More evidence – Tough times for legacy tech vendors, and golden time for the Cloud

Software Asset Management and Licensing app provider Flexera recently published a report on technology investments that makes fascinating, scary or reassuring reading depending upon your perspective.

The Flexera™ State of Technology Spend Report was based on over 300 interviews with enterprise IT executives. Minimum enterprise employee size was 2,000, 62% of surveys were in the US, 36% in Europe. So clearly there is some geographic bias and no representation of the views of Asia Pacific enterprises. However, the research outcomes do pass a cognitive test of analysis (without access to the data). Enterprises spend approximately 8% of revenue on IT, and the trajectory is one of growth with enterprises overwhelmingly looking to spend more on technology.

There is a lot to unpick in the document, more than a single blog post could do justice.

Cloud usage is accelerating across customer size, and workload, with PaaS, SaaS, IaaS all experiencing strong growth at the expense of on-premise. Some of the numbers of cloud adoption may seem a little hotter than the market, but not exponentially so.

The overall state of IT in the organisation is healthy, with the key focus areas being Digital Transformation, Cyber Security and the cloud. Again, no surprise here, these will be a top 3, alongside enterprise resilience for a while to come.

For me, the most interest in the report came from the perspective of investment with various enterprise platforms. The relative health of legacy and cloud providers is highlighted in the figure below. If you are a cloud-native or Microsoft, it is excellent reading. If you are a legacy IT provider, it is a challenging read.

 

The split in the market to AWS, ServiceNow, Salesforce, Google, Workday and Microsoft vs the rest is clear and distinct, but this research reinforces the shift. Not only are enterprises spending more with cloud providers, but there is a net decline for IBM and Oracle. Red Hat is more positive, but clearly, nowhere near enough to compensate for the overall decrease in IBM investment predicted by the research. For IBM and Oracle, who have always been Enterprise reliant, this is a significantly challenging outcome.

On the positive side, the research highlights that AWS, ServiceNow, Salesforce, Google, Workday and Microsoft, in particular, can be very bullish in their revenue growth. These vendors also cover a significant range of Enterprise IT requirements, particularly in innovation-driven markets such as Customer Experience, AI, and process automation. Of course, they are also 100% Cloud Based.

SAP fare better than expected; it highlights the pressure on Oracle, as well as the positive outcomes of their considerable efforts to be available, ready and waiting on Google, AWS and Microsoft Azure. Oracle has primarily taken a different approach seeking to protect its database business.

CAPTURE POINT

Everyone who pays even cursory attention to the tech machinations understands the old vendors are increasingly disrupted, and only a small few have made the leap to leadership, Microsoft at the top of that list. AWS, Salesforce, Google, ServiceNow all are leading for the enterprise from the perspective of anticipated investments. They are the future for the enterprise and also for many smaller organisations. The legacies are running out of time to break this down.

All Go for Zoho

SaaS provider Zoho held their 2020 Analyst Day at their new US hometown of Austin, Texas January 29-31st. If you don’t know Zoho, think of them as an Austin, Texas for the tech industry. It is definitely not weird, but the culture is unique, and in several respects out of the mainstream of most significant technology firms. It is no surprise that Zoho has chosen Austin as the site of the largest US campus for the firm.

What makes Zoho unique? It is privately held, and resolutely so. It is based in Chennai, operates on all continents without a direct presence in more than just a few countries. Zoho CEO Sridhar Vembu is also profoundly committed to firstly, improving the Southern Indian community that he has made his home, and then loftier goals. He seeks to empower local communities furthermore through innovation, such as the cloud, carries a lot of different tools to build and support a community.

The employees at Zoho love it and know they work at an Austin in the tech world. When I asked CEO Sridhar Vembu what the one single aspect of the culture that he would never give up, he mentioned how managers treat their employees. That approach is much more realistic in a privately held company than one tied to the whims of the listed capital markets. The ambition stretches beyond the current position as a challenger to larger vendors and a key player in the small to mid-sized market.

It is also easy to forget that Zoho also has some products, in fact, a lot. From payroll to customer experience and AI and accounting. Customers can acquire Zoho products individually, with CRM being the mainstay, or packaged up as Zoho One; a single portal to all that Zoho has to offer. The growth in both customers and product depth in Zoho One has been exceptional. Soho One has over 40 products within the umbrella suite.

From the perspective of data centres and data privacy, Zoho has a unique take. It doesn’t locate with the global cloud providers, e.g. AWS and Google. Instead, it operates 10 data centres of its own, with Australia’s pair the two most recently announced. It is differentiating on this point with the perspective that the client’s data is their own. It cannot and will not sell that data or sell access to it. This is incredibly important, particularly in light of the Google et al. approach to data privacy. Given the track record of consistency of the overall Zoho approach, it is one that would be anticipated to be maintained without fear or favour as core to the culture.

Zoho is a great success story but not perfect. No vendor is. It has been slow to move to the mid-market. It needs to both accelerate a presence in the market as well as to build out a more partner orientated integration ecosystem to enable the growth and the integration of the Zoho product set for the mid-market, before any consideration for larger enterprises. It can learn from the foe that is Salesforce to an extent for this. It has made a few growth missteps in some key markets but has an awareness of this, so can act upon it. The product suite is robust and deep, but losing focus on breadth and depth would make it a thin veneer, again, something that it is looking to avoid.

Capture Point
Zoho is a fascinating and capable provider, and part of an increasingly strong Chennai SaaS ecosystem. It’s most substantial differentiation is arguably the culture that it exudes for both customers and employees. It is building out and undeniably strong portfolio for the mid-market, with longer-term aspiration and capability. Work is needed here, and it will not fly below the radar forever if it is to succeed.

No US Credit Card, then No Go for Amazon Go

I have written in the past about potential of the Amazon Go experience and the fact that if executed properly it can lead to enhanced skills for retail employees in a similar style that the Barista changed getting a cup of coffee. When I first saw it in Seattle in 2017 the potential was clear.
Now Amazon Go is out of Beta, with nearly 20 stores in Seattle, San Francisco, New York and Chicago all having a handful of stores. Rumours abound of course as to whether Amazon wants 20 or 2,000 stores.
Off I went to a NY store keen to buy some lunch at Amazon Go. I downloaded the app, registered, uploaded my credit card and no bingo. It would not work. I tried another credit card. After talking to a staff member, checking my numbers still no go for Amazon Go. The reason, in New York the most global of American cities, the Amazon Go app only took US-based credit cards. I could not get my lunch, and the shortcomings of the system were evident for all to see. There are of course equity issues around the use of credit card only stores, and San Francisco has made this illegal, with stores having to take cash.
New York does not appear to have this requirement, again leaving me without lunch.

Given the global nature of Amazon, and how it has disrupted and transformed industries in the US and globally it seems remarkable that an Australian credit card is not accepted at Amazon Go’s four walls, but is allowed in the legacy stores opposite Amazon Go. I have Amazon Prime, so it is also not as if I am an unfamiliar customer to Amazon, not that this should matter.

Capture Point
The Amazon Go store is a remarkable concept that has the chance to change the customer experience, increase the skill of employees and transform retail. However, failure to understand that not every customer has a US credit card is a shortcoming that Amazon should have considered. It also highlights how difficult end to end disruption is, and that a total digital experience needs to consider a range of issues from equity, to global payments systems.

AWS goes Local – Bringing the Cloud Closer

In December 2019, AWS had its key global customer event re:Invent in Las Vegas. It is no surprise that the game gets bigger, the event gets broader and the content overwhelming in scale and scope.

AWS now hosts 65,000 from one end of the strip to the other. Even the always charming LAX immigration officials muttered to me “oh Amazon” when I told them I was in transit to Las Vegas. Word gets around.

So what did AWS announce? A lot. Hundreds of new or enhanced offerings. Even the Machine Learning tools of AWS probably struggle to keep up with the announcements.

Key themes from my perspective were as follows.

• Localising AWS
• Broader, deeper Machine Learning (ML) and Artificial Intelligence (AI)
• Increased depth in Database

Of course, there is more than this. Quantum Computing, Chips, Contact Centres, were all enhanced as was security, networking and every product offering that AWS has.

As someone who at least pays their taxes in the outer reaches of the cloud universe, for me, the most important announcements were around bringing AWS closer to their customers. There were three significant aspects of this.

• AWS Local Zones
• AWS Outposts
• AWS Wavelength

While it is positive AWS Outposts is finally GA, after one of the few launch missteps from AWS, and AWS Wavelength has excellent application for edge computing driven by 5G, I was most excited by AWS Local Zones.

What is AWAS Local Zone? It extends the Availability Zone to a dedicated local environment reducing latency and increasing the speed at the point of content creation. The first of these is extending the Oregon AZ to Los Angeles. This is an industry-specific investment specifically for the entertainment industry; content renderers can celebrate. capioIT expects that the next will be to New York and Chicago for financial services transaction support.

This is just the first stage of the local zone. When it is considered a scaled-down version of an AWS AZ, then it opens up considerable opportunities to strengthen up regional coverage. In Australia, a local zone for Canberra and Melbourne will enable AWS to make the first stage of investment without the need for a full-blown Availability Zone. Similarly, coverage in Japan, India and China will be significantly enhanced if the technology is applied to these markets.

The next opportunity will be to make the technology cross border. This will not work in all jurisdictions. No-one expects a Local Zone working from India to Pakistan any time soon. However, for markets such as Australia and New Zealand, it is potentially a way to provide stronger coverage for the New Zealand market. It will just depend on the priority list of AWS from an investment perspective.

Capture Point 

AWS re:Invent is the ultimate firehose event. The number, breadth and depth of announcements are overwhelming even for a five-time event veteran like myself. 

While there is a lot to digest, Local Zones for me is essential to bring the AWS business to more clients and a broader geographic footprint. It has much more full deployment potential than the first steps; however, this is no surprise and no doubt the AWS roadmap dartboard is full of a range of options that will enable the democratisation of the cloud to spread even further. 

Dreamforce 2019 – Still going its own way

A Barack Obama fireside chat, Alicia Keys and a piano out of nowhere to sign off on Marc Benioff’s keynote, members of Prince’s band on the concourse, Neil Finn’s latest backing band AKA Fleetwood Mac at an apparently un-named baseball stadium, upstart blimps, 171,000 attendees and 2,700 sessions, it can only be Dreamforce.

It is a unique event, not least for the scale and the theatre that it brings to San Francisco, but more importantly, for the opportunity to engage, learn, share ideas and break step tracking records.

The big question to consider is there more to Dreamforce than celebrity keynotes and concerts. The answer for most attendees is and should be, yes!! Considering the time and investment in attending the event, that is critical. Some of the scale of Dreamforce could wallow to self-parody but to date that has not happened. It seems to grow effortlessly as an event.

There was a lot of energy from Salesforce, partners and customers to ensure that the value for the attendees is real. As one senior executive of a major bank told me, there is no other forum for them to talk to their global banking peers in an unconstrained manner, just as long as you can find each other and a spare patch of ground.

The key theme this year from a content perspective was trust. Trust is a crucial positioning for Salesforce and one in which it can gain a competitive and moral advantage. It requires consideration as the engine that can provide clients with trust for their clients. This shift to enhance focus on consumer assurance and the related requirements is overdue for Salesforce. The broader data governance is one aspect of the business that they have had the capability in but seemingly underplayed. Consumers have to trust their B2C providers; at the same time, they need to trust the technology platforms that the B2C providers run on.

One of the critical announcement areas for Dreamforce 2019 was the enhancement of partnerships with key platform providers, especially Microsoft and AWS, alongside Apple. The platform push is incredibly crucial for Salesforce, itself a reliable platform for enterprises. Currently, the drive to working closer with AWS is more critical and has higher potential than Microsoft.

Salesforce and Microsoft will often have a merry dance together, but they are fundamentally different companies and compete more aggressively. They define Frenemies.

By comparison, there is a little more substance to the relationship with AWS. The two platforms made announcements covering a range of business solutions from Contact Centres, open data and training. In particular, the Trailhead announcement is of significance. Trailhead is a very well executed platform for training, engagement and narrative building. It is one of the best, if not the best single “product” in the tech industry at this point. The total package is put together with consistent themes, outcomes and usability. The challenge for Salesforce is to get AWS to buy in fully. When I attended the followup AWS RE: Invent event, there was little awareness from AWS of the nature of the Salesforce relationship and enhanced partnership.

AWS and Salesforce also have the opportunity to work closely together in helping each other manage their respective weaknesses. AWS is influential in the mid-market and startup ecosystems, and Salesforce arguably has greater enterprise strength and relationships. The ability to share ideas and execution approaches in this market would be an expected outcome of their closer relationship.

In other areas, there were the expected improvements in each of the clouds. All are improving incrementally. The closing of the Tableau acquisition happened just too late for massive integration and engagement at the event. Still, it will be a piece in the puzzle to get Einstein more front and centre from a business value perspective.

A final word on diversity. In a world where the pushback against diversity, science and reason can be a crescendo, I have to give credit for Salesforce. It double downs on biodiversity every year and this year was no different. AWS, Google and every other tech firm, and business, in general, can and must learn from it. It would be helpful for another scaled firm to be the benchmark alongside Salesforce. Perhaps 2020 can be the year that another champion emerges.

Capture Point

Salesforce each year continues to grow and enhance the Dreamforce event. It is a credit that each year it is still managed in one piece. Unlike Oracle abandoning San Francisco for the charm of Las Vegas, I expect Salesforce to hold tight, even if it cannot name the baseball stadium.

The improvements in engagement with AWS are a crucial outcome, as is the continued performance of the company and social engagement. When it works as advertised, it is a formidable organisation for clients and business outcomes.

Cisco still does not understand the business of the cloud

 

Trawling through the mess and majesty of Twitter I came across an online survey from Cisco about the cloud. Of course, I was intrigued. I have not spent too much time following Cisco since the rise of the cloud. They are survivors in the cloud but have always been too product-centric for me, and never really understood the changing role of legacy vendors in the cloud. They are still there, doing better than some, not as well as others. 

Credit where credit is due, it performs much better than many of its legacy competitors. It is still there, doing better than some, not as well as others. There is always a major blind spot if the Twitter presence is any guide. Cisco had an online survey asking the Twitterverse to tell it what the biggest challenge to cloud adoption is:

• Application Management
• Cost 
• Operations
• Security 

These are all valid reasons, but reasons for a technology product company, not a cloud provider. They were also valid 5 years ago. 

Now the focus is deeper than infrastructure. Key impediments to cloud adoption are much more focused on business issues. These include lack of management engagement or a mismatched digital strategy.

Whilst Cisco continues to believe that product and internal IT-based issues are what impedes cloud adoption, it will never have a seat at the table for enterprise transformation driven by the cloud. It will be reduced to a bit player, whilst Google, AWS and others enable to business transformation. 

Capture Point 

In one online survey, Cisco highlighted what is wrong with legacy IT towards the cloud and why the gulf between legacy vendors and cloud platforms is only growing. It has not appeared to have met the challenge yet of the transition, so it is unlikely that it will be able to in the future unless it makes even more radical changes to perspective as well as products. 

We Need More Female Industry Analysts

I have been an industry analyst for close to 20 years, and run capioIT for eight. I have met hundreds of Industry Analysts and Analyst Relations professionals. Some have been newcomers to the industry; others had the experience 20 years ago that I have now. I’ve made close friends on both the analyst and the Analyst Relations and client-side. In short, it has been an enjoyable and fulfilling career journey. I thought it worth taking time to look at an issue that has grown over the last 20 years — gender diversity.

In the Asia Pacific region, we have an excellent record of diversity from a country perspective. Great analysts come from anywhere, India, China, Australia, Korea it doesn’t matter.

Unfortunately the same cannot be said for gender. While there are excellent female analysts, the industry is the Asia Pacific region, and in other markets, most notably, North America is dominated by males. Of course, there are great female analysts in every market, but there is a distinct under-representation. IDC is perhaps the strongest, globally and in the Asia Pacific region, in part reflecting their broader levels of experience from an analyst perspective. The numbers are significantly worse for independent analyst firms. Intermedium is the only independent analyst firm led and founded by a female in the Asia Pacific region; globally, there is only a small number.

The contrast with analyst relations professionals is incredibly stark. My reading of the top 10 AR programs in the Asia Pacific region, females lead eight. While not as dominant globally, a lot of highly rated programs such as IBM, Microsoft, Oracle and Informatica are led by women.

The questions are, of course, does it matter, and how to improve it.
Yes. It matters. The status quo cannot remain.

As to why, in discussion with the industry, I believe there are contributing factors. The lack of female participation in STEM training, employment and the overall technology sector is a problem that runs more profound than the Industry Analyst profession. We are not immune. This will drive a gender imbalance. Actions to increase female participation in STEM and related fields have had mixed results, although it will take perhaps a generation to be markedly and consistently successful.

Not all analysts come from a computer science or STEM background. I certainly didn’t. The source roles and skills of the industry analyst are diverse. A significant source of analysts of all genders includes professions such as journalism and communications, as well as market research, all-female friendly industries.

Market and customer-facing analysts have to travel. It is a professional fact of life. Travel requirements are an issue that is critical for many women, particularly those with children. I know first hand given my travel schedule that this is not a female-only issue. Due to societal expectations, it is more pronounced for the majority of women than men. The further challenge in Asia is that the distances, especially from India, New Zealand and Australia are substantial.

Outside of the STEM and travel issue, there is no clear structural reason as to why we have fewer female analysts. It would be great to get some feedback on this. I sincerely believe that industry is far from misogynistic, so there is no deep flaw in that regard. If you accept that a stronger gender balance is right from an analyst perspective, then we need to work in objective and subjective ways to get more balance. The more diversity we have, the better we are as an industry and profession.

Capture Point
Females are successful in Analyst Relations. Unfortunately, this has not migrated across to the actual Analyst role as much as it could. We need more female-led, and female-founded analyst firms to help drive further diversity in insight, capability and temperament. It is for the benefit of the entire industry.

Freshworks wants you to Refresh to a Customer For Life

Freshworks is one of the more interesting SaaS startups that has reached the scale of being a viable and reliable long term business. It originated in Chennai, which at the time of founding in 2009 was not a hub of technology perhaps aside from a then-nascent Zoho.

As an aside, Chennai is now on the rise from a tech perspective, looking to attract skills and dollars from the larger Indian centres such as Bangalore and Delhi. Freshworks, Zoho and others can take credit to as drivers for the rise of Chennai as an innovation and employment hub. 

Freshworks was one of the quickest SaaS providers to grow from US1M to US$100M in revenue, doing so in just over five years, beating ServiceNow and Shopify to this metric. Starting as Freshdesk, it has expanded to offer ten key products all centred around customer experience. The breadth of the portfolio is, therefore, significant for a relatively small company with the related challenges and opportunities that this presents. 

In September this year, Freshworks held the Refresh19 customer and partner conference. It attracted over 500 customers to Las Vegas the week after Labor Day, and also had its inaugural industry analyst day. Refresh attendees had doubled from the 2018 Refresh18 event in New York, showing the interest in Freshworks and the importance that enterprises are placing in a unified customer experience and engagement platform. The growth in attendance reflected the client investment in the firm and the increase in capabilities that it has invested in recent years.

The analyst day was attended by a small but hand-picked assortment of analysts. The Freshworks executives certainly were made aware of the collective and individual perspectives of the analysts, and to the executives’ credit, they appeared to relish the at times, pointed advice.

Freshworks started as Freshdesk providing cloud-based customer support software. Due to the growth in capability, and for precise strategic purposes, Freshdesk became Freshworks, with Freshdesk remaining as an anchor product. There are now nine other products in the Freshworks offering portfolio. Key product offerings include:

• Freshcaller – Contact Centre 
• Freshservice – IT Support Management
• Freshmarketer – Marketing Automation and Support
• Freshconnect – Customer and Employee Collaboration 
• Freshsales – Sales Support and Management

The two most recent offerings announced at Refresh19 were 

• Freshrelease – Project Management
• Freshping – Website Availability and Management

As mentioned, revenue is US$100M and growing; success is more than marketing and talk. One of the critical success factors of Freshworks highlighted at the event is customer satisfaction. For any SaaS firm (let alone every single firm or government agency) customer satisfaction is the anchor for renewals and expansion of investment. Engaging with some of the 555 customer attendees, it was clear that there was a high level of customer satisfaction with the investment in Freshworks and with the overall experience and business outcomes generated by this investment. Freshworks wants it’s customer’s customers to be customers for life. It wants that on the Freshworks platform directly or through the required marketplace.

Freshworks has strong leadership and has not been afraid to bring talent into the organisation to enable the next phase of growth, positioning and customer narrative. Expansion globally has accelerated, with three offices in Europe, two in Australia and one in Singapore alongside India and Silicon Valley. The technology is touted as easy to install and easy to use, which enables deeper penetration. Simplicity is a crucial mantra for Freshworks; it has taken an IKEA view of the world to the development of the product set. Given this philosophy, it is not surprising that French sporting goods retailer, Decathlon, an IKEA for sporting goods is a client. 

Of course, there is more that needs to be done by Freshworks. capioIT suspects that more cross-selling is required to boost the average number of products used per customer, particularly for the traditionally targeted small to mid-market customer. As it looks for more enterprise engagement, it will have to engage more with SI’s rather than the current partner base, which is more technology vendor and fellow SaaS provider-based. It also must develop a stronger position in terms of security, and how to ensure that clients understanding of the role of security is paramount.

Capture Point

Freshworks have had success so far in providing customer experience based SaaS platforms for clients. This success has enabled it to scale past US$100M in revenues and to become a key player in the marketplace. This success can continue on the back of the philosophy of making technology more accessible, and customer engagement easier for clients. Clients are, of course, the ultimate judge and the run to US$200M and beyond will be the measure of how successful Freshworks can be in the future. 

Salesforce and Alibaba team up to take on China

China is a problematic market for most non-Chinese technology vendors to penetrate.  In the 20 years that I have been an analyst covering China, the amount of money that I have seen lost, particularly by US-based firms in China is staggering. Politically, things have become more difficult in the past two years. The Trump administration has engaged in a series of trade sanctions, tariffs and other economic measures to put pressure on the Chinese government over trade. The omnipresent and rarely helpful Trump tweets increase the economic and political stakes and uncertainty in equal doses.

In the background of this, Salesforce recently announced a partnership with Alibaba to help provide Salesforce capabilities direct to the Chinese market. It is focused on the PRC, Macau, Hong Kong and Taiwan markets, and will enable Salesforce to have a capacity in the market that is effectively quarantined from the rest of the Salesforce market. Alibaba is the obvious Chinese partner for Salesforce for market reach, capability and cultural reasons. capioIT expects that Alibaba will be the primary go-to-market vehicle. In briefings from Salesforce, it is clear that this is a long term and well-considered investment. Both Alibaba and Salesforce have rightly taken an approach that minimises impacts from both administrations and is focused on customer outcomes. At the same time, the importance of data privacy, and Chinese hosting laws cannot be understated, hence the expectations of quarantining.  

The other important aspect of the deal is that both parties can join together to provide confidence for clients in the market. capioIT believes that the initial target will be MNC’s looking to enter or expand into the Chinese markets. This will be particularly true for industries such as retail and luxury goods. Salesforce is rightly planning to have one consistent UI of Salesforce, aside from clear localisations, customers will know it is Salesforce, and for customers who are also clients outside of China, it will have the same look, feel and capability. This is critical for both markets.

From a partnering perspective, the Chinese market is a modest but growing Services opportunity. Unlike some markets such as Hybrid Cloud and Strategy Consulting, the challenges of China has meant that it lags in terms of opportunity size, but not growth behind Australia and Japan. In 2019 the market is forecast by capioIT to be worth US$146.4M, rising to US$496.3M in 2023. As with the customer base, there will be two distinct markets,  larger MNC’s investing inwards to China, and the domestic organisations that invest with Salesforce and Alibaba.

Capture Point
China is a difficult market. It is not going to become more accessible or straightforward in the foreseeable future for both political and economic reasons. Cloud providers such as Salesforce have to be conservative and pragmatic on their entry to China. The opportunity is there, but it is not as easy as other markets. As a result, the well-considered approach of Salesforce in teaming up with Alibaba to provide capability across China, Hong Kong, Macau and Taiwan markets makes business and geopolitical sense. Trusted parties on both sides can ensure that the opportunity is there for Salesforce to match the growth and scale it enjoys in other markets in the Chinese marketplace.

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IBM Asia Pacific Analyst Insights – Red Hat has arrived at IBM

IBM recently held its 20th annual Asia Pacific Industry Analyst event in Singapore. Firstly kudos to IBM. No other vendor has had 20 Asia Pacific Industry Analyst events. IBM is not the same company that hosted a small number of analysts in Sydney just after the 2000 Sydney Olympics. I have attended 18 of the events; perhaps if I didn’t have three kids, I might have carved out a full 20.

In the initial Year 2000 event, not only was I childless and two months into an analyst career that is still going 19 years later, there was no talk of cloud, Watson or Red Hat, IBM was focused on large scale IT Outsourcing, Mainframes and PCs. The world was different. Digital was a technology company, not an essential business driver or a cliche depending upon your perspective. 

Fast forward to 2019. From an IBM watching perspective, the most significant development this year has of course been the closing of the Red Hat acquisition. Once the deal finally closed and IBM paid the $36 Billion to Red Hat shareholders it was time for the reality to set in. How would IBM integrate Red Hat? Would it become lost in the business, maybe holding onto the name for six months, or would it be treated how Red Hat, customers and partners wanted; that is part of IBM but separated from the IBM tentacles?

The talk is what the market wanted to hear. IBM appreciates the value of Red Hat’s partnership and depth of customers. Red Hat will remain independent, and at the same time, IBM is now fully open. That certainly is a change from 2000. IBM is in effect a partner of Red Hat that happens to hold the ownership papers. 

In principle, Red Hat independence is precisely what is needed; the challenge is going to be maintaining this at the same time that IBM must recoup the investment that it has made. IBM will be watched closely in the next 24 months and beyond to ensure that commitments to an open approach are maintained for Red Hat specifically and technology more broadly. 

The Red Hat acquisition has been rolled into the overall perspective of IBM for Hybrid Cloud. Of course, Hybrid Cloud is the buzz word of 2019; everyone is jumping on the bandwagon. For good reason. Perhaps in a pure world, 100% public cloud is a reality, but in the grittiness of enterprise IT, it is clear that the Hybrid Cloud is the critical model for infrastructure delivery across the next five years or more. The big cloud providers know this, and the legacy vendors know this. Of course, awareness is 1% of the battle for success in the Hybrid Cloud. IBM has a particularly significant opportunity across services, platforms and software for the Hybrid Cloud market, but it is going to take a substantial change internally and by customers, for it to execute. This change will relate to culture and perceptions in customers minds, particularly outside of the largest enterprises in the region. 

For example, the Hybrid Cloud Services market is a truly enormous opportunity, driven by ensuring automation and cloud to produce technology and business outcomes. No-one is there yet, and while IBM should be front and centre in this, it still has a long road to go to drive the growth and outcomes that will be considered a success in the Hybrid Cloud market including services. 

There is a lot more to IBM than Hybrid Cloud and Red Hat. The Hybrid Cloud opportunity for the first time in many years subsumes the Cognitive Enterprise (GBS, Watson, etc.). The Cognitive Enterprise market is increasingly competitive across a breadth of services, and IBM has to do more to differentiate in this space. It has had leadership before but needs to raise the bar higher to regain this position. 

Capture Point

It is a credit to IBM that they have invested in the Asia Pacific Industry Analyst ecosystem for 20 years. No one can claim this length of engagement, while perhaps all the IBM faces have changed, and many of the analysts, the continuity is appreciated. Red Hat was the key drawcard this year. The plans for Red Hat are very cognisant on the importance of an Open approach and the Red Hat ecosystem. If IBM and Red Hat can execute through this, then it has a genuine opportunity to be a leading provider of Hybrid Cloud services. Of course, it is much harder than this, but IBM has no choice, it has to make it successful, that should provide the motivation alone to get it right.