IBM Starts to Show Effects of Cloud Adoption by Enterprise Customers

Perhaps no ISV can lay more claim to owning the market for on premises computing solutions for enterprise businesses and comparably sized organizations in the public and not-for-profit sectors than IBM®.

But a research report on IBM’s second quarter, 2013 financial results, published by Credit Suisse reveals some telltale signs of the negative effects of a multi year effort of this same customer base to implement cloud, and private cloud solutions in lieu of IBM’s own standard offers.

The Credit Suisse analyst team of Talal Khan, CFA, Matthew Cabral, Vlad Rom, Ray Bao and Andrew Ruben characterized the quarterly results as “weaker than expected.” They further attested their ” . . .confidence in the quality of the roadmap [a program designed to assure IBM attains its EPS targets for the fiscal year] is lower.”

On August 6, 2013, Julie Bort wrote on the Business Insider website, in an article titled Credit Suisse Downgrades IBM, Thinks Shares Will Fall To $175 “Some IBM employees have told Business Insider that this promise is causing IBM to take drastic measures to control or reduce costs and that some employees call the plan ‘Roadkill 2015.'”

So it is fair to say internal morale at the company is at a low point. We think a lot of this has to do with the results of a steady evolution of IBMs typical customer, meaning the CIO of an enterprise business, from a stalwart for on premises data centers to an ambassador for a long list of cloud services tasked with provisioning same to large communities of BYOD users.

Further, recent public relations collateral points to an effort on IBM’s part to resurrect the PowerPC chip platform (now renamed simply “Power”) into a real competitor to Intel’s X86 architecture. We find this one real hard to believe given Apple’s decision to migrate off of the PowerPC architecture over to Intel, as well as IBM’s long standing aversion for commodity computing hardware markets.

Perhaps Microsoft is not the only enterprise ISV smarting from the Cloud wars.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2013 All Rights Reserved

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