Digital Transformation – Will IBM Attain its Aspirational Leadership Position? | Sherpas in Blue Shirts

Posted On June 15, 2015

Everest Group had the opportunity to attend IBM’s APAC analyst day in India on 11-12 June 2015. Business and technology leaders from IBM presented their offering portfolio, demos, and real life transformative case studies with active participation from their clients. One thing that stood out was how Big Blue is communicating not only its technology vision, offerings, and organizational commitment toward open technologies, but also its internal transformation to serve clients and reclaim its technology leadership position. It realizes that the “old IBM” ways will no longer work, and it needs to become more nimble and innovative, and play an important part in shaping the technology disruption the digital age has brought onto us.

What’s happening?

Earlier this year, IBM aligned its go-to-market strategy around key industry verticals. It also created internal structures to make myriad of its offerings, technology groups, services business, sales and marketing, and its research lab work in sync. It believes this will help create solutions that are required to leverage digital technologies, and thereby not only redefine itself, but also create a new ecosystem of product and service providers around it.

Going back in the history, IBM truly transformed the technology industry when it invented the Mainframe. And while today’s technology becomes tomorrow’s legacy, no one can deny that the Mainframe was a historical system that shaped and created the technology industry as we know it today.

However, since then, IBM became a nuts and bolts company providing middleware, desktops, and back-end efficiency solutions focused on enterprise computing. While it did introduce incremental innovation and acquire many technology companies, it did not play a meaningful role in shaping the industry vision. It continued to invest in its research labs, and its products were always considered leaders in enterprise computing. But it hasn’t been a leader in true enterprise technology transformations such as the rise of ERP, virtualization, SaaS, or IaaS.

This has changed. The analyst meeting demonstrated that digital has become the new pivot around which IBM will take back its earlier pedestal position of being the company that forms, shapes, and guides the technology industry. This story was ably supported by multiple client interactions during the event. Clients say that this is not the IBM they had earlier worked with, or had expected to work with.

IBM’s much publicized partnerships with digital native firms like Facebook and Twitter, and leading user experience and design companies such as Apple, are an important but small part of its digital journey. The bigger part is moving away from its traditional way of working, and realizing that it must play a key role in the digital everywhere environment. Its increased focus and core commitment toward open technologies is highly apparent. And it has always had the technology, scale, and reach to transform businesses. Now, the muscle it’s putting behind Softlayer and BlueMix, its mobility play, and its investments in analytics, the Internet of Things (IoT), and Watson have the potential to transform not only its clients but itself as well.

Is there any challenge?

With its go-to-market alignment with industry verticals, IBM can bring effective solutions to clients looking to transform their businesses. However, disruption in most industries is happening from the outside, (e.g., Uber to the taxi industry, Airbnb to hospitality, Apple Pay to banks, and Google cars to automotive), rather than within. Therefore, a rigid structure around industries may not work well. IBM will need to ensure that its technology, industry verticals, and innovation groups talk to each other, an area where it has historically struggled.

Moreover, monetization of some of these innovations will be a long, drawn out process. IBM has had significant growth challenges, and has shed many of its businesses. For its growth and profitability to return –which should be the big drivers along with reclaiming its innovator status – IBM has to do a lot more. It has historically been viewed as a company that helps clients’ operations run more efficiently; it now needs to carefully position and communicate its willingness and ability to partner in clients’ growth.

Where does IBM go from here?

In addition to the digital technologies IBM possesses, other of its strong strategic initiatives include: internal transformation around reskilling the workforce toward innovation and design thinking; commitment to open technologies; collaborative alignment between its services business and its technology groups; renewed commitment toward client centricity; improved sales effectiveness; and focus on solving core industry problems.

IBM’s changes have been pushed right from the CEO’s office, and IBM executives believe results will be visible in the next 6 to 12 months. IBM needs to play a dual role in which it helps some clients disrupt their industries and business models, and assists others sail through the digital disruption. It again needs to become a technology innovator. While it’s a difficult task, we believe it has the needed technology, vision, and now internal alignment to achieve these objectives.

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