IBM’s decision to spin out its Global Technology Services business is an example of a business trying to remain relevant in the era of cloud computing.
In the 1990s, the company pivoted to global services, as revenue from its hardware business began to decline. By the end of the 1990s, IBM Global Services was contributing 40% to the company’s revenue. It sold its PC business then its x86 server businesses to Lenovo and focused on the lucrative IT consulting market, acquiring PwC Consulting for $3.5 bn in 2002.
Wind the clock forward to 2018, the company forked out some $34bn to acquire Red Hat, claiming a stake in the cloud infrastructure business market.
Hybrid cloud business and AI
Today, the company’s story is focused on hybrid and multi-cloud IT. No one can argue that IBM has been a pioneer of computer technology. But it has not had a great track record of turning this innovation into market domination. Yes it owns the Z-series mainframe ecosystem. And while its Watson AI engine demonstrated the power of machine learning, when it beat human contestants in the US TV games show Jeopardy!, is IBM still considered a pioneer of AI? As industry-specific applications for AI are developed, IBM is certainly in the running with Watson, but there are plenty of alternatives.
AI-infused applications is the next era of software development and the growth opportunity for cloud-based cognitive systems. In a recent House of Lords committee meeting on AI, one committee member pointed out that Zoom should be able to figure out that someone is trying to say something and unmute them automatically, which would avoid the embarrassment of trying to speak while on mute. It is an example of how AI will be something that is integrated into every piece of software to make it more intuitive. IBM certainly has the portfolio of products to power such cognitive applications. But is it the company that will be regarded as the driving force in this AI age of computing?
Throughout its history in computers, it has focused on being a computer company for business. While it has worked hard to lower the barrier of entry to provide software developers with access to the latest tech, bar the PC revolution it initiated, the IBM business model has not had much success in scaling down to a level that enables mass adoption. This is the challenge the new, leaner IBM now faces.