According to the U.K. Register, IBM will be divided into new departments that include cloud, Watson, and Analytics. IBM's restructuring will put software at the forefront, while hardware takes a backseat.
[ Editor's Note: The author's firm, Cloud Technology Partners, is a business partner of several cloud providers, including Amazon Web Services, Cloudnexa, Docker, Google Cloud, and Rackspace. ]
Why now? IBM is scheduled to post fourth-quarter earnings today, and it abandoned its guidance of $20 earnings per share altogether in October after shares dropped to a 52-week low. IBM's third-quarter results were disappointing, posting a 17 percent year-over-year decrease in net income, as well as earnings-per-share losses. IBM is struggling in the current technology landscape.
As in the case of the latest major reorg at Hewlett-Packard, IBM seeks to find firmer footing in a market that's moving faster and faster to public clouds. However, doing this without killing the existing business is a trick that most large enterprises software and hardware providers have yet to -- and most ultimately won't -- figure out.
Reorgs don't do much to solve the larger systemic issues. If I were advising IBM, I would focus on bringing in new people with new ideas more than shuffling the existing people around. IBM has always been a company of very smart people, but I'm not sure most of its key decision-makers get the true value and purpose of cloud computing.
The fact is you may not be able collocate a healthy cloud business with a healthy enterprise software and hardware business. It may take some major surgery to get IBM positioned in the market as an entity that can actually compete with the likes of Amazon Web Services, Google, and Microsoft. The reorg is, at best, a face-lift.
The good news is IBM's cloud is getting some traction with some enterprises, typically those that already call IBM a long-term partner. However, IBM's growth relative to other providers, such as Google and AWS, is not there.
Also, to transition to the cloud means IBM will sell less-profitable cloud computing services in place of its mega-profitable hardware and software products. That also won't work long-term.