Thesis: While IBM is effectively reorganizing itself around cloud computing and taking full advantage of their new big data analytics brand Watson, the firm needs to rebrand their image entirely to maximize the potential of their new initiatives in the evolving tech marketplace.
Life is tough for firms in the new age of technological evolution and innovation, even for tech giants such as IBM who has been in the industry for 104 years. A company that thrived on business hardware like cheese slicers and card punchers in its earliest days and moved to mainframe computers and microchips in more recent years, the need for hardware has declined greatly. The process of reinventing a historical giant can be quite daunting, but by not adapting and staying ahead of the innovation curve you can end up like record companies did in the 1990’s when Apple came in with iTunes. Even though IBM is late to the party, as their hardware sales continue to decline they announced that they will shift $4 billion in 2015 spending towards their “strategic imperatives” of cloud, analytics, mobile, social and security technologies. While IBM is effectively reorganizing itself around cloud computing and taking full advantage of their new big data analytics brand Watson, the firm needs to rebrand their image entirely to maximize the potential of their new initiatives in the evolving tech marketplace.
Stemming from one of their most advanced inventions, IBM Watson has brought upon the crucial innovation for their strategic partnerships. After the artificially intelligent computer system capable of answering questions posed in natural language won jeopardy in 2011, IBM decided to create an entire business unit around it early last year. Since then IBM has announced several major partnerships with Apple, Twitter, The Weather Channel, and most recently through their Watson Health initiative: Johnson & Johnson, Medtronic PLC. With Watson Health, IBM will pool and distribute healthcare data and analysis, but being announced just last month it is unclear whether or not this will be profitable. FBR & Co. Analyst Daniel Ives stated, corporate buyers are “moving away from traditional services and traditional hardware toward some of these next generation areas of spending, and that’s a headway for some of these traditional stalwarts such as IBM.” These new cloud partnerships and strategic initiatives are on track to become a $3.8 billion business this year, compared to being on track to be a $2.3 billion business in the first quarter of 2014 (Business Insider). They still have a lot of catching up to do as they are behind Amazon who is projected to come in around $6 or $7 billion for their cloud services. IBM is innovating and attempting to catch up to their competitors, rebalancing their revenue streams and being forward-looking enough to be left in the dust of cloud, analytics, mobile, social and security technologies. However, in order to keep up with their younger competitors known for innovation and performance, IBM needs to invest more in re-branding their image to give a competitive advantage in the ever-changing market beyond that of their historical presence and reliability.