IBM set to spin-off managed service business to focus on hybrid cloud


IBM doesn’t want any distractions on the road to becoming a prodigious hybrid-cloud player, and today it eliminated one of those diversions by spinning off the $19 billion Managed Infrastructure Services unit of its Global Technology Services division.

The move creates an as-yet-unnamed firm, tentatively dubbed “NewCo,” which won’t actually be created until 2021 but will quickly be a big provider of managed infrastructure services. It will employ about 90,000 staffers, have more than 4,600 clients in 115 countries—including more than 75% of the Fortune 100—have a backlog of $60 billion in orders, and more than twice the scale of its nearest competitor, IBM stated. That would include Accenture, Fujitsu and Huawei.

“Client buying needs for application and infrastructure services are diverging, while adoption of our hybrid cloud platform is accelerating. Now is the right time to create two market-leading companies focused on what they do best,” Arvind Krishna, IBM Chief Executive Officer said in a statement. “IBM is laser-focused on the $1 trillion hybrid-cloud opportunity.”

Arvin, who took the CEO reigns from Virginia Rometty in April, likened the move to Big Blue’s previous large divestitures such as its decision to get rid of its networking business in the 90s and PCs in the 2000s to focus on bigger things.

In this case that bigger thing is hybrid-cloud computing.

“Hybrid cloud and AI are swiftly becoming the locus of commerce, transactions, and over time, of computing itself. Our decision is also the logical next step in our pursuit of the $1 trillion hybrid cloud opportunity,” Arvin stated in a blog about the move.

“Today, services account for more than 60% of our revenue. When NewCo becomes an independent company, our software and solutions portfolio will account for the majority of our revenue,” he stated. “This represents a significant shift in our business model.”

The acquisition of Red Hat for $34 billion in 2019 let IBM build its hybrid-cloud platform that suspports computing on-premises and in private- and public-cloud environments. “This was the first major step to seize this opportunity and underpins everything that has followed,” Arvin stated.

Copyright © 2020 IDG Communications, Inc.



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