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.
Ginni Rometty leaves complex legacy as she steps away as IBM CEO
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
This kind of transformation requires a change in the way employees think about being an IBMer, which Krishna recognized. “One of my key priorities will be fostering an entrepreneurial mindset across our business. This is about being nimble, pragmatic and aiming for speed over elegance. And, it’s about being comfortable with ambiguity and continuously adapting to shifting circumstances,” he wrote.
Ian Campbell, founder and principal analyst at Nucleus Research, says Krishna is on the right track but has his work cut out for him. “Step one is that he has to rally the troops, figuring out a strong message for hybrid and AI, and why it’s the right direction going forward for the traditional companies. Step two is building out some real tangible AI wins, and not just marketing messages.
“Show me a result where IBM AI is helping to do something, and I don’t want to see some farmer looking at some handheld device to tell me how you’re helping me grow corn. I need to see something stronger than that,” Campbell said.
Paul Cormier takes over as Red Hat CEO, as Jim Whitehurst moves to IBM
Dreadful economics
As for whether the current economic climate makes it harder for Krishna to succeed, Patrick Moorhead, founder and principal analyst at Moor Insights and Strategies, says it could actually help him as IBM’s core customers look to move to the cloud.
“I don’t think the current environment makes it any harder for Arvind and IBM to do well. In fact, the environment could help IBM as its primary customers in financial, healthcare and government institutions have the funding and crisis to make changes,” Moorhead said.
Wang says IBM has a role to play in this shifting economic climate. “Clients need really good technology partners to help them build resiliency and business continuity while preparing for a new market reality,” he said.
One of the biggest points in IBM’s favor right now as it transitions to this hybrid cloud/AI approach is Red Hat, the company it bought in 2018 for $34 billion. IBM must take full advantage of that asset. As we wrote after the deal closed last summer, Rometty recognized the power of hybrid to transform her company even before Krishna took over:
IBM believes it can parlay the Red Hat deal into a much broader market presence, allowing it to not only sell its own cloud, which obviously hasn’t gone all that well to this point, but to other clouds as well. Rometty told CNBC’s Jim Cramer that she sees this is as a strong market differentiator. “We have the leading platform for the hybrid cloud. That means it runs not only on the IBM Cloud, not only on-premise and private clouds, it runs on every other public cloud out there, so whether that’s Amazon, Microsoft, Google, whoever it is, it now runs on those as well. So, that extends our reach into those clouds,” she told Cramer.
IBM has the pedigree and lots of smart people. It has some valuable pieces, especially Red Hat, which was a smart move, even for such a steep price, but it needs to execute quickly against a difficult and uncertain economic backdrop. Krishna has a huge leadership challenge in front of him to move a worldwide corporate behemoth into the modern age. Perhaps he can look to Satya Nadella as a model on how to transform a mature company into a successful modern version of itself.
Ultimately, Wang says, Krishna has to prove IBM still has a strong value proposition over the competition. “They have to show how they’ve provided a clear path for IBM customers so they can see why they want to keep reinvesting in IBM technology,” he said.
Arvind Krishna Letter to Ib… by TechCrunch on Scribd
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