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LAS VEGAS—David Kenny, the freshly minted General Manager of IBM Watson, took the stage at the InterConnect conference here Tuesday dressed in jeans and sneakers with his shirt untucked. I had to check my badge to see that I was, indeed, at an IBM conference.
Kenny, the former CEO of The Weather Company, which IBM acquired in late January, didn’t apologize. “I’m dressed like a developer,” he said, “because developers are Watson’s customers.”
Kenny, together with CEOs of other IBM acquisitions, like Braxton Jarratt, formerly of Clearleap, the video company acquired in 2015, and Derek Schoettle of Cloudant, a 2014 acquisition, represent a new breed of IBM’er, one who is not tied to the buttoned-down past and who can execute the strategy for where IBM is heading.
That new direction, of course, is IBM’s “strategic imperatives” of cloud computing, analytics, mobile, social and security software and services. Revenue from those areas grew 26 percent in the past year and add up to $29 billion, but is that just accounting magic to make the company’s declining revenues look better or is the company’s on-the-fly transformation really working?
Judging from the news from InterConnect, IBM’s focus is certainly in the right place. As Kenny said, the developer is the key to IBM’s strategy and success going forward. The biggest announcement was around Swift, Apple’s hugely popular programming language that IBM, a close partner, is extending with a new runtime and package catalog that will make it easier to develop cloud-based and enterprise applications.
The other key piece catering to developers is IBM’s Bluemix platform-as-a-service, which continues to add services and now includes the new OpenWhisk, a direct counter to AWS’s Lambda event-driven service that enables code to be executed based on events triggered from other applications—a necessary piece of next-generation cloud applications.
Other bright spots include IBM’s new Cloud Video Services unit, formed last month following the acquisition of Ustream and led by Clearleap’s Jarratt. When you consider that video represents most of the world’s overall Internet traffic and data, IBM is now well positioned to manage a lot of it. And by adding Watson to the mix IBM can do interesting things around that data, like build automated video recognition systems.
Traditional video surveillance systems, for instance, are a “huge waste of time,” said Jarratt. “Machine learning and cognitive learning around video is simple and extremely valuable, increasing accuracy and reducing manpower costs associated with monitoring.”
So far, so good. However, this “new” IBM, which makes up about 35 percent of the company’s revenue, is still small fry compared to the rest of IBM’s hardware, software and global services divisions, none of which are growth businesses any longer.
IBM’s Recent Acquisitions Show Developer Mindset in Rebuilding Plan
The question going forward is how much the legacy businesses will help or hinder the strategic imperatives. Can IBM move at cloud-scale time frames while still selling much of their technology as “solutions” that require a heavy service component to any customer engagement?
Watson, of course, is the crown jewel with which IBM is trying to leverage cognitive capabilities across every business. At the conference, IBM introduced in beta three new APIs for Watson: Tone Analyzer, Emotion Analysis, and Visual Recognition, which can interpret text to recognize attitudes, emotions such as joy and disgust, as well as other emotions. But with Watson everywhere, simultaneously a service, a product, and a brand, it can be confusing to customers about what type Watson they are getting.
It will be up to CEO Ginni Rometty to rationalize the new and the old IBMs. It will take some time, but the company still has a ton of resources, lots of cutting-edge and industry leading technology, and very loyal customers. It also is a great partner as well as an industry leader, especially around open source.
In addition, certain areas of the hardware business, such as FlashSystem storage and mainframes, remain very strong. IBM appears prepared to continue acquiring companies and talent, as they did with the recent spree around digital marketing companies, such as Resource/Ammirati.
So what is not to like? It may not be pretty watching IBM struggle as it transforms itself to remain relevant in a new era of computing or as revenue tumbles quarter after quarter, but it’s necessary. As hard as IBM works at making this transition, success is really going to depend on how eagerly customers want to go along for the ride.
Scot Petersen is a technology analyst at Ziff Brothers Investments, a private investment firm. He has an extensive background in the technology field. Prior to joining Ziff Brothers, Scot was the editorial director, Business Applications & Architecture, at TechTarget. Before that, he was the director, Editorial Operations, at Ziff Davis Enterprise. While at Ziff Davis Media, he was a writer and editor at eWEEK. No investment advice is offered in his blog. All duties are disclaimed. Scot works for a private investment firm, which may at any time invest in companies whose products are discussed in this blog, and no disclosure of securities transactions will be made.