IBM Has a Secret Weapon That’s Bringing in Billions

Part of International Business Machines‘ (NYSE: IBM) strategy is to sell clients on its platforms. OpenShift, a container platform that enables running workloads across multiple clouds both public and private, is at the heart of IBM’s hybrid cloud computing business. Watsonx, a new enterprise AI platform from IBM, looks to fill the same role for the company’s AI business.

These platforms come with a multiplier effect, as CFO Jim Kavanaugh explained during a recent technology conference. Every $1 of revenue spent on one of IBM’s platforms generates between $3 and $5 of additional spending on software, and between $6 and $8 of additional spending on services. IBM has adapted much of its software to run on Red Hat’s OpenShift, and its consulting arm steers clients toward its lucrative platforms.

The secret sauce

While IBM builds solutions for clients around its own platforms, those platforms need to run somewhere. IBM offers its own public cloud computing platform, but it’s a small player in an industry dominated by Amazon Web Services and Microsoft Azure. Enterprise customers are going to be biased toward using one or both of those leading platforms. A digital transformation solution that doesn’t involve AWS or Azure is likely a non-starter for many of IBM’s customers.

IBM’s consulting business has always been agnostic when it comes to putting together solutions for clients. While IBM sells a wide variety of software, hardware, and services, the company partners with other technology providers and aims to build the best solutions for clients. In the cloud and AI era, this agnosticism is really paying off.

IBM has recently entered into a variety of strategic partnerships with leading technology companies, including AWS, Microsoft, Cisco, Oracle, Salesforce, SAP, Adobe, and a few others. IBM competes with these partners in various ways, but it’s also happy to include these competing products in the solutions delivered to clients.

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