IBM Splits Into Two Companies

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IBM announced this week that it is spinning off its legacy Managed Infrastructure business into a new public company, thus creating two independent companies. I highly endorse this move and, in fact, advocated it for years. IBM is a big, successful, proud organization. But it has been apparent for years that it faced significant challenges in trying to manage two very different businesses and operate within two very different operating models.

“NewCo,” the spun-off company from Big Blue’s Global Technology Services business, will focus on modernizing customers’ legacy infrastructure and moving it to the cloud. The remaining company, still named IBM, will accelerate its focus on its open hybrid cloud platform and Artificial Intelligence (AI).  

One might say that the company separation shows that IBM finally found its senses. But I closely watched IBM since 2013 act on its senses and execute on a multi-year strategic plan to transform its company. Big Blue had a two-pronged plan for remaking itself, as I blogged about over the years.

One prong was to divest the mature parts of its business (such as its chip business in 2014). The other part of the strategic growth plan was to acquire companies, such as RedHat, that would enable IBM to quickly shift its business into high-growth digital platforms and companies that would help IBM grow its expertise in analytics, automation platforms, AI and the cloud. IBM paid a hefty 63% premium in October 2018 for its RedHat acquisition because of its hybrid cloud capabilities and its fully formed digital operating model. IBM clearly saw that hybrid was the direction for large customers moving to the cloud. 

Implications of the company split for all stakeholders and competitors

Why is the move to two companies operating independently a good move for IBM, its services customers,