By Joe Clabby, Clabby Analytics
For the past 13 years IBM has gathered together leading software industry analysts at an annual conference that has become known as “Analyst Insights.” At this meeting (sponsored by IBM’s Software Group – or SWG), IBM shares its business directions, strategies and product progress and plans. This report provides my analysis of this year’s Analyst Insights 2014 meeting.
Mills on the business climate
Analyst Insights is usually opened by Steve Mills, IBM’s SVP and group executive – Software & Systems – and this year was no exception. During his career, Steve has played an extremely important role in the growth of IBM’s Software group – and is now in charge of IBM’s SWG and Systems and Technology Group (STG which includes mainframes, Power Systems and Storage). All told, Mills oversees products that contributed about $44 billion in revenue to IBM in 2013.
At last year’s event, Mills broke the news that IBM was in the midst of a major transition. The company was fast to promote the private cloud – but slow to adopt a public cloud position (which is why it acquired SoftLayer – a company that gave it strong presence in that arena). With public and private cloud (or “hybrid” cloud) infrastructure offerings, IBM has needed to reposition its product offerings to serve both traditional information technology (IT) markets that buy software licenses – and IBM has also needed to alter its products and pricing models to offer its vast array of software products as services on the cloud.
As the company works diligently through this transition, some “hiccups” happen – and this was largely what Mills speech was about. Although Mills did not outright bring last quarter’s revenue slip to the attention of the room, we all knew that IBM had missed its target last quarter – and we all kind of wanted to know why. Mills explained how IBM operates; its fiduciary responsibilities to its investors; and some of the decisions that it has had to make to transition to a new business model (the cloud model) while divesting products that aren’t critical to its success in the evolving worlds of cloud and cognitive computing.
Accordingly, Mills explained why IBM sold its System x (Intel-based servers) unit – and why it has asked another organization (Global Foundries) to take over the possession and management of its microelectronics organization (both of these topics have been well covered in the press and on the web here and here).
My key takeaway from Mills’ speech is that IBM continues to rationalize its product offerings as it moves to incorporate traditional computing and cloud computing models. IBM will also focus on and make business decisions that will benefit its shareholders in both the near and long term.
Mike Rhodin on Watson
To be perfectly clear on my view of IBM’s “Watson” cognitive computing environment – I love this voice- and graphically-driven “thinking machine” structured/unstructured data analytics environment. Humans should not have to interact with their computers using keyboards (or worse, touch screens on mobile devices) – so Watson’s voice recognition software interface really resonates with me. Further, the graphics now being used with Watson products, like Watson Analytics, are equally impressive. You don’t have to be a technologist or data scientist to use Watson offerings – it can be easily accessed by the common human. Watson, in my opinion, represents nirvana for analytics environments.
Mike Rhodin’s (SVP, IBM Watson) keynote described the progress that has occurred over the past year in the Watson case – including 40 beta customers and a $100,000,000 investment in building the Watson ecosystem. And the preceding sentence illustrates my two key concerns regarding IBM’s Watson: 1) I keep hearing about betas – but I need to see Watson find a firm foothold in an industry or two such that it generates a solid revenue stream; and, 2) I see another red-ink expense (the $100 million ecosystem investment) when I want to see the business in the black.
My key take-away in the Rhodin discussion is that establishing a foothold for a new and advanced technology can be difficult – but IBM is making solid progress. Did he convince me that Watson will turn the corner in this coming year? No. But I do believe that Watson will become profitable in about two years as the betas reach closure and as IBM works out its deployment and pricing plans. Bottom line, I’m a big believer in the future of Watson – even without current profitability.
Watson is a huge differentiator for IBM – no other leading vendor has anything like it. And I will also argue that analytics has also become a huge differentiator for IBM – primarily because of the company’s broad and deep analytics portfolio (over 25 acquisitions as well as internally developed products), and because it has unique platforms on which to run various types of analytics (such as IBM’s PureData System for Analytics – and IBM’s built-for-data Power Systems environments).
Beth Smith (General Manager, Information Management) and Alistair Renie (General Manager, Business Analytics) presented their views on the analytics market, its current situation and its future directions. The key messages delivered by these two executives were that the analytics market is hot, hot, hot – and that IBM’s offerings are being extremely well received. I can independently vouch that this is indeed the case after speaking to over a dozen IBM customers and business partners at IBM’s Insight conference a few weeks ago about IBM analytics, cloud and cognitive products.
IBM’s 2013 4th quarter and full year results reported that business analytics revenue rose 9 percent to $15.7 billion in fiscal year 2013 – representing over 15% of the company’s total revenue last year. I’m expecting an even bigger bump in revenue from IBM in 2014 when it announces its 2014 fiscal year results.
All the rest – featuring Robert Leblanc
Robert LeBlanc is IBM’s SVP, Software and Cloud Solutions Group. His presentation focused on IBM’s Hybrid Cloud positioning, on IBM’s broad stable of infrastructure and middleware product offerings – and on IBM activities in the social, mobile and security market segments. (Note: IBM is strategically pursuing five markets segments: 1) cloud; 2) analytics; 3) mobile; 4) social; and, 5) security).
LeBlanc walked the audience through a dazzling array of products, product strategies and market strategies that pertained to the company’s cloud, infrastructure, mobile and social offerings. Succinctly, the highlights from Leblanc’s presentation included IBM progress in:
- positioning itself as a provider of hybrid cloud offerings (public and private clouds blended and managed together);
- generating solid revenue and seeing strong growth with its integrated infrastructure offerings – which reinforces the company’s “infrastructure matters” study found here;
- driving mobile computing solutions to market (including a discussion of IBM’s recent deal with Apple to co-develop analytics products, as well as provide certain deployment/maintenance services). This Apple deal adds further credibility to IBM’s mobile strategy and growth plans; and,
- hybrid clouds – where IBM has the most comprehensive portfolio for managing security across public and private (hybrid) cloud environments.
LeBlanc also discussed IBM social (collaborative) offerings – and some other social media analytics offerings – but, to be honest, I don’t track these types of products so I cannot provide a perspective on IBM’s growth plans or product offerings in these segments.
The partner ecosystem and customer panel
Sandy Carter, IBM’s GM, IBM Ecosystems and Social Business Evangelism, and Mark Register, Vice President Business Partners and Alliances, presented an overview of IBM’s software ecosystem – featuring a discussion of IBM partners with academia, influencers, systems integrators, entrepreneurs and social partners. This presentation was followed by a panel consisting of these types of partners.
I was pleased that one of the panelists (Elizabeth Caudle from an organization known as “Girls Who Code”) was there to describe IBM’s efforts to promote the cause of careers for women in IT. With seven sisters and three daughters (none of whom are in IT, though my wife Jane is an IT industry analyst), I recognize that technology is not a preferred profession for most women – but I think the industry as a whole would be better served by more female representation. I especially liked Elizabeth’s observation that IBM serves as a good role model for women in the IT business with a female CEO and numerous women in high-level executive positions throughout the company.
I plan to follow-up with Scott Megill, the president and CEO of Coriell Life Sciences regarding the relationship that his company has established with IBM as an ecosystem partner. Coriell does a lot of work on the human genome – so I want to know what types of systems the company uses, I want to know more about its business model and I want to know more about how IBM is helping the company achieve its growth goals. If all goes well, I hope to publish a report on this company in December.
IBM hosted 33 breakout sessions presented by high-level product managers, scientists and marketing people on topics that ranged from development/operations (DevOps) to security through e-mail (IBM Mail Next). The two that stand out most in my memory are:
- The Bluemix discussion (Bluemix allows developers to focus solely on application coding, with Bluemix handling all the underlying infrastructure and platform requirements, dramatically reducing the time required to develop and launch new applications. Bluemix handles the interfaces to storage, the network, the servers, the middleware, virtualization, operating system and runtimes, as well as all the integration between those infrastructure elements and security services – and it also helps address scalability requirements. Growth in this component development environment has far exceeded IBM’s expectations); and,
2) The Software/Hardware Optimization for Systems and Services presentation (that contained some very important cloud network performance information that I have not yet fully processed. I’ll have to do some more research on what I learned in this Power Systems-focused session before I present my findings).
IBM’s Analyst Insights conference is the place to go to get a broad, panoramic view of IBM’s entire software-focused strategy and portfolio in a 24 hour time slice.
Regarding Watson, we in the analyst community need to see some black ink coming from IBM’s cognitive computing Watson efforts. I personally believe that Watson is on the cusp of hitting it big – starting probably in about a year or two. Watch this space.
Regarding analytics, this is a major IBM differentiator that is currently generating a lot of black ink. I expect significantly more when IBM tabulates its 2014 earnings.
Regarding “all the rest” (infrastructure, mobile, social) – these are all successful programs – and infrastructure and mobile are heading in the right growth directions (I can’t speak for social because I don’t track that discipline).
IBM’s ecosystem overview/customer panel delivered an important message: the company is not going after all of these markets alone (which may have been the case years ago) – IBM knows that it can be more effective pursuing markets and growing businesses with partners. (And IBM’s FY2013 revenues prove this point).
All in all, IBM’s Analyst Insights 2014 provided both a broad overview of IBM’s SWG product offerings, as well as deep dive sessions to explore technologies of interest. The most useful aspect to me was Mills’ speech. It showed that the company has spent a lot of time rationalizing its product lines – and it showed that the company is willing to make tough decisions (such as selling off a business unit and transferring possession of a foundry) in order to minimize resource waste and maximize return-on-investment for stockholders. IBM’s last quarter performance was “off.” As analytics, DevOps, security and other hot technologies continue to thrive – and as Watson turns the corner and starts generating revenue – I see IBM as extremely well positioned for growth in all of its target markets.