IBM is taking a major step to focus on the cloud, announcing plans to split its legacy business into a separate company.
IBM is one of the oldest technology companies in existence and has weathered multiple, monumental changes in the industry. Once known primarily for its mainframe computers, the company has increasingly bet on the cloud as it works to transition away from its legacy business.
Now, under CEO Arvind Krishna, the company is taking drastic action to streamline its focus by spinning off its legacy business into a separate company. Krishna made the announcement in an open letter to IBM employees:
On my first day as CEO, I made a commitment to the growth of IBM. I stated that a maniacal focus on our open hybrid cloud platform and AI capabilities is key to this outcome. Day by day, product by product, project by project—we are dedicated to helping our clients unlock the immense value this represents.
Building on the solid foundation Ginni has put in place, we are focused on accelerating our growth strategy and seizing the $1 trillion hybrid cloud opportunity.
As we work toward this goal, two things are becoming increasingly clear. First, we’re seeing a tremendous increase in client demand for our capabilities and expertise. Second, we’re noticing that client buying needs for application and infrastructure services are diverging.
Because of this, we have decided that the managed infrastructure services business of our GTS segment will become an independent company, which we’re initially referring to as “NewCo.” We expect the new company to be created sometime toward the end of 2021. IBM will sharpen its focus on its open hybrid cloud platform and AI capabilities. And the new company will focus on delivering managed infrastructure services.
Krishna makes the point that NewCo will have the resources it needs to succeed as an independent company. The company will have 4,600 clients and nearly $19 billion in annual revenue. This will make it roughly twice the size of its nearest competitor.
This is a huge move for Krishna and IBM, and underscores the importance of the cloud for the future of the industry.
