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Founded in 1911, International Business Machines Corporation (IBM) has invented many essential products like the automated teller machines (ATM), floppy disk, and the hard disk drive that have transformed the world. Over a century, IBM has transformed its business, but one aspect remains common: IBM’s business strategy of innovation.
We live in a digital era of AI and the cloud. Hence it makes perfect sense for IBM to have a business strategy to lead in the hybrid cloud and AI era. In 2021, IBM took dramatic steps to execute that business strategy, strengthening its portfolio and expanding the partner ecosystem.
IBM now focuses on integrating technology and expertise—from IBM, its partners, and even its competitors— to meet the urgent needs of our clients, who see hybrid cloud and AI as crucial sources of competitive advantage.
A deeper look at IBM’s business strategy
IBM’s business strategy is focused on helping clients leverage the power of the hybrid cloud and Artificial Intelligence (AI) to resonate with clients who must continually innovate and redefine their businesses with technology.
Today, IBM has designed a business strategy for accelerated growth while preparing the company for future opportunities. Let’s look at the key elements of IBM’s business strategy.
1. Accelerating Digital Transformation
A new era of rapid change and disruption is underway. The need for digital transformation has dramatically accelerated due to the pandemic and extends through the core mission-critical business processes of almost all large enterprises. Successful digital transformations face significant obstacles:
- Managing increased complexity, as large enterprises use multiple heterogeneous IT environments and clouds
- deriving value from an explosion of available data, projected by analysts to grow up to three-fold in the next three years,
- guaranteeing competitive operations in the context of disruptive changes and worker shortages,
- addressing the increase of malicious security breaches and the rising cost of cybercrime, and
- successfully meeting those challenges together with a cohesive end-to-end sustainable execution.
To address these obstacles, enterprises want technology that provides flexibility with open-source across heterogeneous environments – an approach known as hybrid cloud.
IBM believes such an approach creates 2.5 times more value for enterprises than a public cloud-only one. Open-source technologies, such as Linux, containers, and Kubernetes, are essential to the hybrid cloud, as they harness millions of developers’ power to accelerate innovation.
85% of organizations expect to use Linux containers by 2025. Additionally, AI continues to expand as a critical technology to unlock value, with more than 80 percent of enterprises agreeing that intelligent automation can improve business results.
As AI for production scales, enterprises and governments focus on ensuring AI models are unbiased and trustworthy.
2. A Differentiated Architecture for Business Innovation
IBM claims its differentiation derives from a flexible, secure, open hybrid cloud platform, the comprehensive set of assets it impacts, and its ability to combine them to scale up solutions for enterprise digital transformation and mission-critical systems.
IBM’s value proposition builds on five core capabilities to address clients’ hybrid cloud, and AI needs:
- Build and modernize for the hybrid cloud, to develop and operate with speed, consistency, and agility,
- Create data-driven business insights regardless of where data lives and while maintaining enterprise-grade data governance, privacy and trust,
- Automate the end-to-end enterprise processes for effectiveness and efficiency with AI-driven decision-making,
- Secure everywhere, with consistent governance and compliance across environments, and
- Bring it together by transforming our clients’ businesses and processes into sustainable best-in-class industry practices.
IBM’s business segment to realize this business strategy
IBM operates in more than 175 countries around the world. IBM’s platform-centric hybrid cloud and AI business strategy are realized through four business segments: Software, Consulting, Infrastructure, and Financing.
Software: Software brings together IBM’s hybrid cloud platform and our software solutions, optimized for that platform, to help clients become more data-driven and to automate, secure, and modernize their environments.
Consulting: Consulting provides deep industry expertise and market-leading business transformation and technology implementation capabilities. Consulting designs and builds open, hybrid cloud architectures and optimizes key workflows and business processes with IBM and ecosystem partner technologies. Consulting uses its IBM Garage method to convene experts to co-create business products and solutions with clients to accelerate their digital transformations.
Infrastructure: Infrastructure provides trusted, agile, and secure solutions for hybrid cloud and is the foundation of the hybrid cloud stack. Infrastructure is optimized for infusing AI into mission-critical transactions for accelerated hybrid cloud benefits. Infrastructure also includes remanufacturing and remarketing used equipment with a focus on sustainable recovery services.
Financing: Financing facilitates IBM clients’ acquisition of information technology systems, software, and services through its financing solutions. The financing arrangements are predominantly for products or services critical to the end users’ business operations and support IBM’s hybrid cloud platform and AI strategy.
Strategy and execution
IBM has set ambitious goals: to strengthen its portfolio, simplify its operations, and broaden its ecosystem. IBM has aligned its offerings with the two most transformational technologies of our time: hybrid cloud and AI.
IBM’s platform-centric approach starts with Red Hat, which allows clients to develop and deploy their applications on private and public clouds, achieve consistent security across their computing infrastructure, and consume innovation from anywhere.
IBM’s business strategy is positioned to capture the $1 trillion hybrid-cloud opportunity by enabling clients to access and deploy AI capabilities on IBM’s cloud or those of other major providers.
IBM has expanded its partner ecosystem dramatically, including systems integrators, independent software vendors, service providers, channel partners, and developers to deliver value to IBM’s clients and partners. For instance,
- IBM has created new consulting services in collaboration with SAP and co-created an AI-enabled analytics solution with Deloitte.
- IBM announced strategic partnerships with Cisco, Palo Alto Networks, and Telus. All focused on 5G, Edge, and network automation.
Using this business strategy, IBM generated $57.4 billion in revenue and $12.8 billion in cash from operations in 2021.