Nov
25
2020
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As IBM shifts to hybrid cloud, reports have them laying off 10,000 in EU

As IBM makes a broad shift in strategy, Bloomberg reported this morning that the company would be cutting around 10,000 jobs in Europe. This comes on the heels of last month’s announcement that the organization will be spinning out its infrastructure services business next year. While IBM wouldn’t confirm the layoffs, a spokesperson suggested there were broad structural changes ahead for the company as it concentrates fully on a hybrid cloud approach.

IBM had this to say in response to a request for comment on the Bloomberg report: “Our staffing decisions are made to provide the best support to our customers in adopting an open hybrid cloud platform and AI capabilities. We also continue to make significant investments in training and skills development for IBMers to best meet the needs of our customers.”

Unfortunately, that means basically if you don’t have the currently required skill set, chances are you might not fit with the new version of IBM. IBM CEO Arvind Krishna alluded to the changing environment in an interview with Jon Fortt at the CNBC Evolve Summit earlier this month when he said:

The Red Hat acquisition gave us the technology base on which to build a hybrid cloud technology platform based on open-source, and based on giving choice to our clients as they embark on this journey. With the success of that acquisition now giving us the fuel, we can then take the next step, and the larger step, of taking the managed infrastructure services out. So the rest of the company can be absolutely focused on hybrid cloud and artificial intelligence.

The story has always been the same around IBM layoffs, that as they make the transition to a new model, it requires eliminating positions that don’t fit into the new vision, and today’s report is apparently no different, says Holger Mueller, an analyst at Constellation Research.

“IBM is in the biggest transformation of the company’s history as it moves from services to software and specialized hardware with Quantum. That requires a different mix of skills in its employee base and the repercussions of that manifest itself in the layoffs that IBM has been doing, mostly quietly, for the last 5+ years,” he said.

None of this is easy for the people involved. It’s never a good time to lose your job, but the timing of this one feels worse. In the middle of a recession brought on by COVID, and as a second wave of the virus sweeps over Europe, it’s particularly difficult.

We have reported on a number of IBM layoffs over the last five years. In May, it confirmed layoffs, but wouldn’t confirm numbers. In 2015, we reported on a 12,000 employee layoff.

Nov
18
2020
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IBM is acquiring APM startup Instana as it continues to expand hybrid cloud vision

As IBM transitions from software and services to a company fully focussed on hybrid cloud management, it announced  its intention to buy Instana, an applications performance management startup with a cloud native approach that fits firmly within that strategy.

The companies did not reveal the purchase price.

With Instana, IBM can build on its internal management tools, giving it a way to monitor containerized environments running Kubernetes. It hopes by adding the startup to the fold it can give customers a way to manage complex hybrid and multi-cloud environments.

“Our clients today are faced with managing a complex technology landscape filled with mission-critical applications and data that are running across a variety of hybrid cloud environments – from public clouds, private clouds and on-premises,” Rob Thomas, senior vice president for cloud and data platform said in a statement. He believes Instana will help ease that load, while using machine learning to provide deeper insights.

At the time of the company’s $30 million Series C in 2018, TechCrunch’s Frederic Lardinois described the company this way. “What really makes Instana stand out is its ability to automatically discover and monitor the ever-changing infrastructure that makes up a modern application, especially when it comes to running containerized microservices.” That would seem to be precisely the type of solution that IBM would be looking for.

As for Instana, the founders see a good fit for the two companies, especially in light of the Red Hat acquisition in 2018 that is core to IBM’s hybrid approach. “The combination of Instana’s next generation APM and Observability platform with IBM’s Hybrid Cloud and AI technologies excited me from the day IBM approached us with the idea of joining forces and combining our technologies,” CEO Mirko Novakovic wrote in a blog post announcing the deal.

Indeed, in a recent interview IBM CEO Arvind Krishna told CNBC’s Jon Fortt, that they are betting the farm on hybrid cloud management with Red Hat at the center. When you combine that with the decision to spin out the company’s managed infrastructure services business, this purchase shows that they intend to pursue every angle

“The Red Hat acquisition gave us the technology base on which to build a hybrid cloud technology platform based on open-source, and based on giving choice to our clients as they embark on this journey. With the success of that acquisition now giving us the fuel, we can then take the next step, and the larger step, of taking the managed infrastructure services out. So the rest of the company can be absolutely focused on hybrid cloud and artificial intelligence,” Krishna told CNBC.

Instana, which is based in Chicago with offices in Munich, was founded in 2015 in the early days of Kubernetes and the startup’s APM solution has evolved to focus more on the needs of monitoring in a cloud native environment. The company raised $57 million along the way with the most recent round being that Series C in 2018.

The deal per usual is subject to regulatory approvals, but the company believes it should close in the next few months.

Nov
10
2020
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IBM CEO Arvind Krishna wants to completely transform his organization

When IBM announced it was spinning out its infrastructure services business last month, it was surely a sign that the company was going all in on hybrid cloud. Today in an interview with Jon Fortt at the CNBC Evolve summit, IBM CEO Arvind Krishna made it clear that his whole focus is going to be on transforming his organization into a hybrid cloud management vendor moving forward.

That means that instead of trying to primarily sell its own infrastructure or software services — although it will continue to do that — it will concentrate on leveraging Red Hat, the company it bought for $34 billion in 2018, to help customers manage their hybrid environments regardless of location. That could be on prem or it could be with any of the public cloud providers or anything in between.

Krishna sees this acquisition as a key part of the transition strategy to capture what he estimates is a trillion dollar opportunity in the hybrid cloud management market, and he believes his company is well-positioned to grab a piece of that. “The Red Hat acquisition gave us the technology base on which to build a hybrid cloud technology platform based on open-source, and based on giving choice to our clients as they embark on this journey. With the success of that acquisition now giving us the fuel, we can then take the next step, and the larger step, of taking the managed infrastructure services out. So the rest of the company can be absolutely focused on hybrid cloud and artificial intelligence,” Krishna told CNBC.

While he recognizes that Microsoft and Amazon are powerful players in the public cloud, he doesn’t see them as competitors, so much as partners in this new approach. In fact, mixing in a broad variety of third party partners is a big part of this.

“I look at both Microsoft and Amazon as likely partners in this journey, not as being the one and two [in market share]. In the hybrid world the question is where does the client want to decide where the workload runs? They could run it on Amazon. They can run on Microsoft. They can run it on IBM or they can run it on premises,” he said.

He believes that Red Hat can be the glue to hold this environment together and let customers have a single way of managing this complexity. The key question for IBM is whether customers see IBM and by extension Red Hat, as the key vendor for this role.

He recognizes that this isn’t just about adding and subtracting technology pieces. When it comes to transforming the way you do business in this way, it requires a massive cultural shift, one we saw Satya Nadella pull off when he took over as CEO at Microsoft in 2014. Much like Nadella, Krishna was promoted from within. He understands how things operate and that he needs to change the way things have traditionally been done at Big Blue if he’s going to succeed.

“I’ve talked a lot internally about a growth mindset, and about being much more entrepreneurial. And we can be entrepreneurs, even within large companies. But it comes from having extreme focus. So when we provide the focus of being focused on hybrid cloud and artificial intelligence, which I believe are the two fundamental forces, then you say how do you unlock everybody being able to go after that,” he said.

That’s going to be the big key for him moving forward as transforming a company the size of IBM is going to be a tremendous challenge for him as a leader. As Fortt pointed out, IBM salespeople are used to focusing on IBM products. This approach means they have to look at the market much more broadly, and that requires a new mindset. It will be up to Krishna to lead the way and make sure that his employees are on the same page about this. The success of this approach depends on that.

Oct
08
2020
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As IBM spins out legacy infrastructure management biz, CEO goes all in on the cloud

When IBM announced this morning that it was spinning out its legacy infrastructure services business, it was a clear signal that new CEO Arvind Krishna, who took the reins in April, was ready to fully commit his company to the cloud.

The move was a continuation of the strategy the company began to put in place when it bought Red Hat in 2018 for the princely sum of $34 billion. That purchase signaled a shift to a hybrid-cloud vision, where some of your infrastructure lives on-premises and some in the cloud — with Red Hat helping to manage it all.

Even as IBM moved deeper into the hybrid cloud strategy, Krishna saw the financial results like everyone else and recognized the need to focus more keenly on that approach. In its most recent earnings report overall IBM revenue was $18.1 billion, down 5.4% compared to the year-ago period. But if you broke out just IBM’s cloud and Red Hat revenue, you saw some more promising results: cloud revenue was up 30 percent to $6.3 billion, while Red Hat-derived revenue was up 17%.

Even more, cloud revenue for the trailing 12 months was $23.5 billion, up 20%.

You don’t need to be a financial genius to see where the company is headed. Krishna clearly saw that it was time to start moving on from the legacy side of IBM’s business, even if there would be some short-term pain involved in doing so. So the executive put his resources into (as they say) where the puck is going. Today’s news is a continuation of that effort.

The managed infrastructure services segment of IBM is a substantial business in its own right, generating $19 billion annually, according to the company, but Krishna was promoted to CEO to clean house, taking over from Ginni Rometti to make hard decisions like this.

While its cloud business is growing, Synergy Research data has IBM public cloud market share mired in single digits with perhaps 4 or 5%. In fact, Alibaba has passed its market share, though both are small compared to the market leaders Amazon, Microsoft and Google.

Like Oracle, another legacy company trying to shift more to the cloud infrastructure business, IBM has a ways to go in its cloud evolution.

As with Oracle, IBM has been chasing the market leaders — Google at 9%, Microsoft 18% and AWS with 33% share of public cloud revenue (according to Synergy) — for years now without much change in its market share. What’s more, IBM competes directly with Microsoft and Google, which are also going after that hybrid cloud business with more success.

While IBM’s cloud revenue is growing, its market share needle is stuck and Krishna understands the need to focus. So, rather than continue to pour resources into the legacy side of IBM’s business, he has decided to spin out that part of the company, allowing more attention for the favored child, the hybrid cloud business.

It’s a sound strategy on paper, but it remains to be seen if it will have a material impact on IBM’s growth profile in the long run. He is betting that it will, but then what choice does he have?

May
22
2020
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IBM confirms layoffs are happening, but won’t provide details

IBM confirmed reports from overnight that it is conducting layoffs, but wouldn’t provide details related to location, departments or number of employees involved. The company framed it in terms of replacing people with more needed skills as it tries to regroup under new CEO Arvind Krishna.

IBM’s work in a highly competitive marketplace requires flexibility to constantly remix to high-value skills, and our workforce decisions are made in the long-term interests of our business,” an IBM spokesperson told TechCrunch.

Patrick Moorhead, principal analyst at Moor Insights & Strategy, says he’s hearing the layoffs are hitting across the business. “I’m hearing it’s a balancing act between business units. IBM is moving as many resources as it can to the cloud. Essentially, you lay off some of the people without the skills you need and who can’t be re-educated and you bring in people with certain skill sets. So not a net reduction in headcount,” Moorhead said.

It’s worth noting that IBM used a similar argument back in 2015 when it reportedly had layoffs. While there is no official number, Bloomberg is reporting that today’s number is in the thousands.

Holger Mueller, an analyst at Constellation Research, says that IBM is in a tough spot. “The bets of the past have not paid off. IBM Cloud as IaaS is gone, Watson did not deliver and Blockchain is too slow to keep thousands of consultants occupied,” he said.

Mueller adds that the company could also be feeling the impact of having workers at home instead of in the field. “Enterprises do not know and have not learnt how to do large software projects remotely. […] And for now enterprises are slowing down on projects as they are busy with reopening plans,” he said.

The news comes against the backdrop of companies large and small laying off large numbers of employees as the pandemic takes its toll on the workforce. IBM was probably due for a workforce reduction, regardless of the current macro situation, as Krishna tries to right the financial ship.

The company has struggled in recent years, and with the acquisition of Red Hat for $34 billion in 2018, it is hoping to find its way as a more open hybrid cloud option. It apparently wants to focus on skills that can help them get there.

The company indicated that it would continue to subsidize medical expenses for laid off employees through June 2021, so there is that.

Apr
30
2020
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New Red Hat CEO Paul Cormier faces a slew of challenges in the midst of pandemic

When former Red Hat CEO Jim Whitehurst moved on to become president at parent company IBM earlier this month, the logical person to take his place was long-time executive Paul Cormier. As he takes over in the most turbulent of times, he still sees a company that is in the right place to help customers modernize their approach to development as they move more workloads to the cloud.

We spoke to Cormier yesterday via video conference, and he appeared to be a man comfortable in his new position. We talked about the changes his new role has brought him personally, how he his helping his company navigate the current situation and how his relationship with IBM works.

One thing he stressed was that even as part of the IBM family, his company is running completely independently, and that includes no special treatment for IBM. It’s just another customer, an approach he says is absolutely essential.

Taking over

He says that he felt fully prepared for the role having run the gamut of jobs over the years, from engineering to business units to CTO. The big difference for him as CEO is that in all of his previous roles he could be the technical guy speaking a certain engineering language with his colleagues. As CEO, things have changed, especially during a time when communication has become paramount.

This has been an even bigger challenge in the midst of the pandemic. Instead of traveling to offices for meetings, chatting over informal coffees and having more serendipitous encounters, he has had to be much more deliberate in his communication to make sure his employees feel in the loop, even when they are out of the office.

“I have a company-wide meeting every two weeks. You can’t over communicate right now because it just doesn’t happen [naturally in the course of work]. I’ve got to consciously do it now, and that’s probably the biggest thing,” he said.

Go-to-market challenges

While Cormier sees little change on the engineering side, where many folks have been working remotely for some time, the go-to-market team could face more serious hurdles as they try to engage with customers.

“The go-to-market and sales side is going to be the challenge because we don’t know how our customers will come out of this. Everybody’s going to have different strategies on how they’re coming out of this, and that will drive a lot,” he said.

This week was Cormier’s first Red Hat Summit as CEO, one that like so many conferences had to pivot from a live event to virtual fairly quickly. Customers have been nervous, and this was the first chance to really reconnect with them since things have shut down. He says that he was pleasantly surprised how well it worked, even allowing more people to attend than might pay to travel to a live event.

Conferences are a place for the sales team to really shine and lay the groundwork for future sales. Not being there in person had to be a big change for them, but he says this week went better than he expected, and they learned a ton about running virtual events that they will carry forth into the future.

“We all miss the face-to-face for sure, but I think we’ve learned new things, and I think our team did an amazing job in pulling this off,” he said.

No favorites for IBM

As he navigates his role inside the IBM family, he says that new CEO Arvind Krishna has effectively become his board of directors, now that the company has gone private. When IBM paid $34 billion for Red Hat in 2018, it was looking for a way to modernize the company and to become a real player in the hybrid cloud market.

Hybrid involves finding a way to manage infrastructure that lives on premises as well as in the cloud without having to use two sets of tools. While IBM is all-in on Red Hat, Cormier says it’s absolutely essential to their relationship with customers that they don’t show them any favoritism, and that includes no special pricing deals.

Not only that, he says that he has the freedom to run the company the way he sees fit. “IBM doesn’t set our product strategy. They don’t set our priorities. They know that over time our open-source products could eat into what they are doing with their proprietary products, and they are okay with that. They understand that,” he said.

He says that doing it any other way could begin to erode the reason that IBM spent all that money in the first place, and it’s up to Cormier to make sure that they continue to do what they were doing and keep customers comfortable with that. So far, the company seems to be heading in the same upward trajectory it was on as a public company.

In the most recent earnings report in January, IBM reported Red Hat income of $1.07 billion, up from $863 million the previous year when it was still a private company. That’s a run rate of over $4 billion, putting it well within reach of the $5 billion goal Whitehurst set a few years ago.

Now it’s Cormier’s job to get them there and beyond. The pandemic certainly makes it more challenging, but he’s ready to lead the company to that next level, all while walking the line as the CEO of a company that lives under the IBM family umbrella and all that entails.

Apr
10
2020
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Incoming IBM CEO Arvind Krishna faces monumental challenges on multiple fronts

Arvind Krishna is not the only CEO to step into a new job this week, but he is the only one charged with helping turn around one of the world’s most iconic companies. Adding to the degree of difficulty, he took the role in the midst of a global pandemic and economic crisis. No pressure or anything.

IBM has struggled in recent years to find its identity as technology has evolved rapidly. While Krishna’s predecessor Ginni Rometty left a complex legacy as she worked to bring IBM into the modern age, she presided over a dreadful string of 22 straight quarters of declining revenue, a record Krishna surely hopes to avoid.

Strong headwinds

To her credit, under Rometty the company tried hard to pivot to more modern customer requirements, like cloud, artificial intelligence, blockchain and security. While the results weren’t always there, Krishna acknowledged in an email employees received on his first day that she left something to build on.

“IBM has already built enduring platforms in mainframe, services and middleware. All three continue to serve our clients. I believe now is the time to build a fourth platform in hybrid cloud. An essential, ubiquitous hybrid cloud platform our clients will rely on to do their most critical work in this century. A platform that can last even longer than the others,” he wrote.

But Ray Wang, founder and principal analyst at Constellation Research, says the market headwinds the company faces are real, and it’s going to take some strong leadership to get customers to choose IBM over its primary cloud infrastructure competitors.

“His top challenge is to restore the trust of clients that IBM has the latest technology and solutions and is reinvesting enough in innovation that clients want to see. He has to show that IBM has the same level of innovation and engineering talent as the hyper scalers Google, Microsoft and Amazon,” Wang explained.

Cultural transformation

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