You don't get fired from buying from IBM, but do you really understand what it stands for? The firm's UK CEO provides some insight

Nicola Hodgson

IBM is the 21st Century’s great tech mystery: a key player in services and outsourcing since its re-invention, yet rarely mentioned as being among the 'glamorous' top tier.

An early mover in cloud, Artificial Intelligence, digital assistants, and quantum computing, you didn't get fired for buying from Big Blue, yet the firm curiously appears to fail to capture the public imagination in a world obsessed with the likes of Meta, Alphabet, Microsoft, Amazon, Apple, and OpenAI.

Take IBM’s Watson Assistant: arguably the first enterprise-focused digital assistant, yet somehow neglected next to the consumer-friendly likes of Alexa and Siri. Or Watson itself (now Watson X): a natural-language intelligence service that debuted years before the explosion of ChatGPT, but with little significant impact.

Today, people rave about GPT-powered humanoids, like Engineered Arts’ Ameca robot, being able to answer questions and simulate intelligence, yet robots linked to Watson in the cloud were able to do that years ago. The difference is that no one seemed to notice.

Or take IBM’s quantum service in the cloud. Launched as far back as 2016 and soon to be offering 433-qubit processing – an impressive achievement – yet rarely mentioned when people talk about what Big Tech is doing in the field.

In short, IBM seems to have a messaging and PR issue, perhaps because it doesn’t play in the consumer space, like most of its Big Tech competitors?

Grown-up

IBM is like the school prefect in a playground full of ambitious nerds and competitive sports jocks: worthy, officious, competent, admired, and with an impressive track record, but somehow not in the thick of it. 

Since taking over from Virginia Rometty three years ago, CEO Arvind Krishna has not exactly been invisible, but has maintained a lower profile among his spotlight-craving peers, so it can be hard to divine precisely what he stands for – beyond a desire to pivot away from IT infrastructure. Indeed, it might be argued that many people had forgotten he was running the show, not something his predecessor could be accused of.

That said, despite focusing early on exactly the right areas – cloud, analytics, and cognitive services, including AI and ML – former CEO Rometty presided over six years of falling revenues, despite being a visible presence and an articulate, focused, and convincing leader. A strong woman leading a $150 billion enterprise. A troubling conundrum indeed, as IBM’s influence seemed to wane.

After Krishna took over, IBM’s market cap flatlined at under $119 billion for the best part of 18 months, after a COVID dip as low as $95 billion. However, this week shares rose to a collective value of over $130 billion (at the time of writing), on news of the $4.6 billion purchase of business management as a service player, Apptio. A significant outlay, the seventh purchase this year, and IBM’s biggest since the $34 billion acquisition of Red Hat, completed in 2019.

Who speaks?

So, does IBM have bigger personalities who are prepared to sit in the media spotlight and just talk about the vision thing or the issues of the day, as Rometty was adept at doing? One contender is Nicola Hodson, IBM’s CEO of UK and Ireland, who joined at the beginning of this year.

Hodson’s track record includes stints at Microsoft (15 years running its public sector business, and as UK COO), Siemens, CSC, and Ernst & Young, where she led blue-chip transformation projects. She is also Deputy President of trade association techUK, where she faced an audience of peers this week.

Her passion for technology is rooted in a love of engineering, she told delegates:

As a little girl, my dad showed me pictures of Concorde, and I was really excited about engineering. […] [Later] I studied chemistry, material science, which was absolutely my happy place. Then I did a research degree in surface engineering, with lasers, some finite element modelling, and went to work in the nuclear industry, which was a lot about science and engineering. I was there for about nine years in various different roles, most of them commercial. [But I] like my innovation, and you do not need that in a nuclear environment.

She added:

Who you become is about transferable experiences and what you learn. So, I'm often thinking about what the building blocks are that I’m picking up here, and which I am missing. It all adds to who you are. I'm a polymath, so I like to learn different sectors, different things, and put them together. And so, I naturally seek opportunities where you can learn something new and different.

Not the standard route into IT leadership, then, but perhaps one better suited to a 21st Century defined by transferrable skills and broad sector knowledge across different markets? Asked about her engineering, rather than coding, focus, she said:

We talk about diversity, but there are so many careers in tech: marketing, PR, tech itself, technical sales, delivery roles, programme management. So, it's a bit restrictive to think ‘It's got to be coding’ or ‘It's got to be computer science’. We've got some tremendous early professionals in our business who haven't necessarily come that route either. A lot is about attitude, overall capability, being a team player, and all of those softer skills.

A refreshing shift of emphasis from the messianic tech-bro figure who often characterizes this business. But what about IBM itself? What did she see in the 112-year-old company? And where does she see it going? Hodson was certainly candid:

IBM has evolved a lot – and I must say when I started the dialogue, I didn't understand its full evolution either. So, it's been quite a learning experience for me, because my experience of it was in the days when IBM was very big in outsourcing and I'd competed with them, then later in systems integration when I worked at Microsoft. But IBM today is all about transformational technology. Think of three things: hybrid cloud, AI, and quantum computing.

And it is also about understanding customers’ challenges, she said:

It's about inflation. It's about high interest rates. It's about labour skills shortages. It's about disrupted supply chains. And tech has got a massive part to play in [helping to solve] those. We think those transformational technologies, hybrid, AI, and quantum, can really help with some of those challenges. Around how can you be more productive? How do you take costs out of your business? And, how do you use innovation to drive entirely new business models?

So, think of those three things, hybrid, AI, and quantum. Then we have a large consulting business – around 5,000 people here in the UK and Ireland, not many people know that. A big consulting organization, with very deep industry expertise, with a technology organization, with infrastructure, and a large software portfolio. And we acquired Red Hat some years ago, and that's obviously part of the business too.

Hodson then set out what she sees as the core challenge facing business leaders, when you strip away the hype about some new technologies:

Most organizations have an IT estate that's evolved over years, and sometimes decades. We think the number is 70% plus, who either have a hybrid cloud or will have a hybrid cloud – and will have for many years to come.

Indeed, and this is the underlying reason for the $4.6 billion Apptio deal, which IBM hopes will complete later this year, adding 1,500 customers, cloud integrations, and upselling opportunities in the process. Apptio co-founder and CEO Sunny Gupta said of the deal:

Our customers are evolving to a complex, digital-first, hybrid world where technology investments are distributed and decentralized, but all innovation must be aligned with clear business outcomes. We are so excited to be joining IBM and combining our industry-leading offerings with IBM’s global presence and strong portfolio across AIOps, automation, and hybrid cloud offerings.

So, what about the flavor of the day, AI? This is an area in which IBM has long had a presence, but without grabbing the public imagination in the way that Open AI, Stability AI, and others, have over the past eight months. Hodson told techUK:

The Large Language Models and generative AIs are getting lots of interest and traction in the industry, and that’s carrying through into the business space. We did a survey last year and only 35% of businesses were using AI. But McKinsey did one recently and it's gone up to about 50%, so there's still a massive opportunity. But you know, whereas it might be okay to get a slightly inaccurate result if you're doing a web search, it’s really not OK if you're being given advice on a financial product or a healthcare treatment.

So, it's different for businesses. They've got to have super-reliable and consistent results from AI, and that means they need trusted data. They need to use foundation models that are finely tuned. […] And IBM is all about AI for business, and has been for many years. We launched Watson X a few weeks ago, our data and AI platform that will allow enterprises to accelerate the use of advanced AI. It's an end-to-end stack, but it allows you to train, tune, and deploy AI models across your own trusted data at speed, and across any cloud.

My take

Back in the world of high-profile acquisitions, not everyone is convinced by IBM’s buying spree, with Bloomberg warning that IBM cannot “acquire its way into tech’s top ranks”, because it is trailing behind AI’s innovators. But that isn’t correct.

This, as ever, remains IBM’s biggest problem: it is emphatically not trailing behind the AI innovators, nor, for that matter, the hybrid cloud and quantum innovators. It has always been an innovator in those spaces, but for some reason has lacked the ability to convince people of that – to grab their attention and persuade them of its track record.

Perhaps the weight of history, of a century of change, is dragging it down. People just aren’t sure what it stands for anymore, beyond being dependable, big, and blue. Above all, then, IBM needs a communicator right at the top.