We truly are living in an era of unprecedented change.
Shifting customer behaviors and markets dynamics combined with the digitization of business has led companies to operate much differently than they had even a few years ago.
For companies to keep pace and position themselves to achieve competitive advantage, it's critical for CIOs to leverage technology innovation and the right complement of third-party services from trusted business partners.
For CIOs, selecting the right business partner is a multifaceted decision and one that can't be taken lightly. CIOs want to be sure that they're partnering with a company that has a vision for the future and is driving innovation based on shifts that are occurring with customer behaviors and industry markets that are aligned with their company's business strategy.
The CIO also has to ensure that each technology partners fits into the company's direction. Often, this means assembling the right pieces of the puzzle to fit the enterprise's roadmap in areas such as infrastructure, data, apps, operations, etc. The CIO serves as the linchpin that connects the flow of information throughout the enterprise to customers and suppliers.
CIOs also have to make certain that they've teamed with business partners that have strong leadership, financial stability, and a product development pipeline that maps with their expectations and their organizational direction.
Many enterprise CIOs have partnered with IBM at some point in their careers, whether for IT infrastructure, business intelligence, IT services, and other resources. Although IBM recently beat earnings expectations for Q1, the company has suffered 16 consecutive quarters where it reported lower revenues than a year ago. IBM's stock has dropped 10.2% over the past year.
Some Wall St. analysts remain bearish on IBM's future prospects. For its part, Credit Suisse believes the quality of IBM's 1Q earnings continues to be low and that the direction in which IBM is managing its business appears to be unsustainable. For instance, new revenue from services signings, an area which IBM has counted on for growth in recent years, is down 17% year over year.
Still, IBM is showing signs of life in important areas that CIOs are concerned with. For its first quarter, IBM's cloud delivered as a service revenues were up 46% year over year. Meanwhile, revenue from IBM's 'strategic imperatives' - cloud, analytics, and engagement - saw double-digit growth (14%) year over year. Problem is, IBM's legacy businesses, such as hardware, are shrinking faster than its newer businesses are growing. In Q1, IBM's hardware revenues shrunk 22%.
IBM is clearly a company that's continuing to transition. For its part, IBM is investing heavily in the cloud and in analytics, as demonstrated by recent acquisitions such as Truven Health Analytics, The Weather Company, and Ustream.
But as UBS analyst Steve Milunovich recently told Fortune, "We give IBM credit for changing the narrative...still, the transformation is in the third inning."
IBM's shift to a provider of cloud and analytics services is taking longer than some analysts would like. Meanwhile, the company's cognitive solutions business, powered by Watson, its artificial intelligence system, has expanded into healthcare and is currently IBM's most profitable business unit, with gross margins in the 85% range.
Given the rapid pace of change in business today, CIOs have to make strategic moves quickly. For the courageous CIO, this includes a willingness and ability to partner quickly when new opportunities present themselves.
Whether IBM can successfully carry out its transition - and respond quickly to the changing needs of businesses - remains to be seen.
- For companies to keep pace with accelerated change and position themselves to achieve competitive advantage, it’s critical for CIOs to leverage technology innovation and partner with the right technology and business partners.
- Selecting the right business partner is a multifaceted decision that involves a clear understanding of a company’s product pipeline, its financial stability, and how/whether its strategic direction maps with the enterprise’s master plan.
- As IBM transitions its focus to cloud, analytics, and cognitive solutions, CIOs must determine whether the tech giant’s journey maps with the courses taken by their companies.