As I said in my last two Letters, and now, unfortunately, you can see what I have said is correct (and more announcements to come), with Project Orange, IBM fully intends to do the following:
1) Move close to 200,000 employees as I explained last time. Throw thousands into SpinCo, and remember, this is not easy, as Legal, Finance, Sales, Marketing etc etc, all need to be decided. It’s not simply the people doing the hands on work. I know I shouldn’t repeat myself too much, but on this I’m going to; the bloggers who appear on the finance sites like Seeking Alpha etc who applaud the SpinCo move and think it’s an easy play, have no f—ing clue what they’re yammering about.
2) With ~350,000 employees, 90,000 to SpinCo, then remove approx 20% of the remainder
3) Advance Digital Sales, and focus on large accounts. The GTM model is to be revised, which is interesting given AWS, Salesforce etc are HIRING direct sellers, The announcement that partners will pick up some slack is disingenuous. Some IBM partners are very successful, however, if you take out the 500 accounts Krishna mentioned and the few motivated/successful partners, that leaves thousands of SMB accounts. No tears will be shed if this revenue fades over the years
4) Stick to the BAIN/BCG playbook, again as I explained last time. This also includes de-layering which has been going on for some time. Less than eight/six employees? You’re no longer a manager let alone a D or even a VP ( C ), but in the interest of your self-esteem you can keep your title. Or preferably f— off.
5) Q4 in EU was, politely putting it… not good. I can presume same for US, but hope springs eternal. Again, as I explained, many q4 deals got pushed
6) Reduce debt as fast as possible. Again, as outlined last time, IBM cannot compete with this much debt. It’s costing 6b a year. Same as the dividend.
7) Small acquisitions. You have seen some examples of this recently. Nothing north of $2b. This will continue unless something exceptional comes along
8) Product remix will continue. Faster and more ruthless purge of OM teams with failed or marginal products. After all what's the point of paying people if the products they’re developing don’t sell. So not simply GTM to be impacted during 2021
9) This is an all hands on deck move. Rometty has left IBM so weakened that Krishna feels he has no choice. I will give Whitehurst the benefit of the doubt, but like a few other AA’s he seems out of his depth. Which, still leaves Kavanaugh. I hope Krishna has the balls to dump him. (Rant over)
10) All above approved by the BoD, with buy-in and briefings for the OT and the PT
To clarify, some of this is PO, some is BAU, but it all rolls together.
Extra based on the news yesterday that Gary Cohn from Goldman Sachs is now vice-Chair at IBM, announced after I’d written the above. Which actually echo's what I’d written in point 9. Cohn is a finance guy, though his bio claims he advice's companies in the tech field including on blockchain and security.
“IBM said Cohn will work alongside CEO Arvind Krishna on business development, public advocacy, client services, and other areas.”
All this seems rather redundant. After all doesn’t IBM have highly paid band AA’s in all these areas? What this really means is that Krishna recognizes his team his weak, he needs someone not in love with their own image at IBM, (not beholden to Rometty) and that this guy can run through what his team his doing and make hard recommendations. At least that would appear to be what is meant reading between the lines.
Happy New Year courtesy of IBM
DT