Speaking at this year’s IBM Interconnect conference, Robert Le Blanc, IBM’s new SVP of Cloud gave a very direct and honest perspective on the enterprise tech landscape.
“Everything is changing and if you don’t believe you’re interested in changing then you’d better take a look at what your competitors are doing,” he said to a more than 20,000 strong crowd at the MGM Grand in Las Vegas.
“There are going to be disrupters and the disrupted and you’ve got to be able to understand where you fit.”
Based on recent performance, Le Blanc could easily have been mistaken for talking about his own company, which has been floundering in a digital world that has left many part of its business behind.
In Q4 2014, IBM witnessed its 11th straight quarter without a revenue increase, while revenue for the year declined six per cent to $92.8 billion. The firm’s stock has also suffered, down 20 per cent over the last two years while the S&P 500 has risen 39 per cent.
This performance has seen big blue attempt to reshuffle its units, selling off low performing businesses and laying off thousands of workers in the process.
IBM’s global workforce declined 12 per cent, or 51,600, last year to 379,592, mainly through corporate divestitures, including the sale of its x86 server business to Lenovo for $2.1 billion and paying GlobalFoundries $1.5 billion to take its microelectronics unit off its hands.
Having been forced to abandon a pledge by her predecessor to deliver $20 earnings per share by the end of 2015, and with IBM not expected to post an overall revenue increase this year, the pressure is now on CEO Ginni Rometty to show that she is turning around the company’s fortunes.
However, her vision of an IBM with increasing emphasis on the ‘nexus of forces’ (cloud, mobile, social and analytics) hasn’t gotten off to an ideal start in some areas, according to one analyst.
“IBM has spent way too much time cloud-washing and trying to claim that it was doing cloud-like things that they fell behind on actually delivering any cloud legitimacy or leadership,” says Daryl Plummer, managing VP, fellow and chief of research for cloud computing at Gartner.
￼Plummer says the firm showed little traction in the cloud space until the acquisition of Dallas based cloud computing infrastructure (Iaas) company SoftLayer in July 2013.
That year, competitor Amazon Web Services generated $3 billion in revenue, according to some estimates. Although IBM representatives dispute that the e-commerce giant has enjoyed a head start in the cloud space.
“I think it’s certainly fair to say that Amazon coined the term earlier, that is very accurate, and they’ve spent quite a bit of their efforts in public cloud on premise cloud and trying to attract a particular type of developer community for a certain set of use cases,” says Angel Diaz, IBM’s VP of Cloud Architecture and Technology.
“IBM, if you follow the history of cloud technology, has been doing this for years. It’s just the realisation of the market itself and the kind of coining the term that Amazon did earlier.”
Focusing on the cloud
Last year, IBM continued its cloud momentum, announcing an investment of $1.2 billion to expand its cloud footprint to 40 data centres worldwide.
This was followed by the February announcement of a $1 billion investment in new SoftLayer capabilities including developer platform-as-a-service BlueMix.
Following these moves, the firm’s cloud business grew 60 per cent last year, reaching $7 billion, although still only making up under eight per cent of total revenue.
IBM has since built its offering with a focus on open standards, partnering with OpenStack, Cloud Foundry, Node. js and Docker in an attempt to guarantee interoperability.
Particular attention has been given to hybrid cloud, and providing a bridge between enterprises’ on premise infrastructure and the cloud.
This included the announcement of local versions of OpenStack and CloudFoundry at InterConnect as well as an enterprise- grade version of Docker containers, used to ship distributed applications.
“The arrival of BlueMix and IBM’s commitment to Openstack has certainly brought them into the game but they are not yet leaders in cloud. They claim leadership in Hybrid cloud and IaaS but I cannot verify those claims in the slightest,” says Plummer.
Although he does suggest the company is heading in the right direction, describing BlueMix as a “major opportunity” for IBM to gain market leadership and secure a driving position in cloud “should they do it right”.
“That plus their focus on hybrid cloud, portability, and enhancing the BlueMix proposition are things through which they could gain great traction.”
Among the other ways in which IBM is looking to turn around its fortunes are through a number of interesting partnership deals.
In February, IBM teamed up with Juniper Networks to design and deliver high performance network analytics for communications service providers and enterprises.
It also extended its BlueMix PaaS offering to Computer Science Corporation’s and Tech Mahindra’s developer ecosystems. The latter deal is seeing 5,000 of Mahindra’s developers trained to build apps on a dedicated version of BlueMix.
“What makes the event more amazing than just that fact is that they are our competitors,” says Diaz.
Naturally the partnership that has attracted the most attention, however, is the one IBM signed in July 2014 with consumer tech behemoth Apple to bring a new class of business apps to iOS devices.
Since the announcement, a number of these applications have been launched, focusing on specific sectors, with about 50 foundation clients for the service so far, according to Richard Esposito, GM Mobility Services for IBM’s Global Technology Services division.
“We’ve seen an incredible positive reception to this partnership with the advantages of both organisations. IBM with the enterprise and Apple with the consumerisation,” he says.
“The overall goal by the end of the year is to have about 100 applications based on iOS, and they are focussed across a number of different industries.”
It is hoped that this partnership, and the launch of new modular mobile solutions through the MobileFirst platform, will make IBM a force to be reckoned with in the mobility space, just as it looks to in other key areas of the nexus of forces.
At IBM’s Investor’s Day meeting in February, CEO Ginni Rometty laid out a new strategic goal for the company, involving the shift of $4 billion, not including acquisitions, to spend in cloud, big data, enterprise mobile/social and cloud security.
In return, she promised to grow the businesses from $25 billion last year, or 27 per cent of revenue, to $40 billion in combined annual revenue by 2018, or 40 per cent of total revenue.
“I believe they will achieve it primarily through mixing in so many things under the cloud banner that it will be difficult to tell what is cloud and what is not,” says Plummer.
However, he believes the company needs to understand that just selling more capabilities as cloud ready will not “necessarily change anything”.
“They have to become the market driving leaders like your Amazons and Salesforces are. That requires a big shift in the perception of who IBM is and in their ability to sell cloud.”
More broadly, the Gartner VP sees only one key strategy to turn around big blue’s overall fortunes.
“They need to leapfrog competition and redefine themselves as true leaders in something in the digital world. Cloud is as likely a target as any but it cannot be the only one.”