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Originally published May 12, 2014 at 5:37 PM | Page modified May 13, 2014 at 6:53 AM

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IBM chief promotes new vision for future steeped in cloud

The challenge facing Rometty is similar to those faced by previous IBM executives: figure out how to move to new business opportunities faster than the lucrative, older businesses erode.


The New York Times

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This is a “rocky time” for IBM. That is the frank verdict from Virginia Rometty, the technology giant’s chief executive.

In recent years, revenue growth has been stubbornly elusive, and new technologies like cloud computing have risen to threaten the company’s traditional hardware and software businesses.

Those concerns have weighed on the stock price, which has been stagnant since Rometty took over nearly 2½ years ago.

But in an interview at IBM’s headquarters in Armonk, N.Y., Rometty said she and the company now had a clear vision for how to pursue another generation of growth.

The company, she says, has jettisoned less profitable business and made major commitments in new fields — like technology to help customers find insights in today’s flood of digital data, and cloud-style computing in which processing and software are delivered remotely over the Internet.

Cloud computing, she insists, can be converted to an opportunity for IBM.

“We are transforming this company for the next decade,” she said, sounding a theme she plans to make Wednesday at the company’s yearly meeting with investment analysts. “That is not a one-year job, not when you’re a hundred billion-dollar company.”

The challenge facing Rometty is similar to those faced by previous IBM executives: figure out how to move to new business opportunities faster than the lucrative, older businesses erode.

Over the years, personal computing, the Internet and services firms based in India seemed like dire threats to the company. Each time, IBM adapted and invested, and emerged remade and reinvigorated.

“I feel very good about the direction and how we’ve crystallized it,” she said. She later added, “We are making progress, and we just need to keep moving with speed.”

Rometty characterized some problems, like the falloff in its once-booming China business and the losses in its semiconductor unit, as relatively fleeting or fixable.

Rometty’s message to IBM’s more than 400,000 employees is to embrace the future, and quickly, rather than resist it. The abrupt change in the company’s approach to cloud computing recently, analysts say, is an example.

IBM, analysts say, was slow to grasp the significance of cloud computing.

That technology, they note, is the most pointed threat to IBM because it has the potential to displace big parts of the company’s business of selling hardware, software and services to corporations in their data centers.

For years, analysts say, the company’s SmartCloud offering was a fairly typical response of an incumbent supplier to a new technology.

It was treated as an extension of IBM’s existing product line rather than something genuinely new.

But IBM signaled a new strategy, starting last June, when it bought a fast-growing cloud-computing startup, SoftLayer Technologies, for $2 billion.

Since then, the “cloud DNA,” as one analyst put it, has taken root at IBM.

In January, the company said it was investing $1.2 billion in cloud data centers, with a goal of having 40 cloud-dedicated centers in 15 countries by the end of 2014.

“IBM has made investments and there is a real urgency now in its cloud business,” said Frank Gens, chief analyst for IDC, a research firm.

IBM faces plenty of competitors in the cloud market, including Seattle-based Amazon, Redmond-based Microsoft, Google and Salesforce.

And analysts say that as the largest supplier to corporate data-center technology, IBM has the most to lose when companies move from traditional data-center computing to cloud rivals of IBM.

Amazon Web Services, analysts say, is the clear leader in so-called public cloud computing, in which services are delivered remotely from Amazon data centers.

Public cloud computing, analysts say, is where the growth prospects and developer interest is greatest.



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