IBM: Commodity is not our business model

Vendor to push into high-margin software and services, vice president of corporate strategy says

Tags: Cloud computingIBM (www.ibm.com)
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IBM: Commodity is not our business model Klezl: IBM will continue questioning its own portfolio in terms of where we have commodities, and where we can differentiate
By  Tom Paye Published  April 6, 2014

IBM will continue to re-evaluate aspects of its business that are commodity-driven as it pushes further into high-margin areas of enterprise IT, according to the company's vice president for cloud solution sales, Christian Klezl.

Speaking to ITP.net, Klezl explained that IBM's planned sale of its small server business was evidence of the company letting go of commodity-based business areas. IBM will instead focus on high-margin solutions that are differentiated, he said.

"Commodity is very important, and there are companies out there in the market that provide very important platforms for technology solutions. But commodity is not our business model," he said.

"IBM will continue questioning its own portfolio in terms of where we have commodities, and where we can differentiate."

IBM revealed plans to sell off its x86 server business to Lenovo at the beginning of 2014, but there are plenty of other business units that the vendor might be considering shedding, too. According to its fourth-quarter 2013 financial results, revenue for the Systems and Technology Group was down by 26% compared to the same period a year before.

And while Klezl did not comment on any further divestitures, there has been market speculation that IBM will continue to rid itself of unprofitable, hardware-based business units.

Klezl did, however, explain that IBM was taking its software and services business very seriously, as it senses new revenue streams.

"IBM will always try to develop itself in the value stack up, and try to go into higher-margin, better-differentiated, deeper services. This is services and software-led, and not necessarily a game of commodity products," he said.

There are, however, hardware businesses that IBM will be keen to keep, with Klezl pointing out the vendor's mainframe business as a prime example.

"Our mainframe computer will still be there for a very long time," he said.

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