There’s lots of talk about what’s wrong with IBM, lots of opinions about how the strategies of the old CEOs undermined today’s IBM, and just as many about the company’s lack of vision. Unless you’re in the technology trenches, you probably don’t know how emotional these discussions can get: there are lots of IBM lovers and haters who are not afraid to express their thoughts about what went wrong and how to “fix” IBM.
In my fantasy consultant league I’ve selected myself to define IBM’s future. But before you read what follows, note that I think a major makeover – not a slight overhaul – is required, so no tune-ups or oil changes are suggested. There’s no nibbling around the edges of the business model, no “evolutionary” suggestions and definitely no assumptions that the future will in any way resemble the past.
IBM is misaligned with consumer and corporate computing trends.
It’s operating flawlessly in the 1990s.
The nature of the relationship between personal and professional “business” and all forms of digital technology has forever changed. IBM needs to embrace these changes and radically change its business model and processes. It’s a platitude to even say things like “it’s not your father’s IBM, anymore,” but sometimes platitudes can be helpful, especially when they’re negative, which this one is.
What dominates emerging business models are the themes of continuity, pervasiveness, real-time location and currency. Business models now “travel,” are always open and proactively/reactively locate/widen/deepen/connect/accept/service/reject through analytics. Technology has made this possible as well as the digital management processes around tracking, selling and servicing customers wherever and whenever they might be. The same is true about supply chain planning and management, and product/service distribution. There are new proactive/reactive analytics-driven ways to find, track and attract employees, suppliers, distributors and customers. All business is global, and transactions will largely be automated – even when crowd-sourced, subscribed, auctioned and exchanged.
Perhaps most importantly, the distinction between personal and professional “business” has disappeared.
If you pass IBM’s solutions, products and services through the above business model filters, how well do they do?
Technology will continue to personalize and consumerize and will continue to find almost immediate personal and corporate adoption. Wearable devices enable location-based services. The cloud stores everything personal and professional. Devices provide different screens to different employees, suppliers and customers. Social media – the world's new continuous, always-on portal – provides insights, ideas, reactions and prescriptions to all business models. Open source APIs will give us technology integration and interoperability – in spite of lingering proprietary vendor efforts to derail seamlessness. The internet-of-things (IOT) includes smart sensor technology, wireless technologies and technologies that learn from “their travels.” Gaming technology, supplemented by augmented reality, visualization, wearable technology, and supporting technology architectures and platforms all represent new and exploding markets – many of which are unfamiliar to IBM.
Here too the distinction between personal and professional technology has vanished.
If you pass IBM’s solutions, products and services through the above technology filters, how well do they do?
IBM’s Solutions, Products & Services – Revisited & Revised
Let’s start with what IBM offers today. The list below is from the IBM website. The cross-outs – the products and services that IBM should slowly-but-surely abandon – are mine:
Industries & Solutions
- Analytics
- Asset management
- Application infrastructure
- Big Data
- Business Process Management
- Cloud Computing
- Commerce
- Connectivity and integration
- Continuous engineering
- Data management
- Data warehousing
- DevOps
- Digital experience
- Energy and environment
- Enterprise content management
- Enterprise modernization
- Enterprise resource planning
- Enterprise Social and Mail
- Expert Integrated Systems
- IBM Security
- Marketing
- Mobile Enterprise
- Procurement
- Service oriented architecture (SOA)
- Smarter Computing
- Systems and software engineering
- Talent management
- Unified communications
- Virtualization
Services
Business Services
- Application Innovation
- Business Analytics & Strategy
- IBM Interactive Experience
- All business services
Global Technology Services
- Cloud Services
- Mobility Services
- Networking Services
- Outsourcing and Managed Services
- Resiliency Services
- Security Services
- Site and Data Center Services
- Systems Services
- Technical Support Services
Outsourcing services
- Application management
- Global process services
- IT infrastructure services
- IT outsourcing
Training
- Offerings
- Certification
- Conferences & events
Additional services
- Systems lab services
- Consulting alliances
- IT services financing
- Mobile enterprise services
- Project financing
- Working capital
- All services
Products
Software
- Business Analytics (Cognos, SPSS)
- Cloud & Smarter Infrastructure (Tivoli)
- Downloads
- Enterprise content management
- IBM Platform Computing
- Information management (DB2, Informix, InfoSphere)
- Lotus (collaboration)
- Rational (software and systems delivery)
- IBM Security
- WebSphere (integration and optimization)
- z Systems software
Systems
- PureSystems
- Power Systems (AIX, IBM i, Linux)
- z Systems mainframe
- System x (xSeries)
- IBM Flex System and BladeCenter
- UNIX servers
- Systems software
- System networking
Storage
- Disk systems
- Flash systems
- Tape systems
- Storage software
- Storage area networks
- Network attached storage
Additional Products
- Certified used servers and storage
- Certified used PCs for businesses/schools
- Point of sale
- Semiconductors
- Upgrades, accessories and parts
- Hardware financing
- Software financing
- Financing for medium business
Technical Support
- Support Portal
- Documentation
- Forums, Blogs & Social Media
- Service Requests & PMRs
- Service Registrations
- Warranties & Licenses
- Explore IBM Electronic Support
Developer Support
- developerWorks
- Emerging Technologies
- Design at IBM
- Human ability and accessibility
- Information centers and libraries
- Redbooks
Customer Support
- Agreements
- Contracts
- Order Status, Shipment
- Inventory, Maintenance Status
- Invoices, Payments
- FAQs
Supplier Support
- Supplier World Portal
Former IBM Products
- Printing systems from InfoPrint
- Lenovo ThinkPads and ThinkCentres
- Ultrastar, Deskstar, Travelstar, Microdrive storage
IBM is way too many things to too few customers – especially too few consumer customers. The above list of solutions, services and products is so complicated that many IBM customers in one silo have no idea that there are twenty other silos in which they might find solutions, services and products. Companies that have known IBM as an infrastructure outsourcer, for example, have little or no knowledge about what Watson’s up to. Many of them have barely even heard of Watson, except that once upon a time – in 2011 – he defeated Ken Jennings at Jeopardy. (They have all heard of Ken Jennings.)
IBM conducts too much low margin business and does way too little in the emerging business technology areas, like mobile applications, in spite of deals with companies like Apple. It’s also not perceived as a competitor to the major consulting houses. It has way too large a footprint in enterprise software and outsourcing services which because of consumerization, BYOD and cloud adoption trends are becoming less important, more commoditized and therefore less profitable. It’s time to withdraw from the business that sustained IBM for decades. It should not sell servers or system software. It should not sell storage, except as part of its cloud offerings. It should not be in the break-and-fix business.
Put another way, IBM should sell its plumbing franchise to Capgemini, Infosys, HCL or CSC (other companies, by the way, that need makeovers). They might pay a lot for IBM’s clients and the multi-year contracts IBM owns, and with all the cash from the sale, IBM could start spending in whole new areas.
What IBM Should Do
IBM is still rich. It’s market cap is somewhere in the range of a $160B (down from $240B in 2012). It has cash and other assets to leverage.
IBM should go on a buying spree, the kind that kids launch when they get too much money for their birthdays or graduation. Or when they’ve had too much to drink. Maybe that’s what it takes to get some Boards to act.
For starters, how about Willowtree and Electronic Arts (EA)? IBM should also buy McKinsey or A.T. Kearney. Yes, it should also buy Accenture (but should quickly sell Accenture’s plumbing franchise). (Can you imagine the integration of IBM and Accenture? Sworn enemies become friends – for the good of the stock, of course.)
IBM should buy Accenture because IBM needs to dramatically improve its consulting capabilities and because Accenture has amazing client logos and vendor-partner relationships. Much of IBM’s old business was “assumed,” that is, everyone needed hardware, software and basic services. There was no mystery there and IBM responded with solid basic services across multiple vertical industries. But next generation clients will require a different set of services and products. Digital transformation will be continuous. Strategic and management consulting firms like McKinsey and Kearney therefore become essential to any makeover strategy (as well as the makeover strategies of clients).
IBM should buy Willowtree (and several other mobile application developers) because consumer and business mobile app demand will steadily increase. The acquisition of EA will punctuate IBM’s commitment to the consumer market and the exploding gaming industry.
IBM should also double-down on Watson. “Watson” is a growing brand, but it’s diffuse. Watson should focus squarely on digital intelligence. Watson should focus on digital reasoning driven by real-time analytics around the integration of structured and unstructured data.
Much of the future will belong to big data predictive analytics. Watson should be the spokesperson for IBM’s dominance in the field. In order to dominate, IBM should invest whatever it takes to create the word association that “IBM = analytics.” If I were in charge, I’d buy Tableau and SAS (they already have Cognos and SPSS, but Tableau and SAS would round out things nicely).
IBM must continue to invest heavily in cloud computing. It’s a control thing. While cloud delivery models often generate low margins, they also represent a necessary foothold for major technology companies, and with the right cloud-based applications (across channeled IaaS, SaaS and PaaS applications), margins can increase. Said differently, you get to consult with Dr. Watson only if you enter the IBM cloud. Land-and-expand. Stickiness. Cloud architecture is lead-generation, especially for small and medium-sized companies.
IBM should move aggressively into the consumer business! If personal and professional computing is converging – which it is – then how can a company behave as if they’re separate markets? Even Apple is acquiring business customers. IBM can start with agnostic consumer applications, personal clouds, mobile services and some unique approaches to security and privacy that they need to develop with the help of their newly acquired companies.
Human-computer interfaces will revolutionize the way everyone transacts digitally. IBM should invest heavily in HCI and acquire IDEO, though it should keep it at arms length to make sure that the IBM culture does not undermine IDEO’s innovations processes. IDEO/IBM should manage IBM’s entire innovation agenda.
Finally, IBM should enter the education and training space. It should buy Blackboard and Bisk. It should also buy Udemy. IBM should also start its own accredited university modeled after the Stevens Institute of Technology and Technion, the Israel Institute of Technology. Yes, that’s right. IBM should create its own university comprised of face-to-face and online degree programs. It should lead the US in STEM (science, technology, engineering and mathematics) education and training and create its own employees through a series of innovative entrepreneurial majors designed by IBM and its new, growing family. Admission standards should be high and tuition should be competitive. IBM employees and their families should receive free degrees from the new university, which should be tiered by research and practice. IDEO/IBM should work closely with the University of IBM. Key innovators at IBM should teach at the university.
The new IBM should offer the following:
Consulting
- Strategic Planning
- Digital Transformation
- All Process Modeling
- Emerging Technology Optimization
- Innovation …
Business Technology Solutions
- Mobile Applications
- Business Cloud Services
- Security & Privacy Services
- Business Analytics & Automation
- Location-Based Services
- Internet-of-Things (IOT)
- Adaptive Interfaces …
Personal Technology Solutions
- Gaming
- Mobile Applications
- Security & Privacy Services
- Personal Cloud Services
- Personal Analytics …
Education & Training
- Certifications
- Undergraduate & Graduate Degrees
Support
- Support Portal
- Forums, Blogs & Social Media
- Warranties & Licenses
- Invoices, Payments
- Supplier World Portal …
Now or Inevitably
The good news about the proposed makeover is the talent IBM will acquire from the acquisitions. Instead of taking years to fire-and-hire the right people or identify the right products, services and solutions, many employees would go to Capgemini or HCL and many more would come with the acquisitions. There’s no better or faster way to affect change than to redefine the business model through the aggressive acquisition of people, customers, products and services.
If IBM tries to gradually evolve or tweak its solutions, products and services over many years, time will pass, revenues will fall and profitability will disappear. IBM will become increasingly irrelevant as our personal and professional lives seamlessly blend.
At some point, IBM will have to reimagine itself. It might as well be now.
