IBM Consulting recently held a two-day analyst event for its European business (a significant region for IBM Consulting). Against an ongoing backdrop of uncertainty for client organizations in many sectors, the tone overall is quietly confident, buoyed by recent client wins and progress in a number of internal initiatives.

At a similar event seven months ago, there were clear emphases on IBM Consulting’s partnership ecosystem and on underlying capabilities in consulting-led, garage-style engagements and industry knowledge in support of verticalized offerings. We noted at the time the obvious advantages in being part of the IBM group, including having access to a client base of large enterprises who are incumbents in their markets (and thus pushing for digital transformation), and of course the ease of collaborating with IBM Technology for its cloud and AI assets (see IBM Consulting Strengthening Partnerships to Drive Cognitive & Cloud Consulting Growth - NelsonHall (nelson-hall.com).

Unsurprisingly, the overarching message today is exactly the same. IBM Consulting continues to be a growth vector for IBM Group, delivering topline growth, both at the global level and in Europe, and margin improvement in 2022. Full-year IBM Consulting revenues of $19.1bn were up 14.9% in CC (up 7.1% as reported), with all three business areas (Business Transformation, Application Operations, Technology Consulting,) delivering double digit CC growth.

Recurring themes throughout the analyst event included:

• Macro offerings that look at organizations’ key priorities
• Ongoing development of strategic partnerships
• Key findings from the latest CEO study (under embargo at the time, now published).

Macro offerings around four themes that span the portfolio

At the recent IBM Think customer event, IBM Group launched its ‘Seven Bets’: recommended actions to take in response to seven trends (GenAI, sustainability, profit, digital products, CX, metaverse, the new social contract). Expect to see marketing across the group focus on these.

Meanwhile, IBM Consulting in EMEA has launched four macro campaigns, with various offerings bundled into broad themes that are high among clients’ current priorities:

• Cost and productivity
• Future proofing
• Customer and product transformation
• Sustainability.

Both business-led offerings (e.g., BPS, Talent & Transformation) and technology-led are covered within these four themes. There appears to be an increasing coherence in the value propositions across the company’s broad portfolio; a coherence that historically was not always the case.

Our note on the November 2022 event commented on a bigger push for large deals; a recent win which illustrates IBM Consulting competing against best-in-class opposition is a S/4HANA migration deal at Diageo, won against a well-established incumbent. Among other winning attributes, IBM Consulting highlighted its experience in SAP S/4HANA implementations in the CPG industry.

Strategic partnerships

IBM Consulting’s partnerships have become much richer in the last five years (when there was essentially just one strategic partnership: with SAP). In particular, the Kyndril spin-off has helped IBM Consulting to open up to hyperscalers, in particular with Microsoft Azure and AWS (each of which accounts for ~$1bn in revenues). In aggregate, IBM Consulting’s strategic partnership bookings were up over 50% in 2022, with Azure and AWS more than doubling. This emphasis on developing the partnership ecosystem is evident across all of IBM Group (for instance, in Q4 2022, a series of new IBM Software offerings were made available as-a-Service in the AWS marketplace, and Red Hat continued the expansion of its offerings in hyperscaler marketplaces). But the loosening of the strings to other IBM divisions introduced by Arvind Krishna has greatly benefited IBM Consulting.

We expect to see more types of partnership announcement in 2023/4, including those focused on industry solutions and those expanding its capabilities in generative AI. Indeed, the week after the analyst event, IBM Consulting announced an expansion of its partnership with Adobe, launching a portfolio of Adobe consulting services to help clients navigate the generative AI landscape, leveraging Adobe’s AI-accelerated Content Supply Chain solution. IBM Consulting recently announced its Center of Excellence for generative AI, part of IBM Consulting's much larger global AI and Automation practice, stating that the CoE has around 1,000 consultants with generative AI expertise. IBM Consulting emphasizes assets such as the IBM Garage for Generative AI, IBM’s agile approach to co-creating with clients, to help them fast-track innovation in foundation models for generative AI.

IBM 2023 CEO Study: Cost Take-Out Top Priority; GenAI Top of Mind

Several discussions over the two days of the event referred to key findings from IBM’s 2023 CEO study, under embargo until now, about their top priorities and challenges over the next two to three years.

This latest study finds that the highest priority of the CEOs surveyed is improved productivity or profitability. Product and service innovation has also jumped up in importance, to second place. Customer experience has been pushed down to third place. No great surprises there given current macroeconomic conditions. We noted that, reflecting the current demand by many organizations for their IT service providers to be able to deliver in-year cost savings, a number of presentations featured case studies illustrating IBM Consulting achieving this in different areas of their offerings portfolio, not just in obvious areas of cost take-out.

Another key finding of the study looks at the current pressures on organizations, across nearly all sectors, to adopt generative AI models. It highlights that where the majority of the CEOs surveyed express a high degree of confidence in their organizations’ capabilities to incorporate generative AI into processes and products, this confidence is not shared by other senior execs. This level of disconnect is arguably not surprising: it certainly plays to the need to work with external consultants.

One session at the analyst event briefly referred to potential GenAI use cases that IBM is exploring with clients. The most advanced work to date appears to be in the U.S. health sciences and health payer sectors. For one CPG major, IBM is helping set up a GenAI CoE which will develop use cases for internal processes. In the short term, this is likely to become a common type of engagement for the IT services majors, at least until clients’ organizational functions become more familiar with how they might leverage the GenAI core capabilities of semantic search, summarization and content creation in their operations.

The quality of the client presentations talking of their experience of working with IBM was uniformly high, something that we feel is increasingly rare in these events.

There has been one organizational change since November, one that comes as no surprise: cybersecurity consulting now sits in IBM Consulting (see also our note from last week: IBM Converging Risk Scores to Optimize Cybersecurity Offering - NelsonHall (nelson-hall.com)

So what next for IBM Consulting in EMEA? The company’s recent M&A activity has centered on the U.S. – Europe and the U.K., both more buoyant markets, have not really featured. We expect this to change in the next 12 months.