IBM results reveal hybrid emphasis and virtual garages

IBM has reported revenue of $17.6bn, down 3.4% for the first quarter of 2020. The company posted 5% growth in its cloud and cognitive software business – which includes Red Hat – cognitive applications, and transaction processing platforms to $5.2. Revenue across its cloud business grew 19% to $5.4bn.

“IBM remains focused on helping our clients adapt to the immediate challenges of the Covid-19 pandemic, while we continue to enable them to shift their mission-critical workloads to hybrid cloud and expand their use of AI [artificial intelligence] to help transform their operations,” said Arvind Krishna, IBM chief executive officer.

“Our first-quarter performance in cloud is a reflection of the trust clients place in IBM’s technology and expertise today, and positions us to continue building an enduring hybrid cloud platform for the future.”

In a transcript of the earnings call, posted on the Seeking Alpha financial blogging site, Krishna described how the company had a mission to deepen its understanding of clients’ journey to hybrid cloud and AI.

He described hybrid cloud as IBM’s fourth platform, and said: “We remain obsessed with continually delighting clients. And we further established IBM as the gold standard for good tech. All these are underpinned by our culture that fosters growth and an entrepreneurial mindset. I see these as our collective priorities.”

Discussing the emphasis on cloud and AI, Krishna said: “IBM has already built three enduring platforms, mainframe, services and middleware. The fourth one is hybrid cloud.

“Clients, however, need more than a platform. They need a deep industry expertise. This is why the services that clients rely on to build and manage the hybrid cloud platform is a massive opportunity for IBM. It’s nearly half of the $1.2tn hybrid cloud opportunity.”

During the earnings call, CFO Jim Kavanaugh explained how IBM was supporting its customers during the pandemic. “I can tell you that in India, we had over 98% of our practitioners working remotely within 48 hours of lockdown,” he said.

“As we look forward, we have a solid base of business and a growing backlog, though in the near term, we expect customers to continue to delay and re-plan some projects.

“We are going to continue to prudently manage the business by leveraging our variable and global delivery resource model, to ensure utilisation is balanced with the rate and pace of backlog consumption and new deals.”

Krishna said that IBM services teams were operating virtual garages. “A garage used to be where we would have our consultants and our implementers sit side-by-side with our client and go do those,” he said.

“But, when you do have social distancing and it’s not just us, our clients don’t really want us on-premise either, they have now become virtual garages.”

Krishna claimed that the advantage of working this way means that clients gain access to skills that are around the globe.