Announced last week, the decision to split IBM into two public companies by the end of 2021 was made, in an aim to shift focus to higher-margin endeavours, including artificial intelligence (AI) and the cloud.
A second company dedicated to legacy IT infrastructure, called NewCo, is set to be established next year. This will include IBM’s Managed Infrastructure Services division. Plans are in place for IBM and NewCo to uphold a strategic partnership.
NewCo is expected to have a revenue of $19 billion, and is planned to encompass an approximately 90,000-strong workforce.
IBM chief executive, Arvind Krishna, said: “We divested networking back in the 1990s, we divested PCs back in the 2000s, we divested semiconductors about five years ago because all of them didn’t necessarily play into the integrated value proposition.
“To drive growth, our strategy must be rooted in the reality of the world we live in and the future our clients strive to build. Today, hybrid cloud and AI are swiftly becoming the locus of commerce, transactions, and over time, of computing itself.”
The split is expected to cost $5 billion, according to IBM.
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“There was always massive friction between GTS, GBS and SWG. I believe it makes a lot of sense for modern organisations to focus on their strategic value.
“In this case, one side of their business is all about DX and services, and the other is about innovation and technology. Know what you’re good at, and focus on that.”
Information Age analysis
The decision from IBM to eventually split into two companies, one focusing on legacy IT and the other on developing technologies, shows intent to continue future-proofing its operations. If the corporation is to successfully keep up with the competition and remain effective in its enterprise service delivery, it’s vital that attention on the technologies of the future is maintained and strengthened.
Cloud and AI are sure to continue playing a prominent role in maintaining enterprise operations, with companies worldwide looking at operating remotely beyond the pandemic, whether this be entirely or with a hybrid approach regarding the presence of offices. Recent forecasts from Gartner have predicted container management software, public cloud and robotic process automation (RPA) revenues to grow globally, meaning that IBM must evolve its service with these trends.
While cloud business at IBM has shown growth, with customers implementing the technology in order to ease digital transitions, Amazon and Microsoft continue to lead the way in this space. If the corporation is to realise its potential as a market leader, it will need to keep the need for a range of flexible options for customers in mind, which is vital for companies to continue thriving post-pandemic.
NewCo is bound to bring its own importance, as companies look to continue its digital transformation strategies, many of which will have began with the facilitation of remote working at the start of the Covid-19 outbreak. Legacy infrastructures can be susceptible to evolving cyber attacks due to substandard security, meaning that this must be a key focal point for NewCo to consider from the outset.
Overall, the streamlining of services at the Big Blue has the possibility to revitalise the corporation, allowing for increased profitability and a wider range of capabilities going forward.