Host Daniel Newman and Rob Thomas are live discussing IBM’s success in their Hybrid Cloud & AI strategy, IBM’s new AI product announcement, and their plan for 2023.
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TRANSCRIPT:
Daniel Newman:
Hey, everybody. Welcome back to The Six Five Podcast. I’m your host today, Daniel Newman, flying solo, but super excited for this episode of the Insider Edition. I’ve got Rob Thomas, Senior Vice President, IBM Global Markets back on the show. Rob, welcome. Good to see you again.
Rob Thomas:
Daniel, great to be here and nice to see you. Love what you both are doing. Sorry Patrick can’t be here with us, but I think we’ll make the best of it.
Daniel Newman:
Yeah, we always do. There’s been a few times over the career where he zigs and I zag or he’s going left and I’m going right. But most of the time we are together. So it’s always interesting to have these great opportunities to have conversations without, but you’re absolutely right, we will. And by the way, we were both together just like a week or two ago in New York City, where I actually got to watch both of you on stage together. I won’t tell you who was better Rob, right now, but I did see both of you pretty much go back to back on the stage at the Cloudera event that you partnered, IBM and Intel partnered with them on the Evolve Event. It was great to hear from you. So quick reintroduction Rob, you have been on the show and many people have seen you here before, but for the new audience out there, just a quick run-through of your role at IBM.
Rob Thomas:
Yes, like you said, I run Global Markets, which means basically all of our sales, our countries, our ecosystem partnerships, so really everything that IBM does from a go-to-market and client-facing and partner-facing perspective and I’ve been doing this about a year. Before that, I was running software and this has been a great opportunity to rethink how we’re engaging with clients and partners. So, I’ve had a really good year doing it.
Daniel Newman:
And it appears that it’s working for IBM as a whole, Rob. Patrick and I visited with Arvin last year and he kicked off our Six Five Summit and he shared a lot with us about the strategy, specifically hybrid cloud and AI being in focus and your earnings last week. I got to do the rounds with the press, the media, and of course, out there, everyone thought the economy was getting bad and the markets were closing in. And then IBM sort of came out, one of the first of this earning cycle with some really great results. And not only great because of, hey, we had one big land and systems, it was really great across the board. Talk a little bit about the focus on those two areas and how that’s really contributing to all this success and sort of where you see the industry heading overall with hybrid cloud and AI.
Rob Thomas:
Well, I appreciate you mentioning that. We’re really excited to get some positive points on the board. That’s two quarters in a row now of double-digit growth at constant currency and I think that probably surprises a lot of people who didn’t really see IBM as a double-digit grower, but I think it kind of speaks to focus. I mean, on Arvin’s first day, he said the strategy’s going to be hybrid cloud and AI and that makes everybody stop and think, “Wait, am I doing that?” And as I’ve told our teams internally here at IBM, the great thing about IBM is that a focused IBM can do really good things. And so, rallying everybody behind, we’ve got to be number one in hybrid cloud. We have to be number one in AI. How does that connect to your job? How does that connect to how you’re working with clients or you’re working with partners?
It’s been a galvanizing force and you look at how the market’s reacted to it. Four years ago, I’d say most people didn’t even acknowledge the notion of hybrid cloud, it was everything’s public. At this point, I don’t really talk to a client that’s not thinking about public cloud, private cloud, multi-cloud, hybrid cloud. And so, that’s a discussion everybody wants to have. And AI is, I would say finally coming into a level of maturity where is not just the early adopters doing it. And we can talk about that a bit as we go. In our recent survey, it looked like adoption was pushing up towards 30%, a little bit north of that. And I think this is going to go faster from here as my instinct. And so, we kind of invested behind two big trends, hybrid cloud and AI. The world seems to be moving in that direction and so, maybe that’s why the results are improving, which is great to see.
Daniel Newman:
Yeah, the focus is definitely starting to be well-understood. I think there’s still an opportunity, Rob, for the market to better understand and appreciate. I’ve had a ton of press asking me, especially we’re in another week of big tech earnings and I keep pointing back, I’m like, “Look at IBM.” There seems to be this bifurcation if you’re heavily weighted to the enterprise and you can help companies actually execute on the transformation initiatives that sort of got accelerated, but in some ways got a lot of just endless resources thrown at them during the pandemic because when it was happening so fast, they were hiring and hiring. But a lot of companies, they want to use AI, they want to move to the cloud, they want to automate things and they didn’t get to that immediately because they were trying to move so fast to keep up with customers.
As the economy slows a little bit, there’s more and more data that’s indicating that these companies are going to turn back to those projects, meaning CapEx, OpEx spending on tech could actually be much more resilient. While some of those consumer and device areas, those may have a more difficult near term. But you said something there Rob, that I really think warrants a little bit more explanation. You talked about how hybrid cloud is now sort of ubiquitous, everybody gets it. AI though, I think we’re talking about it a lot maybe because of things like Siri on our phones, but I’m not sure that it’s really fully made it from the boardroom to production yet and that companies are fully taking advantage of the opportunities. What do you think standing in the way of companies moving as quickly with AI as you see them moving with hybrid cloud?
Rob Thomas:
Part of it may, maybe it’s a fundamental misunderstanding that AI is something that stands on its own. And let me say it this way. When we talk about hybrid cloud and AI, we then say we bring that to life with clients who are focused on data automation, security, how you manage applications or data across multiple clouds. AI is actually an ingredient in all of that. So it’s not like something that you do in addition to that, it’s actually become an ingredient in each of those. So, maybe there’s just a base level misunderstanding that this is not something different. It’s about how you do cybersecurity better, it’s about how you do automation better. It’s about how do you run multi-cloud or hybrid cloud better, I think that’s one. I’d say two, maybe a little bit counterintuitive. AI is actually kind of boring if you think of it that way in the enterprise.
And what that means is a lot of the use cases that we started with of, hey, it’s going to change the whole industry, change the whole world. The reality is the use cases that are happening now are a little more boring than that. It’s going to manage multiple instances of an application across clouds without having to hire a 100 people to do it. Or I’m going to organize and catalog my data, understand all my metadata, be able to make decisions without having to hire an army of data stewards who are just doing data matching all day. This is about making our current teams more productive, more efficient. In many cases, enjoying their jobs more. Nobody really wants to go match a bunch of data sets. So the idea that when I say AI is boring, it’s really practical things that companies need to do, but maybe it’s not the thing that gets headlines.
But I think if you think about kind of a hype curve, that’s how these things go a lot of time. There’s a lot of hype, Hey, it’s going to completely change the world. We’re going to have flying cars. And then it’s like, Hey, maybe this just makes what we do today dramatically better, makes all of us more productive. We can serve clients better through using AI for customer service. We can do better financial planning and budgeting. You can think of a lot of these different use cases that I think are fairly practical. And the moment that a client makes that connection that, “Hey, it’s not just something different, this is about very practical applications to run my business better.” I think that’s when the magic happens.
Daniel Newman:
Yeah, I like that you pointed that out. I was having a conversation earlier today, Rob, where I actually said, “AI as sort of a practice area in our world really is an overlay to so many things because it’s AI for CX.” It’s AI for cloud, it’s AI for infrastructure, it’s AI. It’s very rarely just AI. And there’s almost, you mentioned the cars thing and I think there’s almost an analogy there too as well. The way AI is being employed in the vehicle right now is largely as an assist, right? That’s aide assist, it’s an assist to the human. The human in the loop and it’s adding value. And you sort of gave some examples there, how right now, AI can be added to help the cloud run more efficiently or AI can be added for observability of the data ecosystem or the IT operations ecosystem, etc. So let’s jump into the announcement though, because one of the things that it seems that IBM is really focused on is making AI more accessible for your ecosystem partners. Talk to me a little bit about what you just announced.
Rob Thomas:
I’ll bridge back to your other point first and then I’ll hit that head-on.
Daniel Newman:
Sure.
Rob Thomas:
I’ve used this phrase before. AI will not replace managers, but the managers that use AI will replace the managers that do not. And that’s this whole idea that this is actually about giving our employees superpowers, helping them do their job better. Which gets to the announcement, we realized we spend a lot of money on R&D every year, $6 billion plus in IBM. I look at what we are putting into AI and if you’re a software company out there in the world right now and you’re at 50 million, a 100 million, 10 million, 200 million, a billion dollars of AI, you’re probably not going to be able to create a wing focused on the science of AI, the development of advanced AI, it’s kind of unlikely just based on every priority that you have to serve your existing clients.
So what we’re announcing is we’re making our embedded AI portfolio available to all software companies, which means anybody can come in and grab the pieces that they want, make it part of their product, and so they can benefit from all the investment IBM’s making to deliver better AI in their product. And by the way, they can brand it as IBM if they want to or they can brand it as their own. We’re indifferent on that. This is just about making the technology available so it can make their products better and make how they serve their clients or partners better and more elegant. So I think this is really a case where companies will look at this, if they’re willing to give it a shot. And as I say to anybody, don’t give us a year, 30 days and you’re really willing to look at this, I think you’ll find it makes your product dramatically better and you have none of the investment. And so, there’s a big positive there.
Daniel Newman:
Yeah, driving the ecosystem, enabling companies to build solutions and differentiate. That’s sort of the democratization I see here, Rob. Because obviously, you have Watson and a lot of companies have an API or they have a large language model that everybody can use and to some extent, that doesn’t necessarily give as much flexibility to differentiate in their products. So is that the difference or what is the big difference here between that and the traditional API and what you guys did with Watson and that approach?
Rob Thomas:
We’ve gotten the point where I think we have a very strong view of what makes Watson unique, which really comes down to three things. One is natural language processing. I think we do a really good job of understanding language, understanding documents, understanding really any type of human syntax. And therefore, when applied to those use cases, we do very well. If you look at MatchWorks, that type of thing. So one is about natural language, two is about automation. So we talked about using models to do things like AI ops or how you run your system with how you optimize your infrastructure. And third is trusted AI, which is how do you actually manage AI, the life cycle of it. How do you identify a bias drift in your models? So what we’re announcing is we are making these capabilities available as a service, meaning you can embed the component in your application, you can actually call it via API if that’s how you’re deployed.
But it’s really about making your product better by enriching it with language models or bringing in observability or AI ops type capabilities or RPA capabilities or bringing in trusted AI so that decisions being made in your product has data lineage to it, data governance around it. This is just about embedded components that can fit inside of any product, which again can be white labeled. So before it was like it has to be a step removed, you’re going to make a call. Now, what we’re saying is make this part of your product, make this part of the experience that a user feels take credit for the innovation because any partner that’s going to invest some time to actually get this up and running, make it yours branded as your AI.
Daniel Newman:
Well, it’s kind of the IBM garage concept, the whole co-creation built something. Our ecosystem has the opportunity to make it better to innovate. And of course, you will learn from the innovations and the partners and what they do with it and they will learn and be able to take advantage of the huge investment that IBM makes at the research level. I see it pretty symbiotic thing there Rob, happening. And I think that’s what ultimately becomes the force multiplier and IBM has the opportunity to truly start to stand out as a differentiator in the world of AI as an enabler of building the applications of the future and doing so, in a way that truly enables companies to take advantage, like I said, of your capabilities. But also, to be unique in what they do and not just do what everyone else is doing.
So you add your sauce, right? It’s like a burger’s a burger, a chili cookoff. I mean, I hate to use simple analogies like that, but the chili cookoff, everybody uses meat or chili sauce. But in the end, someone wins because they figured out a way to make theirs just a little bit better or spicier. Everybody likes, Rob, to hear kind of the real world examples and IBM tends to generally and make announcements like these with partners and with customers. Is there anything you can share right now in terms of how customers or partners are going to apply this? Some interesting use cases?
Rob Thomas:
I’ll give you a couple good examples. I mean, NICE Systems, which is a very successful software company based in Israel. They started off doing really… I’ll call it call center automation. They’re now embedding Watson capabilities, everything from agent assist to understanding names and being able to recognize different textual formats. So they’re building it directly into the product to the extent that you don’t even know it’s there, but what they serve to their clients is a dramatically better experience in terms of the efficiency it creates, the productivity for representatives. I think that’s one great example. Another one is ACCUBOT, which is actually an investment firm who’s using models built in Watson to actually look at market movements, trading decisions, investment decisions that’s built right into their investment product that they deliver to others, so that’s a couple.
There are a couple examples I would love to share with you that I can’t quite yet, but as these come out over the next few months, I think some people would be surprised at some large software companies that have decided partnering for this capability is a better way to get quick time to value for their clients. So off some more announcements for you coming up soon, but we’re really excited about the progress we’ve made in the last year. Hope you notice we are doing something different here. We’ve spent a year of working diligently at this, before we’re announcing it. So we’ve got, I think there were five companies mentioned in the press release that have already adopted this. There’s quite a few others that we’ll announce as we go here. We wanted to make sure this was really working before we made it generally available and brought people along. And so, now as of today, it is available to anyone.
Daniel Newman:
Yeah, I expect we’ll hear more about those partnerships, whether it’s going to be the breakthrough innovations or the big partners. I’ve seen more cooperation in tech over the last few years as we saw the acceleration of the pandemic, the challenges the companies had. And I think that there’s a lot of truth, Rob to that sort of high tide rises all boats in tech and I think we’re seeing that a lot. So, I think it’s encouraging and I’ll be personally very interested to watch how the partner ecosystem adopts this. And I’m sure we’ll be talking about either with you again sometime or Pat and I will talk about at one of our Six Five Weekly Shows. I want to go back, thanks for giving me the heads up on the announcement.
I think we were one of your early interviews when you started in the role, Rob, and we hit you up right away and kind of said, “Hey, what are you going to do to make IBM easier to work with?” And you gave us a few ideas, but I think it was so new, you were like, “Hey guys, do me a favor and give me a minute. Let me settle into the role. Let me figure out my plan.” And now, you’re a year in. Talk to me a little bit about how that’s gone and where are you and can you give me that update now.
Rob Thomas:
We’ve done, I would say three big things in the go-to market. Number one was we got everybody in IBM focused on consulting or technology. So less of I’d say people jumping between the two, because clients were saying we really want expertise from IBM. So that, was number one. Number two is we built a team called client engineering. This is a pre-sales team. These are hands-on engineers and this is because clients were telling us we want you to engage a different way. We think IBM has great technology, we think you have great talent, but we don’t see that if we just get PowerPoints in a sales cycle. So we’ve completely changed how we engage through things like client engineering, which is again, early in the sales cycle, coming in, improving out technology, it’s show, not tell. I think that’s had a big impact.
Third is we created a team called customer Success, this is post sales. So when a client buys a product, they get a customer success manager who’s only job and only incentive is to make sure that that client loves the product, they get up and running quickly, they’re using it, they’re understanding new features as they come. These are three pretty fundamental shifts and you may say, “Hey, IBM was late to the game on those.” That’s fair, but it’s never too late to do the right thing, I would say. And having a client engineering team, having a customer success team, I think has totally changed perception. Now, I do still talk to a client every week who says, “I haven’t heard of that,” because sometimes it takes a while for this stuff to flow through in all the countries in which we operate.
But I think it’s really a fundamental shift in terms of how we engage. It’s a little bit of going back to what made IBM great. If you think back many years ago, go all the way back to the ’70s, that was what IBM was always best at, was technical skill to help a client solve business problems. That’s really what we’ve gotten back to and I think it’s certainly having a positive impact.
Daniel Newman:
You had a lot of challenges and opportunities, a world of acquisitions, I mean, big entrances into markets to focus on hybrid cloud and AI, but also number of investments and things like observability, which is a huge growth market. And now, you have to figure out how do you integrate, implement, and scale and make the entire ecosystem invest and spend more. That was a big thing and of course, the company’s also deepened its partnerships with some of the big hyperscalers. Those have been really exciting announcements, Rob, but also a little bit of a shift of direction where IBM basically said, “We believe IBM plus AWS is better for a customer” as opposed to, “Hey, we’re going to try to compete head to head on the cloud. We’re going to go in together.” And that kind of collaboration and cooperation was what I was talking about before.
So congrats on all the steps. Sounds like there’s still work to be done. Let’s ask a little bit of a fun question to wrap this interview up, Rob. All right, we’re coming to the end of 2022. I can’t believe this because I literally remember the interview we had a year ago like it was yesterday. We’re aging quickly, what do they say? “The days go slow, but the years go fast.” So as we close out 2022 in your first year, what are you most proud of and what can you share about what your direction is going to be for you, your team, and IBM in 2023?
Rob Thomas:
Look, I’m most proud of getting IBM back to growth. And it wasn’t me, it was the whole collective IBM team, but double digit two quarters in a row I think is a good sign. Doesn’t mean there’s not more work to do, but I think the world is better with a strong IBM. So I feel really good about that. In terms of what’s coming, this is going to be boring, it’s going to be more of the same. We’re not changing the strategy, we’re hybrid cloud and AI. We’re going to double down on data automation and security and hybrid cloud to support that. We’ve got a great team of consulting, IBM consulting, delivering business transformation, hybrid cloud services. So it’s going to be boringly consistent, which I think is the most important thing for us right now, which is we had to find ourselves. Where do we really fit in helping clients as they go through digital transformation, as they’re working through multi-cloud and hybrid cloud.
So, don’t want to change any of that, want to keep going, do more of it, more client engineering, more customer success. We’re going to keep doing the things that people seem to be responding positively to. And then, we double down on working with partners. Back to your point, we have built a great relationship with both AWS and with Microsoft running our software on their cloud, infrastructure, consulting partnerships, working with large, other software companies, SAP, Salesforce, Adobe to name a few, working with other global systems integrators, Accenture, Deloitte, E&Y. This is really about IBM becoming partner first in everything that we do. So we’re going to continue that as well.
Daniel Newman:
Well, Rob, that’s really exciting. And let me tell you, you said boring, I said exciting. Why did that happen? Because I think the streets, and I think your customers are all really thrilled to see a double digit growth at constant currency IBM. We all remember the multi quarters of sort of contract are flat. And I think people found that boring. Maybe not people writing the challenging headlines, but if you’re an investor or if you’re a customer or you’re a partner, companies looking healthier, it’s looking more focused. You start to see the strategy that leaders like yourself, and of course, Arvin is presented, you’re like, “Oh, I can see it now.” And by the way, there was a long period of time where it wasn’t abundantly obvious. And so, as it starts to become more clear, people know how to engage, they know what you’re looking for, they know what you offer to the market. And I think that serves as a bit of a tailwind heading into a tough market even more so.
So I would say exciting and congratulations, there’s nothing boring about success as far as I’m concerned. So, Rob Thomas, IBM, thank you so much for joining me for this edition of The Six Five Podcast Inside Edition. We appreciate your partnership, we appreciate IBM for joining. Let’s have you back on soon.
Rob Thomas:
Sounds great, Daniel, great to see you. Thank you for everything you do.
Daniel Newman:
So everyone out there, you heard it here, hit that subscribe button for more episodes of the Insider Edition. And of course, check out the show notes, you can see links to the embedded AI announcement we talked about today, and we’ll make sure you can learn more about IBM. We’ll also throw some links to those quarterly results that we talked about throughout this episode. Got to say goodbye for now though. So, thanks for tuning in, we appreciate all of you. We’ll see you later.
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Author Information
Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.
From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.
A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.
An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.
