IBM as a Service Will Impact Everyone as IBM Looks Ahead
TBRT ECH N O LO G Y B U SIN ESS RESEARCH , IN C.
TBR EVENT PERSPECTIVE
‘IBM as a Service’ will impact
everyone as IBM looks ahead
Las Vegas, Feb. 24-26, 2014
Stuart Williams, Vice President of Research (email@example.com)
At its core, IBM is an information management company, not a technology company. By shifting its focus to a
service-oriented customer engagement strategy, automating its data centers and slimming its hardware business,
IBM seeks to shed low-profit, low-differentiation businesses and build a more agile and profitable company based
on offering flexible “IBM any way you want it” information management solutions.
The emergence of a new IBM
This is turning into a watershed year for IBM, as the company sheds its x86 server business, opens its Power
platform for licensing, launches an expanded “Cognitive Computing” business led by its groundbreaking Watson
platform, and unveils a new “IBM as a Service” strategy. This transformation dramatically changes the way IBM
engages with its customers, and it will shift IBM’s ecosystem and force competitors to adapt, adopt and improve.
IBM Senior Vice President of Software and Cloud Robert LeBlanc spoke to the changing perception of IBM in the
marketplace at the Pulse conference in Las Vegas:
“There are some who still think of IBM as purely a computer hardware company even though, for many
years, it has been steadily building a broad portfolio of software and services. Now it’s time for yet
another reassessment: IBM as a cloud company.
This shift to cloud — where hardware, software and services meld into one — represents the most
significant change in IBM’s go-to-market strategy since it built a large blue-suited sales force to cater to
businesses in the 1950s and ’60s. It’s a fundamental reinvention of the company, how IBM operates and
how it delivers value to clients and society.”
IBM will continue to sell technology components, as the mainframe business is mature and profitable, and
customers will still buy software; but automation will drive sweeping changes in the way the company delivers
professional services. TBR estimates the private cloud services and cloud components business will grow from $55
billion in 2013 to $105 billion in 2018, which supports IBM’s traditional “own and control” buyers. IBM recognizes
the power of a new category of buyer — an outcome buyer who doesn’t need to own and control underlying IT
assets. Public cloud business growth reflects the shift in buyers, as the market will grow from $23 billion in 2010 to
more than an estimated $91 billion in 2016. Much of this shift is at the expense of packaged offerings for
traditional architectures like licensed software, servers, storage and data center hardware and IBM’s 2014 shifts
reflects this new reality.
Impact and Opportunities
There are six key implications of IBM’s latest transformation:
1. IBM will invest in inside sales and continual customer engagement across a service-oriented life cycle.
Traditional “blue suit” sellers will have to adapt to an even broader portfolio even as they move from
transactional selling to maximizing customer lifetime value through “add-to-cart” approaches.
2. TBR believes IBM will increasingly personalize its engagement — starting with functional roles and
extending to the multiple situational roles of each customer. Using social and mobile technologies,
situational awareness and predictive insights, IBM will lead and support its customers on an ongoing basis
— becoming a constant and trusted partner.
3. Customers (e.g., developers, IT managers or line-of-business buyers) face more choices in IT delivery,
which requires more education on the tradeoffs between owning and renting solutions. TBR believes IBM
will build a strong business in helping customers manage changes across business, process and IT DevOps
— another aspect of the lifetime-based engagement cycle.
4. A shakeout of IBM partners will occur, as hardware-centric partners are winnowed down and IBM chases
partners who invest in adding, extending or volume selling IBM services. IBM will encourage the
development of unique IP in its ecosystem and facilitate the integration and consumption of these new
services and offerings as part of “composable” elements.
5. Competitors will be forced to adapt, adopt or improve their portfolios. IBM is doubling down, betting on
the transformational power of cloud and advanced software. IBM will force competitors to either increase
their investments or risk lagging behind in the market. Using the power of closer relationships with its
customers, closer ties to its ecosystem and its own cloud-enabled road map, IBM will reduce transactional
barriers in its ecosystem and increase barriers to broad adoption of competing ecosystems.
6. IBM’s current revenue and expense structures will shift over the next five years. Revenue streams will
shift from a transactional model to an annuity stream model. This shift will impact short-term revenues
from up-front to continuous recognition as sales move from traditional blue suits to more engaged inside
sales teams. Offsetting the short-term revenue hits will be cost efficiencies in service delivery and
outsourcing gain through the broad application of SoftLayer technologies. TBR believes the automation of
IBM data center will enable headcount reductions as the firm builds its own “composable business.”
Please see the Related TBR Research Notes and Commentary section for additional TBR event
perspectives and commentaries on the changing market landscape.
IBM reshaped its traditional Tivoli-centric and developer-focused Pulse event into “The Premier Cloud Event,”
launching multiple products and using its new roles-focused go-to-market strategy that targets developers,
business buyers and IT managers. Event attendance was up to 11,000 from 7,000 the previous year. IBM added a
Cloud Developer event for 1,000 attendees, a Cloud Partner track and a greatly expanded set of sessions. With
presentations from SVP Steve Mills and other senior executives, Pulse became a part of a powerful suite of
concurrent announcements tied to the RSA and Mobile World Congress conferences, both attended by TBR
Despite positioning the Pulse event as a cloud conference, IBM already took one step past cloud and into what TBR
labels the post-cloud world. Composable Business is the intersection of all IT service sourcing (mainframe,
distributed, private and public clouds, and even Business Process as a Service offered from service providers). The
vision is for firms to enable business model and business process agility through IT flexibility. If this sounds like SOA
and earlier visions of flexible, integrated and composite actions, the outcome is the same. However, instead of
narrow or proprietary technologies, cloud services have very broad acceptance and penetration of enabling
technologies and maturing APIs. The vision is perfect for IBM’s ability to advise and support the complex IT
environments of its large enterprise customers and a powerful differentiator against a host of technology, services
or cloud vendors.
Key Developer announcements:
BlueMix, IBM’s PaaS offering, was built using open-source Cloud Foundry and expanded with IBM
development tools, user interfaces and services. BlueMix represents the basis for API-based, composable
and agile development.
SoftLayer, IBM’s $2 billion IaaS acquisition, will be expanded with an additional $1.2 billion to open and
update IBM data centers around the globe.
IBM acquired Cloudant to provide a No-SQL Big Data as a Service.
Key Business buyer announcements:
IBM announced it will expand and offer several solutions via the cloud. Customers intrigued by the power of
Watson and how it can assist in call centers will have an opportunity to dip their toes into the offering via IBM
Watson Discovery Advisor — a try-then-buy pattern TBR believes IBM will expand across its solution portfolio.
o IBM Watson Discovery Advisor
o IBM BLU Acceleration for Cloud
o IBM Maximo Inventory Insights
o IBM Kenexa Talent Suite
o IBM Connections