What if IBM is spinning off the wrong business?… Amongst the growing pressures to compete in the Cloud business, IBM has announced plans to spinoff its “legacy IT” business into a separate company. The new “#1 IT services business” will have a new name, and the separation is planned to complete by the end of 2021. This all comes after the tough competition IBM Cloud has had over the last few years with Microsoft, Amazon and Google; the cloud titans, and the declining IT services business overall. The cloud is simply winning out above all else in IT, with the subtext that Linux is on top as well!
This “spinoff” strategy is a typical behavior of IBM over the years as it “sells off” businesses with decreasing profitability. They did this with personal computers and their Lenovo brand years ago, as well as other business units.
The new, unnamed IBM Cloud company will include IBM’s basic technology services business that maintains, supports, and upgrades computing operations for enterprise customers. This IT business represents sales of about $19 billion per year. While this IT business may not be as profitable as it once was, it’s certainly enough for a sustainable business for at least a few more years.
IBM Should spinoff Cloud business instead as Red Hat Cloud!
IBM has been struggling to compete with the cloud titans of Microsoft, Amazon and Google. “Big blue” IBM just doesn’t seem to be as desirable of a brand lately, as they once were. Just try asking the average person what IBM does? They may just respond with “Is IBM still around?” Yeah, it’s that bad!
Currently, “Red Hat Cloud Suite” is already a combination of tightly integrated Red Hat technologies used to help build cloud infrastructure, apps, and orchestrate deployments across Hybrid IT environments. It’s possible the combination of Red Hat Cloud Suite and the IBM Cloud business is the foundation for the new cloud business they plan on creating out of this new spinoff effort of breaking out IBM’s cloud business on it’s own.
What are your thoughts on a new “Red Hat Cloud” being better positioned; ready to compete with the cloud titans that are Microsoft, Amazon and Google?
Linux has already taken the lead as the most used Operating System in the cloud; across all clouds. All this could mean the beginnings of a new rise for Linux as the cloud titans are aligning with Linux and embracing it as a means of a new corporate overlord. Ok, maybe not that strong, but it’s certainly interesting that Linux is at the center of the cloud as all these companies are pushing to compete and become the largest cloud provider in the industry. I’ve already postulated that Microsoft should acquire Ubuntu Linux. With IBM already owning Red Hat, it would make more sense to position Red Hat as the center of their cloud business. Red Hat may not be known as much by consumers, but it’s probably a stronger brand in the IT / Cloud space.
What do you think? I’d love to hear your thoughts in the comments!