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What the Pending IBM Break Up Might Mean for IBM i on Power

Posted on October 14, 2020 by Bill Langston

IBM has announced plans to spin off its Infrastructure Services business unit in 2021.1 Many IBM i customers have minimal or no experience working with this part of IBM, but the entity, tentatively called “NewCo,” will launch with roughly $19 billion in annual revenue, 4,600 customers, and thousands of employees worldwide. It will immediately be the world’s largest information technology services provider and have ongoing business with an estimated 75% of the Fortune 500.2 An interesting aspect of this break up is that NewCo may immediately be IBM’s biggest customer.3  

IBM’s decision surprised the industry analysts who in recent years have suggested IBM might exit the systems (aka hardware) business. But while infrastructure services contracts arguably saved IBM in the 1990’s, growth has slowed in recent years, and now IBM sees more potential in helping customers shift to a hybrid cloud computing model that integrates on premises, private, and public cloud resources. So once again, IBM is divesting and shrinking itself to create a new, smaller, and potentially higher growth company. When you are a public company, you must make difficult decisions like these to please Wall Street and large shareholders.4

IBM hopes to convince its IBM Z and Power customers that the best path to a hybrid cloud is through the adoption of open source solutions from the Red Hat organization that IBM acquired in 2019. IBM i customers can expect to see many announcements of Red Hat solutions that run on IBM i. As long as IBM sees that IBM i customers are helping it achieve its growth objectives, there is good reason to assume IBM will continue to invest in i on Power, and third-party software vendors will continue to round out the ecosystem with complementary solutions.

References:

  1. Reuters, Wire Service Content. “IBM to Break up 109-Year Old Company to Focus on Cloud Growth.” U.S. News, October 8, 2020, https://www.usnews.com/news/technology/articles/2020-10-08/ibm-to-separately-list-managed-infrastructure-services-unit.

  2. King, Charles. “Why IBM is Spinning Off its ‘NewCo’ Global Infrastructure Business.” eWeek, October 14, 2020, https://www.eweek.com/it-management/why-ibm-spinning-off-its-newco-global-infrastructure-business.

  3. Morgan, Timothy Prickett. “IBM Goes All-In on Hybrid Cloud.” IT Jungle, October 12, 2020, https://www.itjungle.com/2020/10/12/ibm-goes-all-in-on-hybrid-cloud/.

  4. Healy, Will. “3 Shareholder Benefits to IBM's Spinoff.” The Motley Fool, October 14, 2020, https://www.fool.com/investing/2020/10/14/3-shareholder-benefits-to-ibm-spinoff-newco/.

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