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Despite another quarterly revenue slide, IBM sees a silver lining in its strategic imperatives as these key focus areas—cloud, analytics, mobile, social and security—show significant growth and indicate Big Blue is committed to succeeding in its transformation.
In the fourth quarter of 2015, IBM saw its revenue decline 9 percent to $22.1 billion; however the company’s strategic imperatives revenue grew 26 percent (adjusting for currency and the System x divestiture) to $28.9 billion and now represents 35 percent of the company’s overall revenue.
For all of 2015, IBM’s total cloud revenue grew 43 percent to $10.2 billion. Cloud delivered as-a-service revenue grew 50 percent to $4.5 billion, business analytics grew 7 percent to $17.9 billion, mobile revenue more than tripled and security revenue grew 5 percent.
“Our strategic imperatives continued strong performance, up 26 percent for the year,” said Martin Schroeter, IBM senior vice president and chief financial officer. “This now represents 35 percent of IBM’s revenue. Our profit and margin reflect our portfolio actions as we shift to higher value, as well as the level of investments we’re making to drive our transformation.”
Schroeter spoke of how large companies with many applications and processes are looking to IBM to drive broad-based transformations to the cloud. This underscores how the intersection of analytics and cloud continues to play to IBM’s strengths, and how hybrid cloud is emerging as a major bet for businesses, he said.
As part of a recently signed a $1.5 billion cloud services deal with European Bank BNP Paribas, IBM will operate two of the bank’s data centers in Belgium as hybrid cloud centers, and provide cloud infrastructure and a suite of transformation cloud services spanning applications testing, business intelligence, security and core banking solutions, in addition to big data analytics.
IBM customers are looking to transform their most critical systems into hybrid cloud environments, and the complexity of these partnerships in many cases results in larger engagements, he said. In fact, in the fourth quarter, IBM signed 26 services deals greater than $100 million, and for the full year of 2015. the company signed over 70 of these substantial transactions, which is 40 percent more than last year.
“Now about 70 percent of those transactions feature hybrid cloud content, which reflects both the value our clients see in hybrid, and the reality that not all of their workloads will be optimized for the cloud,” he said.
Two prominent market research firms, Forrester and Synergy Research, recently named IBM as a leader in hybrid cloud. Also, over the last year, many leading brands adopted IBMs Cloud platform for analytics and hybrid workloads, including Ford, Ethiad Airways, EVRY, Finnair, Marriot International, ANZ, Columbia Pipeline, Coca-Cola Amatil, the U.S. Army and many more. IBM also opened new cloud centers in India, Brazil, Canada, Italy, Mexico, Germany, Australia and the Netherlands, expanding its cloud footprint to more than 40 data centers in every major financial market around the world.
In addition, systems integrators such as Accenture, CSC, Wipro, Infosys, HCL and Cognizant adopted IBM’s Cloud platform. And Big Blue built on partnerships with Tech Mahindra, Cap Gemini and TCS to accelerate hybrid cloud deployments. Combined, more than 100,000 global developers will be trained on IBM’s Bluemix platform-as-a-service technology to accelerate analytics, cognitive and mobile app development. IBM now has more than more 140 APIs and services on Bluemix focused on data analytics, cognitive computing, the Internet of things and more.
IBM also made a series of acquisitions to accelerate the delivery of data-driven cloud workloads across industries, including The Weather Company, Cleversafe, Meteorix, StrongLoop, Compose, Merge Healthcare, AlchemyAPI, BlueBox and Clearleap. And just last week, IBM announced its acquisition of Ustream as well as the launch of the new IBM Cloud Video Services unit.
IBM Sees 2015 Growth in Cloud, Security and Systems
San Francisco-based Ustream is a provider of cloud-based live video streaming services. The move will extend the IBM Cloud platform to help enterprise clients unlock the value of video, a rapidly evolving digital media and data asset. Financial terms were not disclosed.
Ustream provides cloud-based video streaming to enterprises and broadcasters for everything from corporate keynotes to live music concerts. The company streams live and on-demand video to about 80 million viewers per month for customers such as NASA, Samsung, Facebook, Nike and The Discovery Channel.
“We’re acquiring Ustream to accelerate our focus on live video streaming,” Steve Canepa, general manager of Global Media & Entertainment Industry at IBM, told eWEEK.
Meanwhile, in its systems unit, IBM’s z Systems mainframe revenue grew 16 percent and Power systems grew 4 percent.
“Our Systems Hardware segment revenue was $2.4 billion,” Schroeter said. “This was the fourth consecutive quarter of growth in both z Systems and Power. We have continued to deliver innovation to our systems to enable them to run the most contemporary workloads. In fact, about half of our systems segment revenue in 2015 was to address analytics workloads, or hybrid and private clouds.”
IBM’s strategy for its systems business has begun to pay off. In 2014, IBM Systems began one of the largest transformations in its history, realigning the business to strategic, high-value areas in IT. The company divested its Intel x86-based System x business to Lenovo and microelectronics semiconductor manufacturing business to GlobalFoundries. A massive $3 billion investment in silicon research to drive the next generation of chip innovation would follow. These moves represented a focus on the future of IT infrastructure and a doubling down on IBM’s dedication to its hardware business.
Finally, IBM announced that its security business grew 12 percent for the year–gaining more market share with double-digit growth for the second consecutive year. Driving the growth has been IBM’s focus on security intelligence and security services engagements. According to the new numbers, IBM Security is now a $2 billion business. Some of the moves in 2015 that helped spur this growth include IBM taking a new open security approach to help the industry battle highly organized cyber-crime. Specifically, IBM opening its database of cyber-threats and delivering the QRadar Security Intelligence platform with the new Security App Exchange stood out as key factors.
And with nearly $18 billion in analytics revenue, IBM is one of the largest analytics providers and is into new areas with its Watson Health and Watson Internet of things initiatives.
“The continuing good news regarding the company’s strategic imperatives is evidence of the strength of IBM’s strategy in these areas,” said Charles King, principal analyst at Pund-IT. “The growth of its cloud services efforts was especially impressive, validating both its SoftLayer acquisition and its global cloud data center development approach.
“As you watch some of IBM’s competitors struggle to become viable cloud service players or abandon the space entirely, the company’s proactive approach to cloud has been borne out time and again,” he continued. “Plus, with strategic imperatives now delivering more than a third of IBM’s total revenues, the company seems solidly on the right track. That said, things could obviously be better in IBM’s traditional businesses though there were some bright points. In particular, I’d point to the solid performance of both the z Systems mainframe and Power Systems groups.”