Business revenue lower than expected cloud computing risks and challenges for IBM

Beijing Time October 18 news, according to foreign media reports, for IBM, cloud computing for its opportunities, but also to bring risks. The risk of cloud computing has actually been reflected in IBM's latest quarterly financial report. In the last quarter, IBM's revenues were much lower than industry analysts had expected.

The opportunity that cloud computing has created for IBM is to help IBM grow into a provider of cloud services, further helping IBM to sell customized hardware and software that can help governments, large and medium-sized enterprises or Web developers, and providers of online sales applications. This September, IBM began selling cloud services to midsize companies, a move aimed at grabbing customers from market dominance such as Amazon and Salesforce.com. In the financial report for the third quarter of this year, IBM said revenue growth in its cloud services had reached double-digit percentages, but IBM declined to disclose the details of the revenue.

The risk to IBM from cloud computing is that it could disrupt IBM's business of selling traditional software and help business users run financial, human resources and supply chain related consulting business. Many customers may not choose expensive applications, or they will not pay for companies such as IBM to install, run, and connect the software to other systems, but will increasingly choose from Salesforce.com, Cloud services providers such as NetSuite and workday buy low-cost leasing software.

In a conference call held in Wednesday, Mark Loughridge, IBM's chief financial officer, blamed the "Mark Logrich of some more traditional package applications" for falling revenue for the company's global business services sector by 6%. IBM's software revenues fell 1% from a year earlier in the third quarter, largely because of the very weak results of its large infrastructure projects that helped run traditional applications. IBM's Thursday share price fell 5% per cent as a result of disappointing third-quarter earnings, which also weighed on the market.

Sanford Bernstein analyst Tony Sakonashi (Toni Sacconaghi), in a October 17 study, said he believes the weakness of traditional software could reflect the development of users migrating to cloud products, The situation also removes opportunities for traditional advisory and integration services. "If all this is true, then we will probably see a major impact on the traditional package of apps, which, of course, will impact most of IBM's International Business Services," the analyst said. ”

All in all, cloud computing faces the dilemma of typical innovators for IBM and other large technology companies. IBM, HP, Dell, Dell and Microsoft, as well as other business technology service providers, have come to understand the need to master cloud computing, but at the same time they are trying to protect their traditional approach by making huge profits from selling traditional software. The challenge for IBM is that small deals can make it hard for their sales teams to push cloud computing services.

"IBM needs to transform its business and not drastically reduce its traditional revenue channels," said Ed Anderson, analyst at Gartner, a market analyst at Aide Anderson. For them, this is a process of income transformation. IBM has much less revenue from cloud computing. This is the current dilemma for IBM. Of course, for all the big cloud providers, it will be a huge revenue. ”

In a conference call yesterday, Logrich said: "What we really feel is a bit confusing is the challenge of traditional application services." "IBM wants to see better performance in these areas," says Logrich. To address this problem, IBM will "rebuild this capability in the fourth quarter and 2013". It is said that IBM is expected to use more staff and resources to try to capture more business.

But IBM's rivals in cloud computing are not facing the same dilemma. They have no traditional business to protect. They are concentrating on delivering technology to the cloud computing field.

"In fact, IBM is Salesforce.com, and it has been focusing on other things, such as professional services and outsourcing," said Benioff, chief executive. ”

As the dynamics of cloud computing continue to grow, investors may be paying more attention to IBM's development trends.

(Responsible editor: Liu Fen)