Thursday, August 3, 2017

IBM sees optimism for cloud and AI despite its weaker financials

IBM recently reported that its cloud revenues continue to rise, however not at the rate of its larger public cloud competitors and not at the pace that investors have come to expect. The company's Q2 financial report posted in late July revealed that that cloud revenues grew 17% in the quarter, led by as-a-service offerings, which were up 32% year-to-year.

Total cloud revenue was $15.1 billion for the last 12 months and XaaS revenue was $8.8 billion at an annual exit run rate in the quarter, up 30% year to year (up 32% adjusting for currency). Revenue from analytics increased 4% (up 6% adjusting for currency), revenue from mobile increased 27% (up 29% adjusting for currency) and revenue from security increased 4% (up 5% adjusting for currency).

These growth areas were offset by continued declines in legacy revenue, leading to an overall decline in revenue for the company compared to the same period a year earlier and marking the 21st consecutive quarter of decline for the company. Overall, Q2 revenue was down 4.7% to $19.3 billion compared to a year ago.

Ginni Rometty, IBM chairman, president and CEO, said:

-    "In the second quarter, we strengthened our position as the enterprise cloud leader and added more of the world's leading companies to the IBM Cloud… it continues to innovate, adding regtech capabilities to its portfolio of Watson offerings; developing solutions based on emerging technologies such as Blockchain; and reinventing the IBM mainframe by enabling clients to encrypt all data, all the time".

Progress in cloud services

IBM's optimism, despite the sliding sales and slower than expect growth in cloud services, perhaps can be traced to its early and strategic entrance into the nascent market for artificial intelligence, a string of recent high-profile wins for cloud services, and a vast pace of innovation in new services. Some of IBM's major new customer engagements for Q2 included:

·         Lloyds Banking Group, which signed a 10-year cloud services agreement with IBM. Under the contract, IBM will transform Lloyd’s from branch structures to digital channels, embracing the API economy without compromising their existing systems and focusing on end-to-end cost reductions.

·         American Airlines, which has agreed to use IBM Cloud as the foundation for a massive cloud transformation. The IBM Cloud will host the airline’s website, aa.com, its customer-facing application, airport kiosks and critical enterprise workloads.

·         BMW - IBM became a pilot partner of BMW Car Data - which will leverage IBM Cloud and IBM Watson IoT - using cognitive and data analytics services to enable third parties, such as automotive repair shops or insurance companies, to develop entirely new customer experiences.

·         Bombardier, which announced it is extending its long-term partnership with IBM through a new six-year deal valued at approximately $700 million. The contract includes IBM Services and IBM Cloud management of Bombardier’s worldwide IT infrastructure and operations. The services management agreement spans 47 countries and represents one of IBM’s largest cloud partnerships in Canada.

·         Blockchain on the IBM Cloud - a consortium of seven large European banks selected IBM to build and host a new trade finance platform that will be based on IBM Blockchain and run on the IBM Cloud.

·         Danske Bank, which recently selected IBM for new 10-year IT infrastructure service transformation project. The IBM Services Platform with Watson provides artificial intelligence capabilities. IBM said its platform enables other automation tools to do more than execute simple instructions, they can now run diagnostics and execute actions to address the root causes of issues. Unstructured e-mails and chats can be read in natural language and resulting insights used to resolve problems without manual intervention.

Expanding the fleet of IBM Cloud Data Centers

IBM has announced the opening of four new Cloud Data Centers, two in the UK (London), one is in Australia (Sydney) and one in the U.S. (San Jose). This brings the total number of IBM Cloud Data Centers to 60 across 19 countries. One notable difference from Google’s hyperscale data centre strategy is that IBM operates smaller facilities but has many more. This helps address data sovereignty requirements in many countries as well as network latency issues.

Offering NVIDIA Tesla P100 GPUs as-a-service

NVIDIA and IBM announced that IBM it is the first major global cloud provider to make the NVIDIA Tesla P100 GPU accelerator available on the cloud, geared towards speeding AI workloads. IBM also achieved new performance benchmarks with the P100 GPU accelerator on the IBM cloud, reducing deep learning training time by up to 65% compared to NVIDIA Tesla K80 GPU.

Direct Cloud Connectivity

In April, Comcast Business announced that it was providing its customers with direct, dedicated links to IBM Cloud’s global network of data centres.

Progress with IBM Watson

Ever since the launch of Watson in 2011, it has been clear that IBM was on the path to artificial intelligence. Watson is its crown jewel and its key point for differentiation. IBM now offers many examples of how Watson can be a transformative decision maker for many industry verticals. IBM's television commercials, which have been heavily promoted in U.S. over the past several months, depict Watson in many industries, from wine vineyards to telemedicine. In the entertainment space, 20th Century Fox is now working with IBM Watson to better understand what is happening in videos. Automatic scene detection lets the cognitive platform analyse how the plot of a film progresses in comparison to other works of the same genre which have measured outcomes with real audiences. This lets Watson predict how a movie will be received, as well to automatically create a trailer.

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