Dive Brief:
- IBM’s hybrid cloud revenue topped $22 billion last year, an increase of 11% over the previous year, the tech company said in its FY-2022 Q4 earnings report for the period ending Dec. 31.
- There were some growing pains as it shifted toward a hybrid cloud business strategy. Overall revenue was flat year over year, the report said, supported by modest revenue growth in the company’s largest segments: software, consulting and infrastructure, up 3%, .5% and 2%, respectively.
- “Our approach to hybrid cloud is platform-centric,” Jim Kavanaugh, IBM’s CFO, said during a Wednesday earnings call. “As we land a platform, we get a multiplier effect across software, consulting and infrastructure.”
Dive Insight:
Software and consulting accounted for nearly three-quarters of total revenue for the 100-year-old company, which for decades dominated the mainframe computing market.
IBM rolled out its newest mainframe, the z16, in April, which helped boost z Systems revenue by 16% year over year, contributing to $4.5 in the infrastructure segment's quarterly revenues.
Yet z16 performance was a footnote in what CEO Arvind Krishna characterized as “the first full year of the new IBM,” during the earnings call.
“Hybrid cloud and AI are the two most transformative technologies for business today,” Krishna said, highlighting IBM’s expanded partnership with AWS, the growth of its revamped partnership program and its focus on AI, automation and data solutions for industry cloud applications.
Krishna, who rose to CEO in April 2020, has tried to make IBM more focused and leaner, Arun Chandrasekaran, distinguished VP analyst at Gartner, told CIO Dive.
The company has made more than 20 consulting and software acquisitions over the last two years, Chandrasekaran said, in part to dispel the perception that its consulting business was merely an extension of IBM products.
“If you want to be a successful consulting company, you need to be vendor neutral,” Chandrasekaran said.
IBM spun off its infrastructure services division Kyndryl in November 2021 and Watson Health in January. The company announced it was laying off 3,900 workers Wednesday as a result of those divestitures.
During the earnings call, Kavanaugh announced another cost-saving measure. “Due to advances in technology, we are making an accounting change to extend the useful life of our server and networking equipment effective the first of January,” Kavanaugh said.
Microsoft made a similar move in July for projected savings of $3.7 billion. IBM expects to bank $200 million over the next year, according to Kavanaugh.
