IBM: We're now a, what's not losing money? Ah, a cognitive cloud champ! IBM topped analyst expectations in its third quarter of the year, but still couldn't shake a run of falling revenue that now stands at 5 and a half years long. Big Blue credited strong returns from its cloud and cognitive businesses along with a boost from its recent mainframe refresh in helping it top $19bn of total revenues …
I do hope they do not make any silly cuts and continue investing in this direction - an alternative to Xeon is badly needed and the move to open power initiative was very smart. Also I am rather keen on POWER9 and especially its NVLink with coherent memory model shared with NVidia GPU - something Intel does not have. They have a good USP now, and what market needs is reassurances that open power will live on.
There is little money to be gained with Power.
It makes perfect sense to not bet the company on hardware, as the competition is ahead, is investing a lot of money, and the prospect is razor thin margins.. the future looks more like SW defined than HW, and has been for the las 17 years at last.
The problem for IBM is that they failed to sell cloud (rent computers) at a decent price.
As someone writing the SW, I am very keen to have a choice of HW platforms where my code will be running on. It is not a wanton wish. Everyone makes assumption that intel architecture will be "forever" because it is most popular, but do not forget that use of 32bit x86 is declining, and 64bit extensions were brought by AMD (not intel) and it was despite intel, not thanks to them. All the good work that intel is currently doing notwithstanding, we must not allow ourselves to become hostages to one platform.
Also, SW must scale across many cores. Sometimes there will be few, sometimes tens, sometimes thousands (Volta GPU) - and there are different ways to useful employ these. It is healthy to have some exploration in this space - should I make use of modern C11 memory model? Should I use consume semantics? Or perhaps try transactional memory? These choices set the scalability limits to the software I am/will be writing, and they should not be dictated by only one R&D department.
EDIT: I do agree that cloud department at IBM is little lazy - I wanted to hire a small VM to try POWER8 myself but was confused as to what I would be buying. The sales ppl never got back to me ...
Layoffs are what is propping up revenue. Layoffs and escaped Techs who ran to HPE Storage Unit. They can't keep that up, because Government, Bank, and Healthcare customers can't be shifted to India or Cairo, as they have USA based support listed in their support contracts. Fun thing about the Server Hardware Support unit is that they can't keep up service levels with less staff and a crowd of managers who just walk around, talk around, do meetings and conference calls, and not much else...
Two people in this thread have now claimed that staff reductions (a COST-reducing action) have propped up revenue. Please explain how cutting costs increases the money people spend with IBM?
Layoffs may be propping up margin or profit but do not impact what clients spend (REVENUE) other than perhaps negatively in the short term.
Sometimes, bean-counters can be useful to help us all understand what it is we are actually counting!
Perhaps the staff being reduced were getting in the way of winning deals. That would increase revenue nicely because those deals would stop being held up in bureaucracy, allowing revenue to start coming in. Perhaps those staff are the ones insisting Mainframe is still relevant in the cloud age, again losing otherwise winnable deals. Getting rid of the Watson marketing division would be good too, because then they could afford technical staff to actually make Watson do what it's sold to do rather than inventing ever more things IBM wished it could do. Or get rid of both departments and just forward traffic from the Watson URL to Cortana/Alexa/Siri/Indian call centre.
So yes, there are plenty of ways staff cuts could increase revenues. But no, not directly, that's just silly.
Staff, in a roundabout way, often do contribute to revenue, or at least they do in services. In IBM, there is generally an amount that a staff member is sold at when staffing a services engagement.
Higher pay bands cost more, so those scoping up the projects will tend to use people at lower pay bands unless the skills offered by those at higher pay bands are needed. The fact that those at higher pay bands aren't necessarily more skilled and generally get where they are through knowing the right people and having more time to spend on filling in the countless forms you need to get a promotion is another matter. We'll skip that.
The ability to offshore work in a services contact increases the competitiveness of the project. You need people at lower pay bands to actually visit the customer, gather data and so on. A project manager in a cheaper country can take this information and use higher skilled, but much lower paid people to actually implement the project.
The result is a lower cost for the project, and hence lower revenue. The profit, in theory, should be the same. The quality of the work done is another matter of course; it's difficult to work remotely even if you do possess the requisite skills.
what is that box on the article picture?
That, sir, is the Dark Knight's Portaloo.
Fashionable, faceted black exterior (armoured, of course), plenty of room for a superhero to hang up his wings, struggle out of the external Y-fronts, peel off the latex, before sitting down for some blessed relief. Or, if all that palava takes too long when the crime fighting hero is already touching cloth, there's plenty of room for Alfred to scrape a bowel full of foulage out of the suit and give it a quick wash, whilst the crusader covers his modesty with his cape.
IBM customers end up locked into the platform for the long term. But not forever.
Off-shoring to cut costs appeared to work because customers couldn't do anything about the change. But if you abuse customers long enough by providing cut-rate service at premium prices, you burn through hard-won reputation in a way that isn't reflected in short-term financial results.
IBM is left with the managers that were promoted because they 'cut costs' by off-shoring. The experienced people that directly solved customer problems were laid off long ago because they were expensive.
How can they fix this? It will take years to regain their reputation, and they can't do it with the people and trajectory they have.
It's a shame that this previously iconic business is now but a shell of its former self, in my opinion it's constant redundancies, out sourcing, and forced office moves for staff that are responsible for the malaise.
I'm sure they've still plenty of IP to sell off keeping at least a few years of executive salaries serviced - if nothing else.
Do you think in some way IBM getting into services in a big way in the 2000's is now causing more issues for IBM than anything else? Services is a tough game and clients are rarely happy/delighted with outsourcing no matter what IT companies do. When you work with clients they are often disparaging against IBM GTS, DXC, Infosys, Fujitsu etc etc. Microsoft and AWS have been luckly/smart to keep out of this game and let their 'partners' be the L1 between the client and themselves in most cases.
IBM GTS in many strange ways competes with the rest of IBM and would regularly propose non IBM Security, Cloud, Cognitive, Middleware, Hardware solutions - almost as if it was a strong competitor. Whilst Gerstner felt IBM was stronger together, in hindsight was it ?
Fashion being infinitely more important than reality . . .
They've pushed everything except their traditional mainframe . . expandible, reliable, and pretty much unhackable (which of course no one really cares about).
It can work well in todays world, but hey . FASHIONABLE tech is way more important.
Revenue down
Profitability down
Earnings per share up because of share buybacks
Revenue didn't drop more because of new mainframe product.
Conclusion:
IBM isn't doing well in any new business areas (software, consulting, cloud) to turn this ship around. Mainframe sales won't keep revenue up as the product ages. IBM is still a dog.
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