Systems Are The Table Stakes For IBM’s Evolution
#BigBlue does not participate in any meaningful sense in the booming market for infrastructure for the massive hyperscale and public cloud buildout that is transforming the face of the IT business. But the company is still a bellwether for computing at large enterprises, and its efforts to – once again – transform itself to address the very different needs that companies have compared to a decade or two ago are fascinating to contemplate. In a very real way, the manner that #IBM talks about its own business these days, which is very different from how it described the rising and falling of its revenues and profits across its vast conglomerate, is a reflection of how it sees the future of business computing, particularly among the Global 2000 customers who now, after many divestitures in the past decade, represent the lion’s share of its revenue stream. It is as much a forward looking statement, using the language of Wall Street, as it is a measure of current performance in its own business. On the whole, IBM’s top line revenues have been dropping steadily for a very long time, even with acquisitions and adjusting the businesses to take out the effects of divestitures, and in the second quarter of 2016, the overall trend continued, with revenues dropping 2.8 percent to $20.24 billion and net income down 27.4 percent to $2.5 billion. While IBM’s chief financial officer, Martin Schroeter, can and did declare that Big Blue was ahead of many of its goals in terms of transforming its business from supplying a wide variety of servers and systems software to supplying more infrastructure and applications over its #SoftLayer cloud, the IBM that many of us remember after its near-death experience in the early 1990s – the one that consistently had single digit revenue growth and double digit profit growth once it righted itself a few years later during the dot-com boom – is long gone. The thing about IBM – and now Microsoft – is that you can’t count it out so easily. Both companies could find better footing and both have vast customer bases that can reinvigorate them. That said, #VMware, which sells software to make virtual machines on X86 iron, is about a third the size of Big Blue and arguably has at least one or maybe closer to two orders of magnitude more active customers.