From Gartner’s perspective, the spin-off of the managed infrastructure services business into Kyndryl will help to streamline the IBM Global Technology Services (GTS) organisation from which it is being spun out. Post-spin, the streamlined GTS business will be part of IBM Services and will focus on enabling hybrid cloud, application modernisation, AI transformation and technology support.
Krishna himself has likened the move to Big Blue’s previous large divestitures such as its decision to get of its networking business in the 90s and PCs in the 2000s to focus on bigger things.
But this may come with its own set of problems, with Gartner warning of customer concerns around the continuation of service quality as the company with which clients may have been dealing for years, IBM, turns into a different entity entirely – a factor that could turn longtime customers off going forward.
According to Gartner, the appointment of a former IBM CFO, Martin Schroeter, as Kyndryl’s CEO suggests that it will be highly focused on managing costs.
“The impression that Kyndryl is intended to be a lean, price-competitive organisation also raised client concerns about possible impacts to service quality,” the report stated.
Against this backdrop, it should be kept in mind that IBM Services will partner closely with Kyndryl after the spin-off. Indeed, Kyndryl will be IBM’s largest sales channel for IBM cloud and, as such, a vital ingredient to the success of its long-term goal to become an established cloud leader.
Kyndryl’s success is essential to IBM’s cloud success, but the spin-off's future is far from clear.
“As Kyndryl provides new choices for its tools and platforms, IBM may see its sales pipeline negatively impacted for certain offerings, including IBM cloud,” the Gartner report said. “The risk for Kyndryl is that many existing IBM clients have bought into the advantages of sourcing traditional and digital services from one provider.
“The split will separate Kyndryl from the cloud, digital and transformational skills that its clients see as essential,” it said.
In addition, clients who originally selected IBM as a one-stop-shop for all IT solutions and services may choose to reassess their strategic sourcing approach and explore alternatives, potentially impacting both IBM and Kyndryl, the report noted.
In fact, the Gartner analysts went so far as to warn enterprises currently partnered with IBM to ensure that Kyndryl does not reduce service quality as part of its cost optimisation drive by linking any novation of IBM contracts to a right to cancel the Kyndryl contract if it persistently fails to meet service expectations.
Regardless, in associated analysis, Gartner has maintained its overall rating of IBM as ‘positive,’ flagging largely good feedback from the company’s customers.
“The company will build all new software on Red Hat OpenShift,” Gartner said in a separate report. “IBM now has more than 3,000 clients on the platform, with a material pipeline for future adoption.
“Most Gartner clients reported that IBM and Red Hat were meeting customer needs in targeted industry verticals. Clients also expressed satisfaction with IBM’s container support, which was faster than that of any other independent software vendor (ISV),” it added.