IBM(NYSE:IBM) has decided to transform its 109-year-old model of business and shift its focus towards artificial intelligence and cloud computing. IBM, a leading IT company has been facing downfall due to various foul decisions. However, it is all set to make a comeback by focusing on their cloud computing segment. Dive in to know more if this move will back-up IBM and help it to retrieve its old stardom.
Analysis of IBM (NYSE:IBM)’s New Business Approach
Also known as Big Blue, International Business Machines needed a change in their business approach. As other tech companies have changed their business approaches with time and have observed a profit, IBM (NYSE:IBM)’s revenue has only crumbled down.
IBM’s recent move of spinning-off the managed infrastructure services of the company can prove to be a smart one. It will help IBM to discard the segment of business that’s fetching low revenue and will help focus on expanding its new segment, cloud computing.
With the aim of creating a better business model, Arvind Krishna was appointed as the new CEO of IBM (NYSE:IBM). According to the new CEO, a business model focused on artificial intelligence and cloud computing is apt for IBM to get into the market again.
Cloud Technology is much favored among companies as it lets one rent data storage space rather than buying physical hardware with a lump sum amount. As software sales and server business dwindle, this new approach may be considered good.
What About The Infrastructure Services Business of IBM (NYSE:IBM)?
Last year, the infrastructure services business managed $19billion sales along with a current $60billion backlog. After the spin-off, a newly public company will emerge with ‘NewCo’ as the working title.
As per IBM (NYSA:IBM), the entire IBM Global Technology Services and its existing clients will be owned by NewCo. This includes 4,600 accounts and nearly 75% of the Fortune 100. Companies around the world will be offered cloud migration services, infrastructure updates and network services by NewCo.
By 2020 end, IBM should be ready with its new approach which will help them get into a partnership with cloud vendors across the globe and ultimately increase its revenues.
IBM(NYSE:IBM)’s Cloud Business
The announcement has interested the investors as there was a 6% increase in IBM(NYSE:IBM)’s share after the news broke. IBM already entered the game in 2019 when they acquired Red Hat for $33 billion. The recent announcement is proof of IBM’s seriousness in creating cloud and artificial intelligence solutions.
Investors should welcome the move with open arms considering the high revenues the cloud software companies are seeing. As per IBM (NYSE:IBM), the hybrid cloud space makes way for a market opportunity of $1trillion.