Editor’s note: Jennifer Hamel is a senior analyst at Technology Business Research.
HAMPTON, N.H. – IBM’s 4Q17 business results reported on Thursday highlight that, although a new product launch can yield dramatic improvement in Systems revenue performance in one quarter, the return to services revenue growth will remain a slow and uneven process.
Year-to-year revenue declines persisted in Global Technology Services (GTS; down 1%) while Global Business Services (GBS) registered modest revenue growth (up 1%).
Similar to last quarter, GBS Consulting outperformed other services subsegments, expanding 3% year-to-year, on the increasing strength of the “tip of the spear” Digital Strategy & iX growth platform and a more client-centric practice model driving adoption of cognitive and blockchain technologies.
GTS continues to differentiate with hybrid cloud solutions that integrate security, artificial intelligence and mobility technologies, but remains challenged by a difficult prior year compare as well as the market’s ongoing shift away from traditional, labor-based IT outsourcing toward automation-enabled cloud infrastructure management.
IBM’s delay in marketing its evolving services prowess externally has allowed more vocal services-led competitors such as Accenture and Cognizant to gain client mindshare as digital transformation leaders over the past few years. This has forced IBM to play defense in both legacy businesses and newer, strategic imperative areas, which we expect will impede revenue growth in 2018.
As IBM Services moves forward as a unified brand, the company will also continue its multiyear realignment of resources away from commoditized IT services and toward digital enablement and cloud-based IT management.
We expect IBM Services will continue to leverage its most invaluable asset – client trust built through long-standing (in some cases, multidecade) services relationships – to drive digital transformation engagements and high-profile collaborations around fast-emerging technologies such as cognitive, blockchain and quantum computing that differentiate the company from peers.
(C) TBR
