IBM InterConnect Delivers Clear View into Long-term Strategy
MAR 10, 2015 12:51 PM
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IBM InterConnect Delivers Clear View into Long-term Strategy 
 
By Stuart Williams 
 
Last year at Pulse, Steven Mills, executive vice president of IBM Software and Systems, and Robert LeBlanc, now senior vice president of IBM’s Cloud Unit, introduced a new vision for IBM’s software and cloud businesses: Align offerings to client needs, ship packaged products and services, and change the purchase experience from “blue suit” selling to include new self-service models. In the year that followed, IBM divested its x86 business, invested in building out SoftLayer cloud data centers, shipped multiple cloud-service versions of its offerings including Bluemix and Watson Analytics, and, most importantly, reorganized the internal groups around solution areas. 
 
Technology Business Research, Inc. InterConnect is a new customer event that integrates and replaces three smaller and product-focused IBM customer events: Pulse (mobile development), Innovate (software development) and Impact (cloud computing). The three-day analyst track portion of the conference, titled A New Way, had three core stories: A New Way to Think, A New Way to Work and A New Way Forward. LeBlanc has emerged as the single cloud leader IBM needs, appearing at the event with other solution-area senior vice presidents including Mike Rhodin, who leads IBM’s market-making Watson cognitive computing group, and Bob Picciano, who leads IBM Analytics.
 
Merging separate customer events into a single venue enables IBM to highlight the evident connections across cloud, mobile, analytics, cognitive computing, Internet of Things (IoT) and software development. The key message was how IT can support business transformation and competitiveness by using and combining these technologies to innovate or reinvent business processes. The offerings highlighted at the event showed IBM has made progress against the strategy laid out a year ago; however, much work remains.
 
What does it mean?
 
IBM is moving much more quickly in its reinvention and with more success than TBR anticipated. Clean execution of portfolio development and establishment of clear and consistent messaging are critical wins at this stage of transformation.
 
The difficult sales evolution has begun and requires building new internal skills and capabilities beyond selling to drive customer success from self-service through continuous deployment. IBM provided clear customer wins and examples of the value of the new offerings, which should start conversations with the traditional sales teams as well as create opportunities for more self-service business.
 
One theme missing across the event was how IBM Services can assist enterprises with a range of objectives, from building strategies for using the expanded portfolio, to integration, to successful utilization and business transformation.
 
IBM is clearly executing its strategy to exit low-margin, “empty calorie” businesses (as CEO Virginia Rometty describes them) and deliver higher-margin, innovative and business-critical products and services that meet the needs of IT and line-of-business (LOB) executives. Efforts in the past year focused on the portfolio and early shifts in the sales engine. InterConnect was a coming-out party for the new organizations to showcase to the largely IT-focused attendees their progress and how IBM enables them to create business value by deploying new and innovative technologies.
 
Customers
 
Customers should look to the new IBM self-service websites to trial new cloud-based versions of the portfolio. The expansion of this industry-critical best practice has begun, and we anticipate IBM will continue to expand its self-service cloud capabilities as well as its freemium pricing. This means shorter cycles for technology assessments and more time for handling change management.
 
Customers should demand more up-front assistance with defining how IBM can support business transformation. TBR research shows many enterprises face challenges in staying up-to-date on how the rapidly evolving technology landscape can best help them. Agile adoption is fine, but successful enterprises need business consulting on how best and where to invest in new technologies and how to capture business value.
 
Partners
 
The change in IBM’s go to market will impact resellers and hit them hard. Self-service models will expose IBM to more direct and continual contact with customers. IBM can capitalize on this by matching customers with partners best qualified to assist.
 
IBM consolidated its partner organizations into one group, and this should help partners if IBM provides an integrated experience. There is much work to be done as IBM grows its ecosystem. Sandy Carter, general manager of IBM Ecosystems and Social Business Evangelism, leads the new focus on developers and ISVs and uses an evangelical approach to building the base.
 
TBR believes this is a best practice in the cloud area but needs tempering for internal developers who work with more slowly paced cycles.
 
Competitors
 
IBM will build value lock-in through further commercialization of its cognitive computing, analytics and high-value assets to deliver tangible business value to its end customers. Competitors will have to demonstrate how competing solutions and IP deliver the same or better client results for the same or less money.
 
Despite its exit from several hardware segments, IBM remains a premier multiline vendor that competes with a range of offerings from management consulting to hardware. Competitors should realize IBM will seek out profit pools across its portfolio, walking away from lower-margin work if it does not serve a client’s broader or high-value transformations.
 
The disruptions in how vendors deliver — and how customers consume — IT intensify the notion of coopetition between IT vendors, particularly in the services space. For example, many consulting and systems integration firms had a presence at InterConnect, with CSC, Wipro, Infosys and Cognizant in full display at the convention center. Still, the end goal for IBM is to ensure its IP maintains de facto industry-standard status regardless of who delivers the services wrapped around it to guide customers on their journeys to a hybrid cloud computing environment.
 
Cloud and professional services views
 
Throughout the event, IBM spoke largely of using cloud and analytics technologies and solutions to help its customers and partners drive improved business outcomes. IBM made it a point to focus on the benefits of the solutions rather than the “speeds and feeds” and features of the solutions. Short demonstrations of how businesses can use Bluemix-based solutions or its new MobileFirst solutions — a modular platform that promotes application management to further mobile adoption among enterprises — were part of many of the keynote sessions, showing the usability, capabilities and possible outcomes as a result of deployment while explaining very succinctly the secure infrastructure in place underlying these solutions.
 
Aside from the features and capabilities of the solutions, IBM provided conference attendees examples of business use cases for improvements to day-to-day processes and activities.
IBM formally announced many new solutions during the event that advance its cloud portfolio and promote hybrid IT (i.e., the combination of on-premises, virtual, public cloud and/or private cloud environments). Furthering its global cloud expansion initiatives with SoftLayer data center rollouts, IBM announced the addition of two new data center deployments in Sydney and Montreal expected to open by the end of March, bringing IBM’s total of data center openings to five in the past four months. 
 
Additionally, IBM announced many additions to its hybrid cloud portfolio:
IBM Enterprise Containers: Docker-based solution that provides enterprises with added API functionality, application portability and security features
Orchestration: Service management layer to help clients extend into public cloud environments and manage entire hybrid environments 
Security: Uses analytics to protect applications and data across enterprise hybrid IT environments
Collaborative Operations: End-to-end view and control of hybrid environments
IBM DataWorks: Aimed at the developer community, allows for easier division and manipulation of data across public and private clouds
Secure Passport Gateway: Self-service tool for developers to connect to Bluemix through a Passport service that allows IT to retain control
API Harmony: Large base of APIs and API management
Bluemix Local: Extends Bluemix into enterprise data centers with fluid management across Bluemix environments, whether on premises, in public cloud or dedicated
Watson Zone: Based on Bluemix, brings Watson APIs, code, training resources and customer use cases for the development of hybrid cloud applications
 
On IBM’s 4Q14 earnings call, company executives highlighted the importance IBM will place on forging strategic partnerships throughout 2015 to broaden its capabilities and reach in key areas of core competencies. During the event, IBM announced cloud-centric partnerships with CSC and Tech Mahindra. With CSC, IBM is bringing its Bluemix platform to CSC’s developer ecosystem through CSC’s IBM Center of Excellence.
 
Furthermore, IBM and Tech Mahindra are partnering to better enable application development. The companies will work together to build an application development platform for developers to create cloud applications on Bluemix Dedicated, IBM’s single-tenant version of Bluemix.
 
Tech Mahindra will train 5,000 of its developers to build applications on Bluemix to promote the development and adoption of hybrid cloud solutions.
 
Despite the business transformation theme, limited focus on professional services made it unclear who will be leading the change.
 
IBM’s A New Way mantra reinforced the company’s messaging around the power of cloud, analytics, mobility, social and security (CAMSS) to enable clients to transform their business models. However, IBM was mysteriously quiet about how it can guide clients through the transformation process with consulting and systems integration capabilities in the Global Business Services (GBS) and Global Technology Services (GTS) units.
 
Though the technologies and client case studies highlighted during IBM InterConnect were impressive — particularly the Watson-enabled healthcare and life sciences success stories — the focus was largely the finished product and achievement of business outcomes.
 
Missing from the discussion were the stages each client went through to evaluate its business challenges, decide which solution would help it achieve its desired goals and navigate the change management obstacles inherent in deploying the solution. With an audience of more than 20,000 clients and prospects, a nod to professional services would have crystallized IBM’s business transformation vision and its differentiated end-to-end engagement capabilities. 
 
By reorganizing in January into solution units, several of which include a select number of GTS and GBS consultants, IBM took a step toward becoming a strategy-led trusted adviser akin to Accenture or Deloitte. However, the company missed an opportunity at InterConnect to showcase its strategy consulting expertise to lead clients to a new way of conducting business, empowered by, but not in service to, disruptive technologies.
 
TBR’s one-on-one discussion with an IBM executive involved in cloud strategy provided more insight into the functional relationship between the GBS and IBM Cloud teams to guide business transformation within client engagements, but the company still has a long way to go to reshape its image as a technology-first vendor. 
 
At the individual solution level, IBM demonstrated its commitment to ongoing service quality improvement aided by insights from its analytics capabilities and experience gained through thousands of client engagements. A common message across keynote presentations around areas such as security, IoT and IT service management was “we’ve been doing this for years and know what works.”
 
As IBM continues to pursue sticky managed services engagements around CAMSS technologies (its own or those of partners such as SAP and Apple), efficient and proactive delivery of client outcomes will be essential to fend off competition from systems integration competitors, including lower-cost India-centric vendors.
 
Conversations with IBM business partners such as Cognizant and Infosys during the solution expo that ran concurrently with the keynotes and breakout sessions reinforced the threat these vendors pose to IBM’s services organization, as they continue to train on new IBM solutions and build their industry-focused consulting capabilities to deliver client outcomes.
 
As IBM continues to work through its solution-focused reorganization, we expect conflicts between its GTS and GBS units and its systems integration partner ecosystem to remain a challenge. 
 
Stuart Williams is Vice President of Research at Technology Business Roundtable. TBR colleagues Geoff Woollacott, Practice Manager and Principal Analyst, Software and BI;  
Cassandra Mooshian, Cloud Analyst; and Jen Hamel, Professional Services Analyst; also contributed to this report.
 
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