IBM’s Spinoff and Restructuring Plans Look Like Steps in the Right Direction

As a long-time critic of the company, I’ll be the first to say that IBM (IBM) still faces its share of competitive and secular pressures. But the planned spinoff of Big Blue’s managed IT infrastructure services business is encouraging news.

First, the managed infrastructure business — though said by IBM to have a $60 billion-plus backlog and more than twice the scale of its nearest rival — is clearly struggling. IBM’s “infrastructure & cloud services” revenue, which is reported within its Global Technology Services (GTS) segment, was down 7% annually in Q2, 6% in Q1 and 5% in Q4. And this is in spite of the fact that this revenue also covers the IBM Cloud public cloud services unit, which appears to be growing.

Secular headwinds — specifically, the adoption of cloud infrastructure platforms much larger than IBM’s, such as AWS and Microsoft Azure — are clearly a factor here. But growth comparisons suggest GTS has also been losing share to rivals such as Accenture (ACN) and Wipro (WIT) . A spinoff that leaves IBM’s managed infrastructure business in the hands of a management team that’s focused solely on running that business just might help turn things around.

Meanwhile, shedding the managed infrastructure business allows new CEO Arvind Krishna and other IBM execs to direct more of their attention towards value-added software, hardware and services offerings. And from the looks of things, that’s what they generally want to do.


Quite a few IBM businesses are seeing revenue declines right now. Source: IBM.

To be sure, the IBM press release announcing the spinoff still contains a lot of the usual Big Blue marketing-speak. Though IBM might now claim to be focused on “its open hybrid cloud platform and AI capabilities,” many of the businesses that aren’t being spun off have nothing