IBM Orders the NooB
Well, it’s official.
Caught in the same share of margin trap that ensnared the likes of DEC and HP (see HP Builds a Boat in Its Basement – December 2016) it appears that IBM has employed the same elite consulting advisors to plot their next move. After all, spinning out your managed service offering seems to be the “go to” option given IBM’s current circumstances.
Back in January of 2019 in a post entitled IBM Eats Its Own Lunch we conjectured that the acquisition of Redhat was not a software play as much as it was a channel arbitration play, with open source software being a key infrastructure component of public cloud providers’ IaaS and PaaS stacks. A critical consideration in the success of this move would be whether or not competing public cloud providers would stand still and continue paying tribute to IBM in the form of Redhat service revenues. While the jury is still out, don’t be surprised if SuSe will soon be on the market or, perhaps more likely, be groomed for public offering, independence being a consideration when selecting up stream component suppliers.
Another consideration, not particularly well elaborated in IBM’s recent announcement, is what degree of freedom will the newly minted managed services business enjoy. They go out of their way to suggest it will be predicated on managing IBM installations employing IBM technology but how long would that last? There’s nothing all that unique about standing up public or hybrid cloud environments and if you were standing in front of a prospect as a independent managed services company would you serious tell them that the only way forward was to build on IBM?
I doubt it.
Ask yourself this: two years after HP unwound their managed service business, which would you rather own, HPE or DXC? And do you think DXC is standing up HPE cloud solutions? Here’s a little clue. Remember back in 2014 when HP was all in on hybrid clouds and they were going to make a $4B investment in Helion their quasi-open-solution hybrid cloud technology platform (see Something Weird This Way Comes – June 2015)? That lasted about six months with most of the Helion software wending its way to SuSe.
Focus is often key to successful execution which would suggest that IBM’s recent move is all about doing things right instead of doing the right things. But tech based businesses have always been about innovation, the new right thing, which requires courage and imagination, entrepreneurs not managers.
Back in 2016, in Platform Strategies in the Age of AI, we proposed that if cognitive computing were so compelling IBM should use it to forward integrate and move into end-user markets, especially those that have relied on information asymmetry to sustain margins and share, particularly healthcare and legal services. An appreciable chunk of those revenues might be more than what’s available to IBM as an also ran offering platform technologies regardless how large that market might be
At this juncture, it would seem that IBM has opted for the conventional wisdom that permeates all the fashionable elite consulting firms that service the boards of the high tech industry and ordered up the NooB, the “newly out of business” gambit that worked so well for DEC and HP.
Below you can watch the elite consultants at the Olympia Cafe hone their expertise in operational efficiency while addressing their clients concerns.
It’s all about the turn over.
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