Sign up for our newsletter
Technology / Cloud

IBM’s new Salesforce strategy speaks to its hybrid cloud ambitions

The venerable IT services provider is building its cloud expertise as it seeks to grow stagnating revenues.

IBM this week confirmed it plans to purchase Salesforce consulting partner Waeg. It will be the company’s second Salesforce-related acquisition of the year following its January move for a similar consultancy, US-based 7Summits. The deals have been triggered by IBM’s desire to grow its market share in hybrid cloud, which it hopes will underpin the majority of digital transformation projects for its customers.

IBM to buy Waeg as part of a drive to embrace hybrid cloud and AI. (Photo by David Ramos/Getty staff)

Terms of the deal for Belgium-based Waeg have not been disclosed, but it marks the latest in a spree of acquisitions for IBM, which purchased nine smaller businesses in 2020 alone. Paul Papas, global managing partner of business transformation services at IBM, told Tech Monitor that the company is keen to deepen its understanding of industry partners such as Salesforce. “We work with a wide range of ecosystem partners like SAP, Oracle and Salesforce, and that ecosystem approach of making sure that we are developing the deepest and best skills with our ecosystem partners, and that we work in tight collaboration with them to serve our clients together, is a central part of our strategy and how we bring the most value to our clients,” he said.

IBM has been all-in on hybrid cloud since CEO Arvind Krishna took the reins at the company in April 2020. “My approach to growing the value of the company is straightforward: we will significantly increase our focus on our hybrid cloud and AI capabilities, the two most important transformational journeys for our clients,” he told investors on the company’s most recent earnings call. The extent of this cloud focus was laid bare in October when IBM announced it was spinning off its managed infrastructure business into a separate company so it could focus solely on cloud solutions.

IBM is refocusing around hybrid cloud

IBM has seen its revenue decline over several years, and has only posted two quarters of positive growth since 2018. Last year income dropped 4.6%, to $73.6bn.

White papers from our partners

In contrast, the popularity of Salesforce has been surging, with the popularity of its cloud-based CRM tools shooting up during the Covid-19 pandemic as digital transformations accelerated, helping it enjoy a record 2020, with revenue up 24% to $21.5bn.

With this in mind, IBM’s decision to grow its familiarity with Salesforce is a pragmatic one. “Salesforce has always had a very strong story around connecting to the customer and I think IBM is recognising the whole underlying idea of being in that workflow together,” says Bola Rotibi, research director of software development at CCS Insights.

Moreover, environments like the hybrid cloud, which can offer AI-optimised tools, should help companies to digitally transform faster and more effectively. “I think that’s where [IBM] is making its bet,” Rotibi adds.

Chirag Dekate, vice president of AI and emerging tech at research company Gartner, agrees. “What IBM is trying to do is reorient its services business unit to be more customer-focused and address workflows that end-users and enterprises care about, including ecosystems like Salesforce,” he explains. “IBM’s strategies are now laser-focused on reorienting the company around cloud and AI. That pervades that entire portfolio, all the way from services to software to platform.”

Across the board, the company is focused on creating opportunities and enabling enterprise journeys in cloud and AI, specifically their services, software strategies and systems, continues Dekate. “What IBM is trying to do here is to address customer needs, meet customers where they are and help them to leverage their existing ecosystems, and enable enterprise end-users to be more productive in these environments.”

Dekate adds that by bringing together knowledge of Salesforce, SAP and other enterprise software packages, IBM is hoping to deliver tailored solutions to help lure in new clients.”Taking these environments, complementing them with automation-driven services that enable customer productivity and enterprise productivity, will allow them to automate and deliver high-quality services at reduced and more competitive price points,” he says. “I think they are key benefits that [IBM] is enabling here.”

Claudia Glover

Reporter

Claudia Glover is a staff reporter on Tech Monitor.