After wisely abandoning plans to compete in the hyperscaler business, the new IBM under Arvind Krishna has built billion-dollar cloud partnerships with Microsoft and Amazon, and expects to match that threshold with a few other Cloud Wars Top 10 companies as well.
“So do we compete with Microsoft or do we partner with Microsoft? How about if I tell you that our book of business with them is now over $1 billion on the backlog and then if I look at Amazon, our book of business with them is even bigger than that,” Krishna said at a recent investors conference.
Those very large numbers and their vibrant growth potential reveal an IBM that’s profoundly different than it was just over 2.5 years ago when Krishna took over as CEO from Ginni Rometty, who presided over an extended period of decline at the iconic company.
Krishna’s comments underscore a major strategy shift for IBM, which in the past would have felt it necessary to compete at every layer of the tech stack. Now, the company realizes the superior value it can generate for customers from its enterprise knowledge, consulting expertise, cutting-edge data, and AI services.
Krishna said that following the spinout of IBM’s managed-services infrastructure business — now an independent company called Kyndryl — the company had to pivot aggressively to meet a new type of demand from customers.
“Our clients want to interact with us very differently than in the past,” Krishna said at the recent Royal Bank of Canada investors conference in a Q&A session with RBC CEO Dave McKay.
“The days of doing only a financial sale — walking and talking about pricing and long-term contracts — are over. Everybody wants to get value, and it all comes down to how they get to that value as quickly as possible.
“So our clients want to interact with us by saying, ‘Come show me in my own environment. Don’t tell me — show me that this works,” Krishna said
“So we’ve got to pivot the whole front of the house into being much more co-creators with our clients, demonstrating the value.
“And as consumption increases, then we get a return that goes along with that,” Krishna said.
That pivot involved a total transformation in how IBM thinks about:
- What is its primary business?
- What types of value is it uniquely qualified to deliver to customers?
- Where does it compete and where does it partner?
- How can it use the cloud to fully leverage its vast expertise in every type of enterprise technology without having to compete in the hyperscaler world?
By uniting two separate businesses into IBM Consulting, which offers in-depth technical expertise, industry knowledge, and business consulting, Krishna believes the company is now aligned with the most pressing needs of its clients.
“In this new world, it’s clear that we’ve got to work a lot better with partners,” he told McKay as he related the new perspective on being a better partner to Microsoft.
Referring to the large consulting practices IBM has built for not only Microsoft and Amazon’s AWS but also SAP, Salesforce, Adobe, ServiceNow, and Oracle, Krishna said IBM had to “change how we approach our clients, and change in ways to be a really good partner.”
“And as long as we can do that, we’ll keep going. And we’re committed with these partnerships — for at least the top few, we’ll get them well north of $1 billion each,” he said.
“We’re on our way there with at least half of them already.
“And the other half will get there.”
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