Editor’s note: Elizabeth Hedstrom Henlin is a Senior Analyst with Technology Business Research.
HAMPTON, N.H. – Current year 1Q14 software revenue growth shows the potential ahead of IBM (NYSE: IBM) if it can monetize its cloud, big data analytics, social, mobile and security ambitions.
Amid a mixed growth picture for IBM as a whole, 2% year-to-year growth in overall software revenue illustrates that IBM’s existing software assets continue to drive customer conversations and purchasing across the IBM install base. Demonstrable growth in middleware (up 4% year-to-year overall, with WebSphere up 12% and Tivoli up 7%) underpins the degree to which IBM can build out from its core infrastructure strengths. However, TBR also sees a significant opportunity for IBM to continue its investments in and focus on its business intelligence assets, tying IBM analytics to its “Smarter” application suites.
With executive attention aimed at cloud, big data analytics, social, mobile and security, TBR believes IBM is set to expand its software-centric investment, sales and marketing across CY14 and into CY15.
The degree to which IBM can align its software and cloud visions into one unified narrative that delivers a seamless user experience regardless of delivery method will dictate whether software revenue growth increases to midsingle-digit growth by the end of CY14 or within CY15.
IBM will accelerate CY14 and CY15 revenue growth by staying focused on data
The key theme in all of IBM’s strategic topics for customer engagement is data, and IBM will add to its long-time DB2 strengths with its purchase of Cloudant. IBM will use Cloudant to create new paths to application development, engaging users sought by core competitors including Oracle, SAP and Microsoft. TBR sees IBM’s purchase of Cloudant as a particular shot across competitive bows, emphasizing the company will no longer be a stealth player in the database wars.
TBR sees customers increasing focus on in-memory, and competitors including Oracle and Microsoft adding additional marketing and development dollars to take back brand awareness from SAP and SAP HANA. TBR believes IBM will capitalize on its ability to message both business-to-business and business-to-consumer to bring DB2 and Cloudant center stage in the in-memory dialogue, creating additional buyer momentum for IBM and market choice for customers.
IBM’s acquisitions will continue to expand the breadth of its cloud…
After formalizing a cloud business unit in 3Q13 around the acquisition of SoftLayer, IBM is now acquiring smaller, niche vendors to extend the capabilities of its cloud portfolio. The October acquisition of Fiberlink adds mobile device management to IBM’s cloud portfolio while the purchase of Xtify in November adds cloud-based mobile marketing capabilities with industry-specific packaging, providing IBM and its partners with additional revenue opportunities in new and existing accounts.
Ensuring its acquisition of Cloudant will be compatible with SoftLayer and its new PaaS BlueMix will allow IBM to leverage Cloudant as a cloud-based alternative to DB2, enabling developers to more efficiently engage with IBM to build cloud-based applications, particularly around analytics.
…with targeted investment to complete the full picture
Recent investments further exemplify the importance IBM is placing on shifting its traditional business model to one that is increasingly cloud-led. IBM’s $1.2 billion investment in additional cloud infrastructure highlights IBM’s commitment to expanding the global reach of its cloud business. IBM also plans to invest an additional $1 billion in enabling cloud platform capabilities, with the launch of BlueMix at the center of this investment.
IBM’s cloud business now extends across the cloud stack to include applications (both cloud-enabled legacy apps and acquired apps such as Kenexa), platform (BlueMix) and infrastructure (SoftLayer). In addition, IBM launched industry-specific cloud consulting services to enhance its ability to offer an end-to-end cloud portfolio that spans hardware, software and services.
(C) TBR
