By Charles King, Pund-IT® November 30, 2022
It is common for companies to sell business units (BUs). That is particularly true when those groups and the products and services they provide no longer reflect the parent organization’s underlying strategies, goals or economic benchmarks. However, corporate spinoffs are considerably rarer and often indicate that the BU in question is too large or asset-rich to attract interested buyers.
IBM’s spinoff of its managed infrastructure services organization in late 2021, and what was later named, “Kyndryl,” is a good example of this. Recently, Kyndryl executives, including CEO Martin Schroeter hosted a briefing with industry analysts to discuss the company’s progress during its first year as an autonomous entity. Let’s consider what they shared.
Kyndryl then and now
When it was officially separated from IBM on November 4, 2021, Kyndryl began its independent life with more than $2B in cash on its books, 4,000+ enterprise customers in 60+ countries and annual revenues of nearly $19B.
Though Kyndryl’s annual revenues are roughly 3X higher than its closest infrastructure services competitor, the company’s leadership recognized and are intent on evolving and revitalizing its business model and focus areas. Those efforts took center stage after the spinoff and during the company’s recent analyst call.
In his introductory remarks, Martin Schroeter noted that Kyndryl’s “Services are not discretionary. They are vital to helping our customers run the systems of the world. The infrastructure services we deliver for our customers are the backbone for how billions of people live their lives, how they communicate, how they get their food, how they move their money, how they manage their health, how they travel, and of course, how they do business.”
He also described the departure from IBM as breaking “out from being a captive business unit inside of a product-oriented company.” Its central goals now are “Refining our systems, our tools and our processes to unwind the complexity we inherited … to build a people-centered culture that will serve as our foundation for our future progress.”
Schroeter outlined specific steps the company is taking to achieve those ends:
- To invest in our business for growth.
- To participate in the ecosystems that matter most to our customers
- To focus on our existing customers who already trust us with their mission-critical work
- To expand our wallet share
- To move decision-making closest to where the data and the relationships are
- To show up differently with a framework for creating a culture that is restless and empathetic and devoted to customer success.
The bulk of the webinar was devoted to expanding on this outline.
The three “A’s”
On the company’s economic situation, Schroeter said Kyndryl’s plan for returning to profitable growth underscores three areas:
- Alliances – Establishing significant new strategic alliances and expanding existing partnerships have been central to the company’s efforts in its first year. To date, Kyndryl has formed agreements with 20+ partners, including cloud-focused partnerships with Microsoft, AWS, Google Cloud and Oracle, enterprise-oriented alliances with Red Hat, Cloudera, NetApp and Nokia and expanded partnerships with Dell and SAP. Some of these deals have also resulted in new Kyndryl service offerings that would have been, at best, difficult to imagine when the company was part of IBM. The new Mainframe Data Pipe to Azure is a good example since it provides customers a pathway to connect their mainframe and midrange data with Azure cloud, assisted by Kyndryl staff who are deeply knowledgeable about mainframe hardware and software. Similarly, Kyndryl supports Google Cloud’s Dual Run which enables parallel processing so customers can create digital copies of their mainframe systems, then run them simultaneously on Google Cloud without negatively impacting core business processes or end user experience. These services may seem counterintuitive since Kyndryl maintains deep ties with IBM, including serving thousands of shared customers. Safe to say that it speaks loudly to the company’s unfettered independence.
- Advanced delivery – During the past year, Kyndryl has launched new, homegrown solutions and services attuned to modern and emerging business needs. These include: Kyndryl Bridge, an open integration platform that uses data-driven insights and services expertise to enhance the connections between technology and business processes to deliver improved outcomes with a unified customer experience. Kyndryl Vital is a collaborative co-creation experience in which the company’s experts and partners work side-by-side with customer development teams to assess problems and design effective solutions. Finally, Kyndryl Consult works with Kyndryl Bridge, Kyndryl Vital and other solutions to help customers achieve digital transformation by aligning outcomes with the technologies that support them, adopt and deploy new solutions and processes, and evolve those offerings over time.
- Accounts – Along with new alliances and offerings, engaging new customers is obviously top of mind for any new company. Kyndryl has been remarkably successful in this regard, inking contracts with global enterprise customers, including Michelin, CaixaBank, BMW, Raytheon, Bangalore International Airport, CarreFour Belgium, Spain Ministry of Defense, Ricoh, Honda, Yamaha and Singapore Airlines. This growing list attests to the depth and breadth of Kyndryl’s expertise and market reach.
Customer profile: Laurentian Bank
Following the strategic overview and discussion, Kyndryl’s President of Strategic Markets, Xerxes Cooper, interviewed the Laurentian Bank’s EVP and CIO, Beel Yaqub, about the assistance Kyndryl provided during the company’s cloud transformation.
According to Yaqub, the bank believes cloud is vital to its future for several reasons, including enhancing its agility and speed. “Part of our strategy is building out a decoupled architecture which allows us to separate our back-end systems from front-end systems where we build strong new capabilities for our clients.”
Yaqub also noted the importance of cloud native applications and capabilities. “Recently, we launched our API platform which will be a huge enabler of this effort. A key pillar of our strategy is partnership. Instead of building tools and solutions in-house, we’re partnering with fintechs and other organizations to develop best-in-class capabilities. Cloud is the foundation for that effort.”
Describing Laurentian Bank’s cloud transformation experience, Yaqub said, “We’ve been able to do it with remarkable speed. With Kyndryl’s help, we were able to actually implement our multi cloud strategy with both AWS and Microsoft in under seven months. The fact that we’ve been able to deliver so much value in such a short period of time is truly amazing.”
Yaqub believes Kyndryl’s support will also help the strategy resonate beyond the transformation process. “Kyndryl’s team is equally excited and passionate about what we achieved, about moving with speed and purpose. In fact, Kyndryl’s leadership set a very clear tone about what success looks like. I think working with the team sets us up for great success in developing future capabilities for our customers.”
What were my takeaways from Kyndryl’s first anniversary briefing? At one level, the company’s presentation followed a familiar corporate script. After an overview of existing assets and strategies by CEO Martin Schroeter, members of his leadership team and an enthusiastic customer, Laurentian Bank, added depth and color to the discussion.
However, while Schroeter and his team members stayed on track, they offered few if any of the bromides and homilies common in similar presentations. Instead, they laid out the case for Kyndryl’s strategy clearly and in substantial depth. An objective appraisal of the company’s progress during its first year as an independent entity would conclude that Kyndryl’s leadership understands its needs and opportunities and is moving apace to address the former while pursuing the latter.
The company’s core focal points, including its pursuit of new strategic alliances and deepening of longstanding partnerships, are particularly well-considered. So are launching new, future-focused offerings, like Kyndryl Bridge and Kyndryl Vital. Finally, the nearly thirty new customers that Kyndryl signed contracts with during the past year is a promising start.
This is not to say that Kyndryl’s road ahead will be bump-free or easy. Like other vendors in managed infrastructure services, many of its traditional practices and areas of expertise are either shrinking or under pressure. In essence, the company needs to assess, design, deploy and achieve a transformation similar to those it is helping other enterprises pursue.
Fortunately for its employees, customers and shareholders, Kyndryl has the leadership, strategy, assets and experience to make that transformation a success.
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