IBM spinning out managed infrastructure services to focus on hybrid cloud growth
IBM announced it will accelerate its hybrid cloud growth strategy to drive digital transformations for its clients. Additionally, IBM will separate its Managed Infrastructure Services unit of its Global Technology Services division into a new public company (NewCo). The separation is expected to be achieved as a tax-free spin-off to IBM shareholders, and completed by the end of 2021.
“IBM is laser-focused on the $1 trillion hybrid cloud opportunity,” said Arvind Krishna, IBM’s CEO, in a statement. “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. IBM will focus on its open hybrid cloud platform and AI capabilities. NewCo will have greater agility to design, run and modernize the infrastructure of the world’s most important organizations.”
With tighter integration and focus on its open hybrid cloud and AI solutions, IBM will move from a company with more than half of its revenues in services to one with a majority in high-value cloud software and solutions. IBM will also have more than 50% of its portfolio in recurring revenues.
NewCo will be entirely focused on managing and modernizing client-owned infrastructures, a $500 billion market opportunity. It will offer hosting and network services, services management, infrastructure modernization, and migrating and managing multi-cloud environments. These are critical services that are core to client operations.
Ginni Rometty, IBM’s executive chair, said in a statement: “Our multi-year transformation created the foundation for the open hybrid cloud platform, which we then accelerated with the acquisition of Red Hat. At the same time, our managed infrastructure services business has established itself as the industry leader, with unrivaled expertise in complex and mission-critical infrastructure work. As two independent companies, IBM and NewCo will capitalize on their respective strengths. IBM will accelerate clients’ digital transformation journeys, and NewCo will accelerate clients’ infrastructure modernization efforts. This focus will result in greater value, increased innovation, and faster execution for our clients.”
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