We can call today the “Tale of Two Quarters” because both IBM and Verizon reported this week, and there’s some interesting parallels…and differences. Verizon is showing semi-expected strength and IBM continues to show strategic and semi-unexpected weakness. I’m seeing signs I never thought I’d see, signs of rust on that iconic IBM logo.
IBM’s revenues declined about 4% y/y and more surprisingly its revenues missed by 10%. Hardware slipped 17% and software was slightly off estimates. Even service signings were off 7%, which is a pretty darn clear indicator of a strategic problem.
For the last five surveys we’ve done (2.5 years), IBM has slipped in its ability to strategically influence IT, and in fact in the spring survey this year they were off in every category. The Street thinks that IBM has an aging, weak, portfolio but I think they have aging and weak positioning and marketing. Worse yet, they’re suffering from consumerization even though they don’t sell to consumers.
Consumerization has dropped the price for computers significantly even in the business space. This in turn has lowered the profit per account and increased the number of people who can afford servers and related technology. IBM has increasingly relied on direct account presence to sell new ideas as much as new products, and with the cheapening of gear they have less commission to pay for these dedicated teams and less to fund even part-time account presence. Buyers are unable to connect to IBM’s marketing, which is limited and poorly supported by their website. The net is that IBM’s brand recognition is declining except in its direct accounts.
In those direct accounts we have more of the “SOX effect”. With quarterly numbers to make, IBM pushes for short-term results over long-term project wins. Their professional services suffer, and they also lose an opportunity to direct the IT trend line for buyers, which absent IBM pressure moves away to brands the buyers see more often.
You can see a bit of the problem IBM has here at SDN World Congress. They have a small booth but they’re pushing only OpenDaylight, and OpenDaylight has a larger and much more popular booth on the other side of the exhibit floor. The people in the latter booth look excited and engaged, and the ones in the IBM booth look like they’re putting in time. Why would I, or anyone, stop at IBM then for OpenDaylight material? I didn’t, and most others don’t seem to be. There’s no big diagrams, no obvious material, just a couple of people standing around, and that is what IBM is doing in marketing.
Contrast this with Verizon, who among the US carriers and cable companies is gaining strength in ratings and in revenues. Their FiOS numbers were great, and their growth has made them perhaps the second-largest TV provider after Comcast. They have also improved their user satisfaction ratings for television, consumer broadband, wireless, and even business data services.
One of the biggest reasons for this is one of the biggest problems for IBM. I remember when IBM in computing was a name to conjure with, a company even consumers who at the time couldn’t have hoped to buy from them would have revered. When IBM launched their PC line they transformed the whole industry and made themselves a household brand name. Their advertising, aimed at the home, carried IBM brand awareness to the workers who lived there. That’s true with Verizon today; the Wall Street network services or cloud buyer likely has a Verizon phone…and FiOS. It’s like having your customers let you stick sandwich boards on them and then walk around displaying your brand for all to see. If you have a sea of customers—which at the consumer level Verizon does—then you have a sea of Verizon logos drifting through the city streets. What more could you ask. But where will the IBM logos be? There’s nothing for consumers to buy, and no reason for an SMB to even go to an IBM website. If they do, they’ll be disappointed.
Online presence is something that gets underestimated as an influence. If you’re reading these words you’re reading my blog (and I appreciate that). I know from people who come up to me that they like what they find. In networking, I could well be as influential as IBM (more people talked to me than to the IBM people in their booth yesterday, for example) simply because I offer something for people to read, something that carries my brand.
We are in age of social media and instant gratification. You can’t put your logo on a skyscraper and hope somebody looks up. You can’t put largely static content, poorly organized and not aligned at all with the likely trajectory of buyer interest, on a website and hope somebody enters a URL wrong and finds it. Anyway, if they do they’ll never come back.
I really like OpenDaylight (we’re trying to work a project to integrate it with CloudNFV) but I’m darn straight sure that you can’t build a company presence in SDN and NFV by being a member or even a founder of the project. Remember, OpenDaylight is a project and not a product, just like CloudNFV. People want us to productize, and I’m sure that they want IBM to productize too. You’d never know they were from visiting their booth, and never see how SDN or NFV figures into IBM’s data center or network strategy. IBM once ruled data center strategic planning. No longer, and this is a sign of why that has happened.
For fifty years, IBM has defied the odds and stayed on top as other rivals have sunk or disappeared. They’re sinking now, for the first time apparently unable to navigate a strategic shift. Not for lack of knowledge; they have incredibly bright people. Not for lack of products; I could put together a great cloud or data center with their stuff. For lack of presence. They were so big they couldn’t have hidden if they wanted to. Now they seem to be too big to succeed.
In economic news, the end of the debt-ceiling and government shutdown crises hasn’t ended rancor in Washington but it may well have ended the hostage-taking. All the polls show that the Tea Party took a terrible hit outside its own ranks, and that they took the Republican brand down with them. There are more stories about how more traditional Republican contributors are now backing opponents to the Tea Party in at least three or four states where gerrymandered districts don’t make conservative candidates a cakewalk not an election.