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Why IBM Chose Vodafone |
NEWS |
IBM’s 2018 financial results were positive, beating analyst expectations and returning to revenue growth after nearly seven years of revenue declines. It should be pointed out that a big portion of the revenue growth came from a replacement cycle in mainframes, even though CFO James Kavanaugh has stated that cloud services without mainframe grew nearly 20%. Kavanaugh also said in an interview with CNBC that, with the Red Had acquisition, IBM is well-positioned to address the second phase of cloud migration. In the first phase, cloud adoption was more cost-driven and workload simplistic, which was the reason for public cloud growth; in the second phase, cloud migration will be more strategic and distributed to address workloads across multiple clouds. IBM feels it will be particularly well-positioned during the second cloud migration phase.
These financial results and IBM’s cloud services portfolio may suggest that IBM did not really need to partner. However, the competitive environment around IBM was rapidly changing in ways that could potentially slow its recent momentum. This is exemplified in the following observations and market trends:
Why Vodafone Chose IBM |
IMPACT |
Vodafone brings a global connectivity footprint with key assets in fixed line, wireless and IoT services. In addition, it has reported solid growth in IoT connections and is investing heavily in the latest network technologies, namely 5G and LPWA networks. Both technologies will open new markets and revenue streams such as in manufacturing and supply chain. Like many telcos, Vodafone is only capturing a small share of the potential revenue opportunity. Finding the right partner could help them overcome some key barriers, because:
Where the Venture Should Focus Now |
RECOMMENDATIONS |
Vodafone and IBM have more than a twenty-year history of working together. Recently, IBM helped deliver additional capabilities to Vodafone’s private cloud services. The convergence of communications and cloud computing is a powerful combination for end-to-end solutions, especially in the world of interconnected physical and digital assets.
On the face of it, Vodafone and IBM are a promising combination for driving enterprise innovation, but execution and alignment between the two parents could prove to be the bigger hurdles in the way of venture success. There are three areas that the venture will need to address immediately to ensure market confidence and enable steady revenue growth. First is creation of a product and service roadmap. This needs careful attention not only to leverage resources affectively but also to tap the right markets with the right products and that addresses the solution development complexity issue that the vast swath of technologies creates. If done correctly, the range of services available through this partnership can enable “land and expand” revenue growth. Second is the venture’s positioning strategy. The key question here is whether the venture positions itself more as an SI with products and a trusted resource for enterprise transformation, an end-to-end solution provider for specific vertical markets, both, or something else. This decision is very dependent on its product roadmap and overall go-to-market strategy. Third is the pricing and offer strategy. What will be important is that the venture is flexible with how it prices and offers products, as it is likely the range of customers it engages will have various maturities toward implementation of new technology.
In early 2018, PTC announced its partnership with Microsoft and Rockwell, similar to the Vodafone-IBM announcement kicking off 2019. More announcements will come from big, multinational suppliers teaming up to capture a piece of the pie created by enterprises implementing new technologies in areas of IoT, AI and advanced analytics, robotics, 5G, and blockchain. These announcements effectively reflect that business is global, and that all enterprises, but particularly large ones, face multiple technology innovation challenges. IBM and Vodafone are a potent combination for realizing the disruptive power of the latest connectivity and analytics technologies. Their potency could be magnified in markets that need to converge IT and OT.