IBM's Journey: From Tech Giant to Consulting Powerhouse
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Chapter 1: A New Era for IBM
When I think of "Big Blue," my mind doesn’t wander to my partner’s azure eyes or the vastness of the ocean. Instead, it conjures images of the classic film "Jaws." I can't quite explain why that is.
In this age where machines dominate content creation, I'm here to remind you of the human touch in writing. By the way, that statistic I mentioned — “80% of content is machine-generated” — is entirely fictional. Just another quirk of human nature!
Remember IBM? Surely, you do. A humorous tidbit: my first encounter with IBM was through those iconic cash register systems in popular restaurants. During my software engineering studies over a decade ago, they were quite the sensation.
Yes, I’ve aged, and yes, IBM has evolved beyond recognition. The company isn’t at fault; the world simply outpaced it. This is a familiar narrative. Don’t forget the saga of Nokia versus Apple — it wasn’t that Nokia failed to innovate; it was that the market shifted too quickly for them.
Large corporations like IBM and GM have processes that aren’t designed for rapid change. Their transformations occur gradually, unlike their more agile competitors, which possess a “startup energy.”
IBM finds itself struggling to keep pace with tech titans like Amazon, Google, and Microsoft. These companies operate with a sense of urgency that allows them to pivot at a moment's notice. For instance, when OpenAI launched its products, Google had to scramble to develop a response, a feat unlikely to happen in a corporate structure like IBM’s.
IBM Watson once stood as a benchmark in AI technology. I recall launching an ed-tech startup during my college years, where we relied heavily on a robust AI model. Back then, IBM was synonymous with quality.
But what’s changed in the last decade? Today, the cloud computing landscape is dominated by Amazon, Microsoft, and Google.
The generative AI competition is similarly led by Microsoft, Google, and Amazon. So, what led to IBM's decline? I prefer citing real experiences over statistics. Recently, I wrote about IBM and received insightful feedback from several knowledgeable individuals.
Numerous factors contribute to IBM’s slower evolution, but the cultural dynamics of its competitors play a crucial role. The truth is, IBM is simply lagging behind.
However, an interesting development occurred this year: they’ve seen substantial gains in their consulting division. Yes, you read that correctly.
IBM: The Consulting Firm
Let’s examine some financial figures:
- Revenue from Software (Watson, Cloud, etc.)
- 2022: $25 billion
- 2023: $26.3 billion (+5.2% year-over-year)
- Revenue from Consulting
- 2022: $19.1 billion
- 2023: $19.98 billion (+4.6% year-over-year)
It’s ironic that a company synonymous with "software" is generating nearly equivalent revenue from consulting services.
Their total revenue increased from $60.5 billion in 2022 to $61.8 billion in 2023 (a 2% increase year-over-year). In contrast, Microsoft’s revenue surged from $198 billion to $211 billion (a 7% increase year-over-year), while Google and Amazon saw growth of around 5.3% and 8%, respectively (though Amazon operates in a different sphere).
The market responded positively to IBM's growth, even if it came from consulting, adding $20 billion to their market cap in a single day. Some analysts are proclaiming, “IBM is back!”
Nevertheless, the fundamental issues remain unchanged and are unlikely to resolve in the long run. IBM still struggles with:
- Being outdated
- Lacking agility
- Missing the drive to innovate
The entrepreneurial landscape often reveals truths that numbers cannot capture. IBM is, after all, a business. They need to ensure financial viability, whether through consulting or other means.
The innovation game is unpredictable. By diversifying their efforts, IBM is managing to stay afloat. As long as they’re turning a profit, they can weather the storm. Relying solely on tech innovations can be perilous; loyalty in this market is nonexistent.
Consider Apple, widely viewed as the world’s most valuable company — well, not quite; Microsoft holds that title currently, and it could shift again tomorrow.
This reminds me of a personal entrepreneurial experience. I co-managed an ed-tech startup that decided to heavily invest in AI and VR a decade ago, but the market wasn’t ready. Our financial advisor warned, “Never kill a money-making product.” We ignored this advice and faced bankruptcy within a year.
We didn’t emulate IBM in that regard, but we should have.
In today’s entrepreneurial world, you don’t need to be developing cutting-edge technology to succeed. If you’re selling courses and generating revenue, you’re on the right track.
Focus on the future, but don’t overcomplicate things.
This is my perspective on IBM and its consulting trajectory. As with most of my writings, I encourage interaction. Let’s discuss in the comments.
For those of you who have worked at IBM: Are you surprised that their consulting revenue is growing almost as significantly as their software sales? Do you think they could transition into a major software consulting firm?
I’m AL, a business consultant based in Zurich, Switzerland. I strive to provide valuable insights to my readers. Connect with me on various social media platforms if you’re interested in more of my content.
Chapter 2: Insights from Industry Leaders
Victoria Pelletier, IBM's Vice President and North American Talent & Transformation Leader, shares her thoughts on the evolving landscape of consulting and the role of technology in shaping business strategies.
The 'Cat Herders' video from EDS, an HP Company, humorously illustrates the challenges of managing large organizations and the importance of adaptability in the corporate world.