IBM's cloud strategy is finally about to pay off

Posted by Ron Miller on Oct 20, 2016 11:05:27 AM

640px-20110425_Amsterdam_65_IBM_building.jpgIBM is the poster child for a company having the roughest of transitions. It has seen its revenue drop an astonishing 18 straight quarters. The good news was that this quarter it didn't drop that much and even beat analyst's expectations (that frankly have to be pretty low at this point).

What's more, they saw growth in the areas that represent the future of the company, which include Watson, the company's artificial intelligence initiative, data, analytics, and the cloud.

These new areas generated a healthy $8 billion in revenue and were up 16 percent from a year ago, according to Bloomberg. Meanwhile, the old Systems group, which includes legacy hardware and operating systems business was plunging down 21 percent (as you would expect).

IBM has been moving toward this for years, using its cash on hand to purchase its way into new markets.

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The cloud initiative began in earnest in June, 2013 when IBM bought SoftLayer for $1.3 billion. That gave the company an infrastructure layer where it could build its software and platform business. Since then, it's been working its way into verticals buying into video, financial services, healthcare and even buying the Weather Company, all with an eye toward providing data and analytics powered by Watson for each of these industries—and delivering it all as cloud services.

It's a long road to the cloud

It's been a long, slow slog for the company as it makes its way through this transition, but the key here is that it saw a cloudy future and its cloud strategy has pointed the company firmly in that direction ever since. It has not wavered, and it could be on the edge of finally paying dividends.


Chart courtesy of Bloomberg

As you can see, the company has seen its revenue decline for five straight years; and 2016 is the first year in some time, that they're starting to see the trend in the right direction. Whether they can continue that or not remains to be seen, but they have been pushing the right buttons and they appear to be finally starting to see the light at the end of the revenue tunnel.

It could be good news for other traditional players like Cisco, HP, and Oracle that such a change is possible, but it's worth noting that it has taken IBM years to get to this point. Others have been too late to the game or seem to have trouble finding a cloud strategy (I'm looking at you HP). 

Changing an entire company's business model, especially a large publicly-traded company is a massive challenge, and there are no guarantees of success, but when you spot the right trends like cloud and AI and you point straight for them like IBM has, at least you have a fighting chance.Intronis MSP Solutions State of the Industry Survey

Photo Credit: Mark Ahsmann on Wikimedia Commons.

Topics: Cloud Trends

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