After a long and fairly massive overhaul of its entire business, IBM in Q4 posted cloud revenue growth of 18% and I’m predicting they’ll push that up to 20% for Q1 to give the company some badly needed momentum in a wickedly competitive market.
We’ll get the formal numbers from IBM on April 19, and perhaps I’m being overly aggressive with my prediction of 20% cloud growth for Q1, but here’s why I’m feeling like IBM’s time has come to spread its wings in the booming cloud business:
- For Q4, which encompassed the final stages of the massive year-long spin-out of IBM’s managed infrastructure services into separate company Kyndryl, IBM was able to post cloud revenue growth of 18% in spite of all those internal distractions and upheaval.
- In IBM’s slide presentation for its Q4 earnings, the company indicated strong cloud growth in the new sectors of “Software and Infrastructure” (cloud revenue grew 24% to $2.7 billion) and “Consulting” (formerly Global Business Services, that unit grew its cloud revenue by 34% to $2.2 billion).
- While it has not always easy to divine exactly what IBM has been delivering to clients in exchange for its very large cloud-revenue figures, the company says that even after the Kyndryl spinout, IBM cloud revenue for calendar 2021 was $20 billion. That would make it the world’s fourth-largest cloud vendor, behind only Microsoft (about $80 billion for calendar 2021), Amazon (about $62 billion), and Salesforce (about $26 billion). At $20 billion, IBM was bigger than Google Cloud’s $19 billion, although Google Cloud’s likely to grow in the range of 40% throughout 2022 and will almost certainly bypass IBM by the end of this year.
- IBM’s rapid and significant progress with its IBM Cloud for Financial Services, which the company says can help big banks cut total IT budgets by 40%, should give it a boost in Q1. And the size of some of those potential deals with big banks would be simply scintillating.
- And while I think IBM’s making a mistake in trying to differentiate its cloud business almost exclusively by saying “hybrid cloud platform” over and over again, there’s no question that the demand for hybrid-cloud services is enormous. The catch for IBM is that about 5,000 other cloud providers are also chasing the hybrid-cloud phenomenon—so IBM needs to summon up all of its unique IBM-ness to deliver insights and value and security capabilities and industry expertise that those others can’t touch.
Final Thoughts
A couple of weeks ago, IBM CEO Arvind Krishna began his third year in that role. And while there is no question that he inherited a mess from his predecessor Ginni Rometty, two years in the Cloud Wars is a pretty long time, particularly as the other companies in the Cloud Wars Top 10 have been growing at least 20% (Salesforce, Workday, Oracle, and SAP) in the cloud with some in the 30s (Microsoft and ServiceNow) and a few at 40% and above (Google Cloud, AWS, and Snowflake).
Under Krishna, IBM has lopped off some widow-maker hunks of deadwood, and as noted the Kyndryl spinout/distraction is done.
The job in 2022 for Krishna above all else—and I would say way above all else—is to get the IBM cloud business humming along at growth rates that are comparable to those of the other world-leading companies in the greatest growth market the world has ever known.
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