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IBM focuses on platform-based plan for hybrid cloud and AI

For decades, pundits have suggested that IBM has lost relevance. IBM wasn't in trouble then, and it's not in trouble now. See how IBM's cloud focus provides great advantages.

There are few alive today who can remember a time when IBM wasn't a powerhouse in computing. The company has played a major role in the three major periods when tech spending grew faster than gross domestic product, and it's reinvented itself more times than any other major player.

Buyers consistently rate it among the most strategically influential companies in tech, and yet it gets relatively little love from the press. IBM is often portrayed as the sleeping giant that's falling into deeper sleep. What is IBM up to now? How should enterprises assess its future and their future with IBM? The answer is platforms.

Hardware takes a backseat

As recently as 20 years ago, a platform in computing meant a computer system. Application software, even then, was the critical ingredient in turning something that could do little more than heat a room into an experience that people and businesses value. The computer -- the hardware -- was just what software needed to run. What IBM realized about that time, when considering the broad topic of AI that led to its Watson initiative, was that not only was hardware insufficient to build the foundation of software, but it wasn't even all that important.

What mattered was an emerging and growing software layer that sat between hardware and applications. This layer -- or platform -- consists of OSes, middleware and operations tools. It's the link between that applications layer and the business cases that drive IT spending.

What IBM realized about that time … was that not only was hardware insufficient to build the foundation of software, but it wasn't even all that important.

IBM's platform strategy is what led it to abandon networking, which it sold to Cisco, and even personal computing, which IBM made into the business tool it is and then sold to Lenovo. It retained only its mainframe computers: the Z series and Power servers. The former were kept because the largest IBM customers, which were also the largest companies, had written their own software for these systems and the latter to accommodate a large base of enterprise software written for IBM's Advanced Interactive eXecutive, or AIX, OSes.

Over time, application evolution has eroded the software base for both types of hardware, and so hardware is less and less important to IBM's revenues. That's not a problem; it is a sign that the transition to the platform concept is almost complete.

Is a platform just software now?

In one way, yes, because the platform strategy builds standardized software tools in a hardware-independent way to build applications. However, it also isn't because a platform is also a customer acquisition and retention strategy, as well as the basis for professional services revenues.

Since a platform is an integrated, symbiotic unit, it also offers buyers an application framework they don't need to build and integrate themselves. Even platforms can't totally unravel software complexity. Platform skills can be sold as professional services. It's no surprise that IBM's software and professional services businesses are growing, more than offsetting the hardware erosion.

IBM jumped on the notion of hybrid cloud because it knew from its mainframe experience that the data center was a persistent part of enterprise strategy.

IBM's hybrid cloud and AI strategy remains strong

Hybrid cloud is currently IBM's most valuable platform, partly because it cuts across all vertical markets and all applications.

IBM jumped on the notion of hybrid cloud because it knew from its mainframe experience that the data center was a persistent part of enterprise strategy. With the Red Hat acquisition, IBM gained a broader potential market and a modern software base on which both data center and cloud applications could be built. The hybrid cloud model then connects and unifies the two.

Given that most of IBM's competitors are relying on an "everything is moving to the cloud" story, IBM sees that enterprise C-suite members are highly uncomfortable with a total migration. Recent softness in cloud growth proves that. The capstone of the IBM hybrid cloud strategy could well be the Software AG's StreamSets and webMethods acquisition in December 2023, both technologies to organize software portability in hybrid and multi-cloud deployments.

Watsonx is not only an AI platform, but a data platform that provides a direct link to business operations. What IBM heard from enterprises was that AI wasn't valuable alone. Instead, it works well as an extension of business analytics and as a means of solving business problems by analyzing past activity and projecting future trends.

We should expect IBM to continue to exploit its hybrid cloud advantage through software and to capitalize on its unique ability to link AI directly to corporate data to gain advantages.

Tom Nolle is founder and principal analyst at Andover Intel, a consulting and analysis firm that looks at evolving technologies and applications first from the perspective of the buyer and the buyer's needs. By background, Nolle is a programmer, software architect, and manager of software and network products, and he has provided consulting services and technology analysis for decades.

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