IBM to Spin Off Managed Infrastructure Services Unit to Accelerate Hybrid Cloud Growth Strategy

IBM has announced that it will separate the Managed Infrastructure Services unit of its Global Technology Services division into a new public company ("NewCo"), creating two companies, each with strategic focus and flexibility to drive client and shareholder value. The separation is expected to be completed by the end of 2021.

The move will enable IBM to focus on its open hybrid cloud platform.

"IBM is laser-focused on the $1 trillion hybrid cloud opportunity," said Arvind Krishna, IBM CEO. "Client buying needs for application and infrastructure services are diverging, while adoption of our hybrid cloud platform is accelerating. Now is the right time to create two market-leading companies focused on what they do best. IBM will focus on its open hybrid cloud platform and AI capabilities. NewCo will have greater agility to design, run and modernize the infrastructure of the world's most important organizations. Both companies will be on an improved growth trajectory with greater ability to partner and capture new opportunities—creating value for clients and shareholders."  

IBM closed on its acquisition of Red Hat for $34 billion in July 2019.

The move positioned IBM as a leading hybrid cloud provider and accelerated IBM’s business model, extending Red Hat’s open source innovation to a broader range of clients.

With tighter integration and focus on its open hybrid cloud and AI solutions, IBM will move from a company with more than half of its revenues in services to one with a majority in high-value cloud software and solutions. IBM will also have more than 50% of its portfolio in recurring revenues.

IBM said that its Systems business, integrated with the hybrid cloud platform, allows cloud-native developers to capitalize on the unique capabilities of IBM's hardware. Leveraging its long-term relationships with clients, IBM said it will continue to drive the innovation in hardware that enterprises rely on for their most mission-critical computing needs.

As part of this strategic acceleration, IBM is simplifying and optimizing its operating model for speed and growth. This includes streamlining its geographic model and changing its go-to-market structure to better engage with and support clients. IBM is also continuing to consolidate its shared services. This simplified and focused operating model will support accelerated innovation for the hybrid cloud, and provide more flexibility to increase investment in growth areas.

IBM said the new company (to be named at a subsequent date) will immediately be the world's leading managed infrastructure services provider, and have relationships with more than 4,600 technology-intensive, highly regulated clients in 115 countries, including more than 75% of the Fortune 100, a backlog of $60 billion, and more than twice the scale of its nearest competitor. The focus on managing and modernizing client-owned infrastructures represents a $500-billion market opportunity.