IBM Post-Rometty — The Immediate Future Lies in Multi-cloud AIOps

The News: IBM announced that Arvind Krishna will be its next CEO, replacing Virginia Rometty, who will remain executive chairman until the end of the year. Krishna, 57, joined IBM in 1990 and is currently IBM’s senior vice president for cloud and cognitive software. In addition, the company announced that the office of president will be held by a different executive, James Whitehurst, who is Red Hat’s former CEO. It is the first time IBM will have a leadership structure with a CEO and separate president. The changes are effective on April 6. My colleague here at Futurum Research, Daniel Newman, covered that in greater detail in his article published yesterday: IBM Announces Change at the Top: Driving the Company Into the Future.

IBM Post-Rometty — The Immediate Future Lies in Multi-cloud AIOps

Analyst Take: Rometty’s 8-year tenure as CEO has been a challenging run. Her big bets on cloud and AI have been ambitious, and moved the company in the right direction, but ultimately left the market wanting for more. AWS, Microsoft, and Google have all gained momentum in those markets, while market leadership for IBM has been somewhat more elusive. For IBM post-Rometty, it is imperative that the immediate future lies in multi-cloud AIOps.

To her credit, Rometty did what she needed to do by jettisoning unprofitable older hardware businesses and investing in growth segment, while keeping IBM’s stagnating business and technical services business from heading south. But it wasn’t enough to keep IBM sales falling year-over-year, as IBM labored valiantly to remake itself inside and out for a 21st century in which clouds will predominate in business technology environments.

IBM’s Challenges and Opportunities

As IBM contemplates its post-Rometty future, a key concern is the fact that the vendor’s bottom line still largely relies on revenues from its legacy mainframe and database products. IBM underlined that reality in its most recent quarterly earnings reports. Revenues have grown slightly after falling for five straight quarters, with improvement largely due to the fact that it recently concluded an upgrade cycle for the z14 mainframe computer, with the new model, the z15, now shipping for more than one quarter. More on that here: IBM Fiscal Q4 Results Driven By Strong Sales Performance.

After years of battling declining revenues and lukewarm quarterly results, IBM faces another series of challenges. Its new CEO needs to take bold action in order to restore the company to robust growth, increased adoption, and competitive differentiation in the dynamic business technology markets in which it competes.

Futurum holds IBM’s new leadership in high regard, and we are encouraged that Krishna’s elevation to CEO should expedite the pace of the positive turnaround for the 108-year-old solution provider. On the plus side, Krishna brings continuity in IBM’s executive suite, and experience as a strong product unit leader with a consistent emphasis on profitability and innovation. It is probably also fair to say that as the most recent leader of IBM’s product unit for cloud and AI solutions, he will be eager to prove that his vision for robust growth and leading market share in the cloud AI segment can be fully realized now that he is at the helm.

Leveraging Red Hat is Key — Focus and Speed Are Important

As one of the executives involved in IBM’s $34 billion Red Hat acquisition last year, Krishna’s success going forward should be judged predominantly on how well he and Whitehurst leverage that acquisition’s assets into seizing multi-cloud opportunities. We believe that by leveraging the Red Hat acquisition, the hybrid cloud solutions that IBM brought to market under Rometty IBM could be well-positioned for growth if those complex environments become standard in IBM’s Fortune 500 customer base.

The Red Hat unit’s ability to sustain its revenue growth while winning larger deals inspire confidence that it will be a substantial piece of IBM’s growth strategy over the coming one to two years. But also Red Hat’s relevance to IBM growth later in this decade is worth considering, given IBM’s history of the past decade or so of making acquisitions both of established niche players and of promising startups, only to see those vendors overtaken by disruptive trends and rivals.

For example, SPSS has been challenged by diverse data science workbench startups such as DataRobot, Netezza by cloud-based data warehousing startups such as Snowflake Computing, and Cognos by business intelligence vendors such as Tableau. That’s why we suggest that both focus and speed here are important. With all of this in mind, we believe that IBM has a sound plan for Red Hat to remain a key component of its long-term success and both Whitehurst and Krishna will be certain to make it a priority.

Hybrid and multi-cloud management is a both a challenge and a must win for IBM’s growth prospects. In addition to IBM’s acquisition of Red Hat, 2019 also saw significant hybrid and multi-cloud product launches from AWS, Microsoft Azure, Google Cloud, Oracle Cloud, VMware, Dell, and Cisco. The fact that most large cloud providers have shifted toward addressing these opportunities in the past year means that the path ahead for IBM is clear. There is significant work to be done by the brand within these areas and we look to Krishna and team to make these areas more successful with a short horizon.

Futurum Recommendations for IBM

Now that everybody in the cloud arena is angling for these opportunities, the industry battlefront has shifted toward convincing enterprise IT that they should move their most demanding workloads—especially those related to AI and machine learning—to a given provider’s hybrid-cloud platform. For IBM/Red Hat, the strategic imperative now is on differentiating up the stack.

Chief among these IBM priorities should be providing AIOps tooling and services to bind all of its solutions into a unified multi-cloud environment for ensuring that these complex environments are continuously self-monitoring, self-healing, and self-optimizing. In 2020, more AIOps environments will incorporate intent-based networking, which uses embedded machine-learning runtimes to automatically capture IT administrators’ intent regarding the business and technology outcomes to be achieved through automated system monitoring and management.

In order to remain the multi-cloud pacesetter, the future IBM under Krishna and Whitehurst should pay close attention to what its rivals Cisco and VMware are doing with AIOps in their respective portfolios. Both vendors provide automated cloud management tooling that allows administrators to capture their intent as policy that specifies end-to-end network business and operational metrics.

With AIOps as its focus, IBM post-Rometty with their new leadership should extend the breadth of its AI initiatives beyond Watson’s application-level focus into a comprehensive focus on automating the management of multi-clouds, meshes, and edges 24×7. The company should also focus on building a partner ecosystem for its multi-cloud management portfolio that tailors its embedded AIOps capabilities for specific opportunities in managing complex supply chains, industrial IoT environments, and other vertical environments.

As mentioned, it’s clear that IBM post-Rometty with Krishna and Whitehurst at the helm have their work cut out for them, and if they can deliver results short-term, that will be a big win for the company. The battle will be fought for relevance on key fronts including Cloud and AI. Later it will be about market leadership, and where IBM can stake its claim. That is the blueprint for Big Blue. Meanwhile, we will be watching this develop with interest.

Futurum Research provides industry research and analysis. These columns are for educational purposes only and should not be considered in any way investment advice.

Other insights from Futurum on this topic:

IBM Announces Change at the Top: Driving The Company Into The Future 

Cisco and IBM Join Forces to Deliver Managed Private Cloud-as-a-service 

IBM Fiscal Q4 Results Driven By Strong Systems Performance

Image Credit: Marketing Mind

Author Information

James has held analyst and consulting positions at SiliconANGLE/Wikibon, Forrester Research, Current Analysis and the Burton Group. He is an industry veteran, having held marketing and product management positions at IBM, Exostar, and LCC. He is a widely published business technology author, has published several books on enterprise technology, and contributes regularly to InformationWeek, InfoWorld, Datanami, Dataversity, and other publications.


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