After many IBM events this year (Connect, Impact, Pulse, Enterprise, analyst summits on BigData & Analytics, the STG products) etc. – it became clear to me with Insight, that maybe everything is coming together for IBM in 2015.
Fresh off the abandonment of 20 cent EPS goal – here are the three strongest arguments for IBM that it's all is coming together, and the three strongest arguments why maybe not:
Top 3 positive signs
- Partner Power - IBM has the gravitas in the IT space to make deals and partnerships that no one else has done and may not get done. I see the Apple as well as the SAP and Twitter partnerships in that category. Wondering why these partnership happened now is one question, but the dynamic and sequencing gives reason for optimism that more will be coming. If IBM can monetize these early partnerships, IBM will do well. But first you have to have them in place and here IBM has a leg up in the competition.
- Product Synergies - The synergies between the SoftLayer powered IBM Cloud, the march to 40 data center locations (that is formally un-answered in the cloud industry), the addition of Power to these data centers and the ability to run Watson on Power and the dynamics around BlueMix form a powerful and compelling combination for enterprise who want to run their next generation applications in the cloud (and move some older loads there, too). IBM can play both the ‘bread and butter’ cloud game on x86 as well as the high end game with e.g. cognitive and analytical applications running on Power. In either case both data residency and performance requirements ask for ‘as local as possible’ data centers, which IBM is rolling out more and more right now.
- Watson the Big Differentiator - Watson remains a strong differentiator for IBM – and with Insight it has become clear to me that IBM is pushing the envelope with enabling business end users, through normal sentence questioning to find the right (true) analytical insights (more on ‘true’ analytics here). So it is the combination of Watson linguistic capabilities and then (true) analytic offerings (e.g. built on Catalyst) that are the real power of the Watson platform. If IBM manages to bring (true) analytics in the hands of business users – this could then quickly become the strongest selling product for IBM.
Top 3 remaining concerns
- Service Business and Dependency - IBM has a strong service arm with GBS, which for the longest time was an area of growth for IBM. But with the disinvestment of the x86 servers the question is going to be – what are the low margin product / services in the IBM portfolio and my guess is that more and more services find themselves in the bottom third of profitability assessments. Not because IBM is running them badly, but because it has stopped selling or disinvested other products and services. However a certain amount of professional services is key to help customers with adoption, change management and to keep a pulse on innovative business best practices. But IBM is operating services at a far too large scale for that ‘tiger team’ approach and with that is faced with competition and margin erosion, triggered by ‘me too’ service offerings by the competition.
- API Economy (too) unique? - The API economy vision is a toss-up and could be turned into a positive sign over the next years. It makes sense for IBM to push this and it has a maturing platform with BlueMix to deliver on it. But it remains a unique vision and hand in hand with that goes significant risks. In the past enterprises ultimately always selected integrated offerings over products they had to integrate themselves. There is no guarantee this will not change going forward, and IBM makes plausible arguments of that decision criteria to change. But until we see a shift in buying / investment decision it remains a risk and IBM is not hedging the decision by building a (massive) 21st century enterprise suite. Then again – IBM can of course well buy one of these suites in case executives realize they need to get a hedge in the next generation application game.
- A huge engineering quality challenge - IBM is facing a massive engineering challenge to make the whole product portfolio work together. In the industry only Oracle is trying to do something similar (see my latest here), and there I am equally concerned that it will be a huge challenge to make it all work. It’s not even 7 years ago when IBM divisions like WebSphere, DB2 and Rational were being ‘integrated at the customer’, and sound end customer advice was to best to treat these product areas as if they were separate vendors. Today’s IBM scope is significantly larger and the delivery cycles are faster, both not friendly forces to deliver end to end quality. But that said, IBM has senior management team on this and profound quality experience – so it may well overcome these challenges.
MyPOVAs product cycles get faster and enterprises need to accelerate, the IBM product portfolio is nicely coming together, assuming a mildly optimistic approach to art of future telling. The integrated portfolio, engineered from the hardware up (e.g. Watson on Power) and combined with attractive services (e.g. SoftLayer) and coupled with the right mix of open source vs. proprietary (e.g. BlueMix) are certainly coming together. But it remains a massive undertaking that needs to be more integrated and better working together than any other IBM product offering before.
The strong services arm, while an advantage in the past, could become a hindrance, as IBM needs to partner with other service providers to gain market share for its products and cannot accept an ‘ok’ outcome if its products would remain to services intensive. To a certain point IBM product leadership needs to engineer products that make services more and more obsolete, or at least fundamentally change them, to service the 21st century business user, who no longer wants, accepts and can afford (more from a time, less from a budget perspective) lengthy service engagements.
An important year for IBM ahead, which as a last observation has noticeably slowed down the acquisition machine in the last quarters. But then you need to slow down, even stop acquisitions, when you need to bring all things together, which IBM is certainly in the midst of doing right now. (Much) more than a penny for Steve Mills’ thoughts and plans.
- First Take - Top 3 Takeaways from IBM Insight Day 1 Keynote - read here
- IBM and SAP partner for cloud - good move - read here
- Event Report - IBM Enterprise - A lot of value for existing customers, but can IBM attract net new customers? Read here
- Progress Report - The Mainframe is alive and kicking - but there is more in IBM STG - read here
- News Analysis - IBM and Intel partner to make the cloud more secure - read here
- Progress Report - IBM BigData an Analytics have a lot of potential - time to show it - read here
- Event Report - What a difference a year makes - and off to a good start - read here
- First Take - 3 Key Takeaways from IBM's Impact Conference - Day 1 Keynote - read here
- Another week and another Billion - this week it's a BlueMix Paas - read here
- First take - IBM makes Connection - introduces the TalentSuite at IBM Connect - read here
- IBM kicks of cloud data center race in 2014 - read here
- First Take - IBM Software Group's Analyst Insights - read here
- Are we witnessing one of the largest cloud moves - so far? Read here
- Why IBM acquired Softlayer - read here