Apple and IBM, a view from the peanut gallery


Apple and IBM are both companies I hold in great esteem – in the top 5 of all companies I care about. I worked at IBM for a long time, and I own a lot of Apple devices. I have small investments in the stocks of both companies . My day job is to make partners successful for my employer MongoDB – so any enterprise alliance news is something I look at as a learning opportunity  Naturally it picked my interest significantly when I heard the announcement . My instinct was to say “Wow Ginnie scored big”. So, here are my thoughts on the alliance – strictly my personal views and not that of current or past employers.

There is very little in common between IBM and Apple to begin with.

1. Apple is a much more prosperous company than IBM – be it Market cap, revenue or margins. And its no secret that Apple is the senior partner in the relationship. IBM’s CEO flew to CA to do the announcement with Apple’s CEO, and not the other way around. If this happened in IBM’s prime years, Tim Cook would have landed in JFK and taken a limo to Armonk 🙂

2. Apple is more prosperous than IBM with MUCH less employees than IBM has. On top of that the IBM internal organization is heavily matrix oriented to take care of its complex business. It would take some Eisenhower-esque leadership to get all the right teams focused on this initiative. (But honestly, I am not all that worried since I know first hand that when it comes to leadership, IBM has some of the best in the corporate world in their ranks.)

3. Apple is extremely focused – it has a much smaller portfolio around which this massive empire has been built. IBM portfolio is like encyclopedia Brittanica in comparison 🙂 . When I looked at the joint announcement first – I smiled thinking “wow you could not have expressed in a more cover-all-bases generic way”. 

4. Apple makes money from hardware and IBM has been steadily divesting hardware business

5. Apple provides a workplace that is cutting edge and has an awesome cafeteria – IBM to my knowledge does not even provide free coffee to its employees . Apple prefers jeans and IBM prefers suits. The impedance mismatch in culture is palpable.

6. Although several employees at IBM use Apple devices in a BYOD mode, the company standard issue has always been a thinkpad laptop, and not a Mac.

Why does this alliance make sense ?

Just like with the law of magnetism in physics – opposite poles attract !

1. Apple is a company that thrives on innovation. But they need something to keep the market happy during the time taken between innovations. IBM opens the doors to the top enterprises – voila, a whole new addressable market delivered on a platter.

2. IBM services is pretty good at production support and maintenance. Many large companies have outsourced support to IBM – and combine Apple care with what they do today, there is a clean new upsell package for IBM GBS and GTS. 

3. People don’t give enough credit for IBM’s design investments. IBM has a solid design team that does an amazing job – the most famous being the public facing sporting events like US Open. So when it comes to creating the 100 apps – design is something that IBM can rely on being a differentiator. Same goes for advertising – IBM makes some pretty impressive ads. I am thoroughly enjoying the ones I am seeing during US Open, although I don’t see any mention of the Apple collaboration in any of them. 

4. IBM has an asset that they don’t seem to be able to use effectively so far – that is IBM Watson. It frustrates me to no end seeing IBM take incremental steps in pushing Watson. I think this partnership is the most fantastic way for Watson team to push its case before the biggest corporations on the planet. A Watson on every iPad ! . In fact I think rather than do the generic announcement they did – I would have preferred to see 100% of the focus on just Watson and Applecare for the enterprise. The rest seem like noise to me

5. IBM has strong alliances with many ISV partners like SAP, Oracle, MongoDB etc. And most enterprises already use solutions from these ISVs. IBM has a great opportunity to further the value of Apple alliance by building apps around what enterprises already have. 

6. IBM has sheer size in its favor . A massive overhaul of enterprise tech landscapes need armies of consultants. Apple does not have that army, and can’t recruit fast enough even if god forbid they want to do it. That is a huge advantage for this alliance. 

And finally, what is the big risk factor ?

This is largely a Global Business Services (GBS) led effort if I understood it correctly from the announcements. GBS is a well managed machine with extremely low bench at any given point. So if a massive investment is needed in headcount , time and budget – it will need to be taken away from billable engagements. That is a really hard thing to do unless another part of IBM can pick up the slack to bring in the money to keep investors happy. The only viable division that can pick up slack is the software group. Since Ginnie did not reset Sam’s 2015 EPS roadmap – IBM cannot take a lot of risk on losing focus on existing revenue and bottom line. That in my mind is what the risk is – there is a significant upside in the long term if everything works out well , but it needs making big bets in rejiggering the existing business for IBM. 

If IBM won’t take that risk ( and I REALLY hope that they will take the risk, and convince investors to cut them some slack) – then it will be business as usual for both companies, and this will be yet another partnership announcement that did not pan out. 

 

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4 thoughts on “Apple and IBM, a view from the peanut gallery

  1. Thanks for posting your thoughts on this, it was a good read. I’ve been thinking about the partnership myself quite a bit as I find it a fascinating partnership in terms of potential and culture clash. Your post has helped clarify some of my own thoughts. Regarding the risk to margins of pulling GBS consultants away from paying engagements, I don’t see why this has to be a major issue.

    I’d imagine in the work done to date to ink the deal, IBM senior management have outlined internally some level of framework within which new Applecare-style support agreements could work. After all, they probably had to agree some key points with Apple as part of this deal (on this point I’m still quite unclear though – there’s been a notable absence of concrete details forthcoming). From there, GBS leadership within each individual client could tailor this to a site-specific proposal. It may not even need a large amount of pre-sales work in a lot of cases; after all, IBM wouldn’t have gone to this trouble if they hadn’t seen the opportunity. I can imagine clients having asked IBM for a while now to help them with their BYOD admin headaches. This is even becoming a real issue within the major consultancies themselves, never mind the enterprises they serve (an entire separate post is warranted to discuss why internal IT tools and services are so awful in so many of the consultancies, something I have both strong feelings and strong opinions about).

    Sure, there will inevitably be some upfront investment needed but it may not happen with their largest clients all at the same time, and as you say, the payoff could be substantial.

    I’d be interested in hearing you expand a little more on this specific point, if you had the time.

    Like

  2. Thanks for posting your thoughts on this, it was a good read. I’ve been thinking about the partnership myself quite a bit as I find it a fascinating partnership in terms of potential and culture clash. Your post has helped clarify some of my own thoughts. Regarding the risk to margins of pulling GBS consultants away from paying engagements, I don’t see why this has to be a major issue.

    I’d imagine in the work done to date to ink the deal, IBM senior management have outlined internally some level of framework within which new Applecare-style support agreements could work. After all, they probably had to agree some key points with Apple as part of this deal (on this point I’m still quite unclear though – there’s been a notable absence of concrete details forthcoming). From there, GBS leadership within each individual client could tailor this to a site-specific proposal. It may not even need a large amount of pre-sales work in a lot of cases; after all, IBM wouldn’t have gone to this trouble if they hadn’t seen the opportunity. I can imagine clients having asked IBM for a while now to help them with their BYOD admin headaches. This is even becoming a real issue within the major consultancies themselves, never mind the enterprises they serve (an entire separate post is warranted to discuss why internal IT tools and services are so awful in so many of the consultancies, something I have both strong feelings and strong opinions about).

    Sure, there will inevitably be some upfront investment needed but it may not happen with their largest clients all at the same time, and as you say, the payoff could be substantial.

    I’d be interested in hearing you expand a little more on this specific point, if you had the time.

    Like

    • 1. IBM has not done AppleCare or Apple specific app development at scale before . So some significant presales is unavoidable in my opinion

      2. I don’t think customers will pay for app development in a project mode . So 100 apps need to be developed first – to some shape at least – before customers pay . That needs chargeable resources pulled from somewhere . Given this announcement happened mid year and budgets would have been fixed at beginning of year – GBS ops managers will need to make a call on where to pull resources from

      3. Then there is training . Apple app development is not a core skill for an SI . So a lot of people need to be sent for training – which also takes people away from chargeable gigs

      But all said and done – I still think it is a risk worth taking

      Like

      • Sure, and I agree with all of that regarding app development. Apologies if I was unclear but I was talking specifically about the Applecare-type support at enterprise scale, not the app development (which absolutely would need significant investment, yes). They may not have done Applecare before but they’ve certainly done large-scale support contracts for hardware, software and services before. The main difference I see would thus be in what they can agree with Apple in their partnership, as I said. What else would be so different about this aspect of the partnership to what IBM have experienced in the past?

        Like

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