Why IBM is splitting its business in two

Stop me if you’ve heard this one before: A giant of the tech industry with a history stretching back many decades and a footprint in most large organisations – and many smaller ones – finds itself struggling against the tide of digital transformation and the shift to cloud.

Despite its best efforts to reform its business over a number of years, IBM has taken the decision to split its company in two in the hope that, as separate entities, they can pursue more successful growth strategies than they could under one umbrella – but they will maintain close ties.

To be fair to IBM, the split it announced yesterday, which will see its managed infrastructure services unit spun off into a separate entity, is less fundamental than that of HP in 2015, which saw the creation of Hewlett Packard Enterprise and… HP. Nevertheless, it is meaningful.

It’s clear from the announcement that the centenarian company does very much want to capitalise on its strengths in AI and cloud, with Red Hat taking centre stage as an example of its excellence in the latter and talk of being “laser-focused on the $1 trillion hybrid cloud opportunity”.

Reading between the lines, however, it’s also clear that IBM has no intention of letting go of its core infrastructure heritage, either. While the paragraph on its Systems business is coated in a sweet layer of hybrid cloud, if you were to bite down you would find there’s a traditional hardware business still sitting at the core.

And why not? One of IBMs strengths is its enterprise hardware products and, when it comes to things like mainframe, it has very few competitors. While it may not be quite as sexy to talk about as more modern technologies, it’s still fundamental to many large organisations in lucrative areas like financial services.

What it won’t be doing any more, however, is managing that hardware. This new company will be fundamentally IBM’s managed infrastructure services business, packing up its belongings and striking out on its own. It makes sense for this business unit to become independent, too – multi-cloud and hybrid cloud are all about flexibility and choice and, while it’s promised the company will maintain “a strong strategic partnership with IBM”, it will be able to work more freely across all cloud vendors.

The split is expected to be complete by the end of next year, which gives the branding teams and consultants 12 months to come up with an inspiring name for the new venture. Infrastructure Business Management Corporation, perhaps?