IBM seems to have everything , but TIME


IBM is a good case study for balancing out everyone singing the “transformation is cool” tune . Transformation is utterly painful – almost directly proportional to the size of the company .

So IBM announced its Q1 results and no surprises there – HW business is not in good health , and software and services are not exactly stellar either .
But that is the top line story . Bottom line – or specifically EPS, is a different story . EPS continues to grow as IBM promised in its plan .

Several people commented today that The best days of IBM are behind them . I actually think the opposite is true . I think IBM will come back with a roar in couple of years .

Why do I think so ? For two reasons primarily

1. Look at their investments in last couple of years while their top line was shrinking . They formed the Watson group – and put their best leaders in charge of growing it . They bought Softlayer and are moving full speed to make it the base of their cloud strategy up and down the stack . They partnered well with growing technologies ( capitalized on Hana momentum from SAP on the hardware side – and yes they sold it off to Lenovo , supported MongoDB API in DB2, etc) . They haven’t let the slow down on top line from affecting their investments – that is how IBM works . They bet on the long term and don’t panic (at least in public). On top of that they continue to invest heavily in their research capabilities . iBM spends more money on research than many hot shot companies make in revenue .

2. They have a very deep leadership bench – and has the brand and money to attract more leaders if needed . This is by far the most important reason for me to believe IBM will come back with a roar . There aren’t a lot of leaders of the caliber of Ginni Rommety , Steve Mills etc. The people working for them are equally talented and it goes a few layers deep . And if that is not enough – they have plenty of cash and brand value to attract away most top leaders from other companies .

So what is it that IBM doesn’t have ?
They don’t have time on their side !

Investors are not always a patient bunch . On the bright side , people buy IBM for guaranteed dividends and long term appreciation . Come what may – I am sure IBM has enough capability to squeeze costs to make earnings promises be made good . But if the investment community doesn’t show patience – they might have to cut deeper than necessary to deliver and that helps no one .

As much as I care for IBM – I feel terrible every time they let go of people, since I have a lot of friends who work there . And in every round, some of them get affected . That makes it difficult for me to justify what looks like a good decision on economic front . That does not do IBM any long term good – a business is only as good as the people who work there, and not just the leaders . But that is the price to pay when IBM does not have time on its side .

For the sake of all my friends who still work there , and for my own sake as an ex-IBMer who cares for the company – I hope that IBM can buy some time to make its come back and not cut much more deep into its payroll to deliver on its commitments to the street .

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2 thoughts on “IBM seems to have everything , but TIME

  1. Pingback: Enterprise hits & misses – April 21 | Travel Gadget Blog

  2. A few challenges I see here Vijay beyond WS.

    I think it’s been 8 quarters of declining revenue while other companies and sectors are seeing significant growth. While doubt much question exists that bench is deep, they were late to recognize the fundamental changes taking place in service automation, cutting to the core of their business model. I clearly recall when the same company did the same thing, telling everyone it would was temporary, and they DID have the deepest bench in the world at the time–and few competitors, but almost killed the company. While the situation is much different today, and I would agree that nothing as radical as that is needed, it’s still a historic, fundamental generational shift requiring deep changes to the business model. And that change clearly translates to fewer people in IT services so that customers can expand and grow. The actual growth numbers I’ve seen are just super clear on trajectory of the industry. IBMs revenues appear to be very clear and confirming.

    I agree with the headline–lack of time, and if the company were punished severely for one or two quarters by investors, I’d be among first out there yelling unfair, but that’s not what I see. What I see are competitors moving with far more speed and agility in the right direction. Even some large service and hardware companies that compete with IBM are seeing solid growth in revenue. To be fair, we should have seen more significant movement by now given trajectory, breadth and depth of technology, products, and relationships. More fundamental change is occurring, and it’s the core of the business model. KR, MM

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