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    You are at:Home»News & Analysis»IBM»IBM’s New Success Secret: Focus
    IBM focus umbrella revenue
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    IBM’s New Success Secret: Focus

    1
    By Rob Enderle on April 25, 2022 IBM

    IBM just released its financials. After divesting its legacy services unit, it’s showing an impressive 11% year-over-year growth in an increasingly challenged market due to the Russia/Ukraine war and sustained logistics issues related to that war and the pandemic. These growth numbers potentially showcase that IBM’s pivot is working well and, barring even more problematic global problems like a World War, this growth should continue for the foreseeable future.

    Let’s talk a bit about this success and why focus is so critical to a complex technology product company like IBM.

    Why umbrella companies are difficult to manage

    Umbrella companies like IBM are very difficult to manage. Corporate creates a redundant layer of management that, over time, can become isolated and fail to make timely decisions because of that isolation. IBM’s near failure in the 1990s resulted in a realization and correction of this isolation problem. Then, in the 2000s, IBM began to pivot to new efforts like AI and the cloud while beginning to plan for a future pivot to quantum computing.

    Management moved to simplify the company, address endemic issues like the lack of diversity, and bring in an unprecedented amount of new blood to adopt better practices and make better decisions surrounding IBM’s future development and sales efforts.

    While this has often had mixed success, which is not unusual in the course of a massive pivot like this, IBM has emerged stronger and both more able to focus and more focused over time. This is clearly helping the financial results which were very solid this quarter. Top-line results indicate significant growth in every product area save one, Infrastructure, which is likely still facing a significant drag due to the pandemic given firms haven’t fully figured out whether employees are coming back to work or not during the reporting period. When they do, I would expect Infrastructure sales to increase rather than be flat as they were this quarter.

    Cloud revenue really stood out with 17% growth year-over-year. What makes this interesting is IBM’s cloud effort. It’s unique in that IBM doesn’t compete with the major cloud vendors, nor does it avoid selling to them, but it does create solutions that span those providers with multi and hybrid cloud offerings while differentiating its own cloud service on a high security vector.

    This allows IBM to work better with the other cloud providers collaboratively because it doesn’t threaten them. Instead, it helps build higher-performing and more secure offerings that use those services for their lower security projects.

    Another stand out area was consulting where IBM also showed a significant 17% year-over-year growth while other firms are experiencing staffing issues that have created a huge drag on their ability to generate consulting revenues. Signings were up a whopping 40% year-over-year, suggesting next quarter could blow the doors off in revenue if IBM can continue to staff this effort. Red Hat consulting grew by 130 new clients, suggesting that Red Hat will also continue to show impressive growth under IBM.

    It should be noted that under Arvind Krishna’s impressive leadership, IBM has successfully completed 24 acquisitions. IBM’s acquisition process is second only to Dell’s, and Dell’s process was initially based on IBM’s which was market-leading back when Dell started to adopt it. Now IBM appears to be advancing its process, as well, moving it up toward acquisition leadership.

    Wrapping up

    IBM turned in impressive financials thanks to a combination of three strategies: getting rid of many of the distractions and focusing on the future, a new CEO who clearly can generate and execute a vision, and an impressive level of execution by IBM employees. All of this resulted in a stellar quarterly report suggesting that next quarter, if things don’t blow up globally because of an expanding conflict or a pandemic resurgence, will be even more impressive.

    Nice work IBM.

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    Rob Enderle
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    As President and Principal Analyst of the Enderle Group, Rob provides regional and global companies with guidance in how to create credible dialogue with the market, target customer needs, create new business opportunities, anticipate technology changes, select vendors and products, and practice zero dollar marketing. For over 20 years Rob has worked for and with companies like Microsoft, HP, IBM, Dell, Toshiba, Gateway, Sony, USAA, Texas Instruments, AMD, Intel, Credit Suisse First Boston, ROLM, and Siemens.

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