(Note: After an award-winning career in the media business covering the tech industry, Bob Evans was VP of Strategic Communications at SAP in 2011, and Chief Communications Officer at Oracle from 2012 to 2016. He now runs his own firm, Evans Strategic Communications LLC.)
CLOUD WARS -- Accelerating its remarkable turnaround and establishing itself among the top 3 enterprise-cloud players, IBM's cloud revenue for the year rose 24% to $17 billion and jumped $30% in the fourth quarter to $5.5 billion.
With cloud revenue now making up 21% of IBM's total revenue of $79.1 billion, IBM's reinvigorated technology and market focus have allowed the company to snap an agonizing streak of 20+ quarters of declining revenue as CEO Ginni Rometty's heroic transformation of the iconic 106-year-old company has come full circle.
With its multifaceted cloud business leading the way, IBM's "strategic imperatives"—cloud, security, analytics and mobile—grew 14% in the fourth quarter and now account for close to 50% of the company's revenue.
This type of resurgence in the dynamic and rapidly evolving tech sector is supposed to be impossible—for several years now, the prophets of doom have been saying IBM had lost its way, couldn't afford to invest in advanced technology, was overinvested in services, didn't get the cloud, and was hopelessly trapped in a death spiral.
But proving yet again that conventional wisdom in today's unconventional enterprise-IT world is utterly worthless, IBM reported growth across the board and projected continued growth throughout 2018.
And Rometty solidified her reputation as not only a courageous CEO willing to take on the near-impossible task of turning around a slumping giant, but also as a visionary strategist who several years ago set a bold new vision for the company centered on powerful new technologies, defied critics who said IBM should be sold off in pieces, and forcefully recreated IBM as one of the world's pre-eminent sources of innovation and business value.
"During 2017, we strengthened our position as the leading enterprise cloud provider and established IBM as the blockchain leader for business," Rometty said in a press release announcing its financial results, adding that IBM is "uniquely positioned to help clients use data and AI to build smarter businesses."
"Strengthened," indeed. In the red-hot enterprise-cloud sector, here are some highlights of what IBM achieved in the fourth quarter and for all of 2017 as it defied the doomsayers and joined Microsoft and Amazon among the three biggest and most-influential cloud vendors.
- The "as a service" portion of IBM's cloud business posted revenue for the year of $9.3 billion. Looking forward and based on Q4 results, that "as a service" slice of the cloud business is on a $10.3 billion run rate, indicating that Q4 as-a-service revenue was $2.575 billion.
- Within that "as a service" segment, IBM's SaaS business grew 30% for the fourth quarter.
- The other part of IBM's cloud business—what I call its "cloud-conversion" business—had 2017 revenue of $7.8 billion. (IBM defines this segment as "hardware, software and services to enable IBM clients to implement comprehensive cloud solutions.")
- Revenue for the four "strategic imperatives" cited above rose 11% to $36.5 billion.
- "2018 will be all about reinforcing IBM's leadership position in key high-value segments of the IT industry, including cloud, AI, security and blockchain," said CFO and senior vice-president James Kavanaugh in the press release.
And in an internal move that will create huge new scaling capabilities for the IBM Cloud, senior vice-president Martin Schroeter said on the earnings call that IBM would be moving its massive services business—the current backlog is $120 billion—onto the IBM Cloud platform.
"So not only are we building and moving new SaaS properties into the cloud—which have great margins—and not only are we building our Platform as a Service and building ecosystems around that, but we also have north of $120 billion backlog in our services business that we're in the process of moving to the cloud," Schroeter told the analysts per the earnings-call transcript on SeekingAlpha.com.
"So when we talk scale, we're moving our whole services platform on to the IBM Cloud, and that's going to give us the scale we need, not just for that infrastructure layer but it's going to give us the scale we need to manage applications, it's going to give us to scale we need to deliver SaaS as effectively as possible and efficiently as possible. So we've got a lot of scale coming our way."
So IBM is not just "back"—IBM's now one of the big dogs in the new high-stakes world of modern enterprise IT centered on how cloud, AI, blockchain, machine learning, and advanced cybersecurity can help businesses get, manage and exploit data to make better decisions, dazzle customers and trounce competitors.
And IBM fully deserves to be regarded as one of the Big Three in the Cloud Wars along with Microsoft and Amazon.
