BB: Is your sales force fully onboard with selling those cloud services versus the traditional on-premise offerings? What have you done to incent the sales force to make that shift?
There are always two things you do with a sales force. One is you have to train the sales force. They have to be aware of the offerings and how to put the offerings in context with what the client is trying to do. We are training our sales force in the cloud and honestly, when you talk about the cloud you have to talk about it in the context of industry. We are educating our sales force in how you put the cloud in the context of the industry I’m in.
I talked about business models and business processes being affected by the cloud but you have to understand the industry you’re in to understand the business process and models that are being affected. That’s where most of the disruption, in fact, is happening. One is certainly getting our sales force to understand how we can bring value and what we have in our portfolio to help them make the transition. We’re undergoing a transformation. Every client, every industry I’ve talked to in the last year is going through some form of transformation. Some people call it digital transformation. There are different names for it but everyone is going through that transformation. That’s number one. Number two is how we compensate. We have changed the compensation model so a big part of a salesperson’s compensation is their ability to sell our cloud offerings.
JG: Investors and financial analysts have lots of questions about what’s happening with IBM’s revenue and the length of this transition and whether it is taking too long. Do you get those same kinds of questions from IT buyers? Are they concerned about that transition or do they see this as an absolutely necessary move for IBM? What kinds of questions are they asking you about it?
I don’t get a lot of questions about the financials from clients. They’re more [concerned] about where we see the cloud going. What are the things I need to do to prepare for that transformation? Almost every client I talk to is committed to the cloud. There’s no maybe anymore. Everyone is going to the cloud. Now they’re trying to decide what to move to the cloud. There are certain business processes, certain applications that are natural to move to the cloud. Some of them will stay on-premise. Sometimes that on-premise is driven by regulatory, security, the amount of data they have. There are a lot of factors that go into it but in most cases they end up with hybrids.
A lot of the dialogue I have with the client is: ‘What do I move, how do I move it, when do I move it?’ They’re looking for help and guidance. They’re looking for capability. I don’t have a lot of discussions about IBM financial results with clients. What they want is to make sure we’re in it for the long haul. They know as they make the transition this is a decade-long commitment that they’re making. The other piece that I hear a lot from clients is [about] culture. How do they make the shift in culture? They’re always asking for my experience and insights into how you make that transformation because inside of IBM we’ve had to make that transformation.
JG: From the CIO perspective, when you talk to them about the IBM transition, what would you say is the single biggest worry they have? What’s the one thing they don’t want IBM to screw up?
I guess they’re always worried about two things. Are you bringing the A-team skills to help me make the transformation that I’m undergoing and are you going to stay in the public cloud longer term? I point them to our strategy. We’re as dependent on the cloud, if not more, than our clients are. If I’m not in the cloud, then I don’t have a Watson business because everything I do is on Watson. If I’m not on the cloud I’m not in the internet of things business, I’m not in Blockchain. All of those value-added services and solutions that we’re building for ourselves and for our clients are all on top of the cloud. The cloud is a foundational element for the IBM business and also for our clients. I talk to them about the level of investment we’re making, which is in the billions of dollars and about the progress we’ve made in the last 18 to 24 months, really starting when we acquired SoftLayer in 2014.
BB: Robert, I want to get back to hybrid cloud. In her annual letter to IBM shareholders, Ginny said that hybrid cloud is the fastest-growing segment of the cloud market and that IBM is the global leader in hybrid cloud for the enterprise. How is IBM better than, say, Dell/EMC or Hewlett Packard Enterprise for hybrid cloud?
Think about hybrid cloud: It is the combination of private and public. For some players, it’s hard to be a hybrid cloud provider if you don’t have part of the equation. Being a world-class public cloud provider is a perquisite to being a world-class hybrid cloud provider. You’ve got to enable the client to build these solutions and put the solution or the application and the data where it makes sense for their business. As an example, if you’re building a new mobile application, most mobile applications today are being built out on the cloud. You’ve got to have a world-class cloud platform to enable mobile. You’ve got to be global. Some of these players are more local. Most enterprises are global. Even smaller companies have aspirations to be global so you’ve got to have data centers that are around the world. We’ve got almost 50 data centers now as part of our cloud around the world. In fact, just last week I was in Korea opening up our Korea cloud data center.
Clients are looking for the ability to deploy their solution anywhere around the world and to have data local. There are a lot of companies that have data regulation, data security, privacy regulations that force some of the data to be in-country. We give that flexibility to the client so they can decide where the application runs. They can decide where the data resides. If I’m running an application, I may have an instance of that application running in Country A and the same instance running in Country B. That really is the client’s decision.
When you think about some of the other players, they may have one piece or the other. We’ve got the on-prem; that’s our history, that’s where we come from. We understand how to securely connect applications to data, securely connect back into transactional systems. That is where we have a unique set of capabilities, a unique understanding, since we were a major player in that generation of on-prem IT. Our ability to map and to connect them to the public cloud and a world-class public cloud solution is unique.
I’ll give you an example.If I’ve got a large application and it’s handling a lot of data, for me to move the application to cloud is one thing. For me to move the data is another thing. If I have transactional systems that are producing new data every day, if I’m having to replicate the data back and forth, that becomes a very expensive proposition. What I hear from clients is: ‘Yes, compute and storage is a big part of the public cloud but I’ll tell you, I’m spending more money on networking and moving data than I am on compute and storage.’ Having to move data and replicate data, if you have to do that in a hybrid world, is not a cost-effective way to manage my environment.