the spin-out is completed.
Best,
-jp
Why did IBM spin off to Kyndryl knowing the company has lost annual revenue 2 years in a row?
Joseph: Your comment answers the very question that you asked. IBM spun off Kyndryl because it’s a shrinking business, and IBM wants to focus purely on its growing businesses.
The more important question: Why is Kyndryl shrinking amid growing demand for managed services?
-jp
Kyndril’s gross profit margin at 11 percent is abysmal for a tech company. I am suspecting that if they’re to make a success of the spin off, they will have to make difficult decisions around streamlining their 90k strong workforce amongst other big changes that will be required to provide them competitive edge.
Given Kyndryl’s low valuation – appears to be at a discount to book value, and several times lower than gross revenue, could it be a takeover target of another company. The spinoff stock dropped like a rock.
Andrew: I have not heard any rumors about a potential Kyndryl buyout or company sale.
Two quick facts to offer context:
Some of my personal opinions:
But again, I have not heard any rumors about Kyndryl possibly being acquired. And there may be smarter paths forward than the hypothetical stuff I’ve shared above.
-jp