This month, NelsonHall has attended the IBM Services analyst/adviser events in New York and Paris and we noted a distinct evolution in emphasis, with a much closer alignment between IBM's two services divisions. In recent years, IBM’s Global Business Services (GBS) and GTS businesses have been somewhat in the shadows of its Cognitive Solutions segment, although together they represent around 60% of total IBM revenues. However, 2018 looks to be a year when these two divisions, under the umbrella branding of IBM Services, really come back into the IBM limelight, benefiting from several factors coming to fruition, including:

• An increase in Watson use cases, providing real differentiation around cognitive-based offerings across GTS and GBS portfolios
• Investments in GBS to shift its practices around digital, cognitive, and automation and cloud
• GTS transforming to what it calls a ‘services integrator’, leveraging IBM assets
• A much closer alignment between GBS and GTS.

In this, the first of several blogs on IBM, we will look at some of these overall developments.

GBS aligning around three ‘growth platforms’

While GBS has been focusing on IBM’s strategic imperatives for years now, the influence of Mark Foster, who has headed GBS since September 2016, is very evident. Under his leadership, GBS has aligned and focused its capabilities around three ‘growth platforms’ centered on digital, cognitive and cloud:

• Digital strategy and iX: integrated strategy and design capabilities, extending to road map creation. iX is already at scale: IBM now has 36 iX studios globally, the latest one opening in Washington DC last month. A newer area of focus is building a larger digital strategy practice
• Cognitive process transformation: combining GBS’ business and process change advisory (including RPA design and build), BPO and analytics capabilities into an integrated play. GBS is one of few organizations that has significant capabilities in helping clients both transform their processes internally and also in operations. With BPO, there is a very clear focus on higher value services enabled by AI (embedding Watson), also blockchain
• Cloud application innovation: here, the ongoing emphasis is on reinventing strategic partnerships with the likes of SAP, Apple, Salesforce, and Workday for next gen enterprise application services, also leveraging automation/Watson to bring innovation into application maintenance and cloud application migration services.

Followers of Accenture will recognize that ‘growth platforms’ was a term used by Accenture for many years, then quietly dropped, so I was surprised to see the phrase now being used at GBS. Having coined the term when he was at Accenture, Foster told me, he feels no hesitation in continuing to use it as an apt description of the ambitions for GBS. Foster unveiled the growth platforms at the IBM Investor Day back in March; since then, GBS has aligned its personnel around these three areas. This year, he has brought in a slew of external hires to scale or revitalize certain parts of the portfolio, including digital strategy consulting, automation advisory, and SAP services. Expect to see a further crystallization of core GBS offerings next year.

What else are we likely to see at GBS in 2018? Here are a few suggestions…

• Will there be some niche acquisition activity bringing in digital strategy consulting capabilities?
• Clearly, in the cognitive process transformation growth platform, work will continue on the infusion of Watson capabilities in different use cases
• Perhaps closer interaction between the Cognitive Process Transformation unit and the blockchain practice set up in 2016 and headed by Bridget van Kralingen (who moved there from heading GBS), for example in developing more blockchain-based use cases (that eliminate any need for queries that a transaction, say in supply chain processing, has taken place)
• Possibly a greater emphasis on industry-specific offerings within GBS, again boosted by closer integration with the Industry Solutions practice. Will we also see some inorganic growth?
• As GBS’ business mix continues to transform (and the proportion of its revenues coming from more price sensitive traditional IT services declines further) GBS may at last return to topline growth
• Similarly, margin expansion, both from revenue growth and as increasing efficiencies in delivery and project management begin to outweigh the level of investments in the growth platforms and sales.

GTS: cloud and cognitive now embedded in all offerings, emphasis on ‘services integrator’

GTS, the larger and more profitable division, has also been going through a quiet transformation, also powered by IBM cloud and cognitive assets, with it positioning as a ‘services integrator’ to capture opportunities around large managed hybrid cloud and multivendor tech support services.

Its Technical Support Services unit (a large business, with a current revenue run-rate of $7.2bn) continues to target larger opportunities around multi-vendor support services in complex environments, inside and outside the datacenter, with (no surprises) embedded cognitive and automation components in the service delivery. Our next blog will look at solutions such as Augmented Remote Assist, which is already rolled out to most of its field force.

IBM’s huge infrastructure services business (revenue run rate $22.7bn) is beginning to recover from the market decline in – and its shift away from – traditional services, with cloud and cognitive now embedded in all offerings. IBM has been talking about the application of analytics and automation in GTS for over three years; cognitive is now also a reality, noticeably with the ‘IBM Services Platform with Watson’. Announced in July, the cloud-based IT operations platform, designed for hybrid cloud environments, can identify or predict potential problems and self-heal, and provide visibility via role-based dashboards. There are four key elements:

• IBM’s data lake, containing 30+ years of systems operations data from thousands of engagements, plus other structured and unstructured data, for use in incident analysis
• A broad set of automated capabilities for environment build, system hygiene, and dynamic automation (IPCenter), to support the design, management and optimization of IT environments
• IBM Watson providing insights and recommendations for future automations
• Client insights dashboards, powered by the Watson Insight Engine.

A big emphasis is on the platform’s full lifecycle management capabilities and on its flexibility to compose modular services from IBM and third-party providers. As such, it is another key asset in IBM’s armory (in addition to the nearly 60 IBM cloud data centers globally across 19 countries) in its positioning for large managed hybrid cloud services deals.

What are we likely to see at GTS in 2018?

• TSS start to deliver revenue growth, driven by expansion in multivendor support services, also margin expansion and improved service with more widespread use of predictive analytics and solutions like Augmented Remote Assist and the use of blockchain (for sharing operational data)
• IT infrastructure services also start to return to topline growth, driven by managed hybrid cloud
• An expansion in AI/automation advisory services capabilities, to target the enterprise transformation agenda
• Further developments in the use of Watson in support of infrastructure and endpoint security. We blogged in July about IBM's work to date in training Watson in the 'language' of cybersecurity (see here).

​Closer alignment between and GBS and GTS

A few years ago, the migration of IBM’s BPO business from the GTS division to GBS appeared to be a lengthy and difficult process. In contrast, this year has seen more branding around a single ‘IBM Services’ capability. Noticeable at both the New York and Paris analyst events was the number of sessions, both plenary and roundtables, which were co-hosted by people from GTS and GBS. The positioning now centers on their combined capabilities, powered by IBM assets, to support clients in addressing five ‘core needs’, which IBM classifies as:

• Finding growth in a low-growth, digitally disrupted world
• Innovation and data leverage as a basis for new growth
• Taking out structural costs, for competitiveness and to fund investment in growth
• Winning the war for talent, to access intelligence and automation
• Transforming enterprise processes and systems, to enable growth and competitiveness.

But how far does this alignment go in terms of the sales organization? Historically, collaboration has tended to be client-specific, for example in large multi-tower outsourcing pursuits. This is now changing. Apparently, in Europe alone this year IBM has invested over $7m in retraining on the new portfolios, with $30m earmarked for next year. There have also been appropriate changes to incentivization metrics and to internal processes.

In short, 2017 appears to have been a foundation year in the transformation of GBS and GTS; the prospects for both in 2018 look better than they have done for some years, with Watson, at last, really beginning to make an impact in the delivery of core and next-gen IT services.

In the next blog in this series, we will look at examples of where IBM is deploying cognitive and automation assets across its services portfolio.