IBM's third-quarter revenue slump breaks traditional business by dabbling in cloud computing

For IBM, the opportunity is that the company will become a somewhat cloud-like provider by selling customized hardware and software to help governments, large and medium-sized enterprises or Web developers and managed service providers that provide applications online. This September, IBM began selling cloud services to midsize companies, targeting the market leader Amazon and Salesforce.com. Amazon's third-quarter earnings show a double-digit percentage of revenues for corporate cloud services, though the company did not provide detailed data.

IBM's exposure to the cloud computing industry lies in its potential to disrupt the company's traditional software sales operations and to help clients run financial, human Resources and supply chain consultancy services. Many customers are choosing cheaper leases, leasing software from cloud computing providers such as Salesforce.com, NetSuite and innovation company Workday, abandoning expensive software and paying companies such as IBM to install, run, and connect to other systems. Workday recently made a successful initial public offering.

In a conference call held in Wednesday, Mark Loughridge, IBM's chief financial officer, Mark Lockerich that the company's global business services revenue fell 6% per cent year-on-year, largely due to "a decline in some of the more traditional packaging application projects." "IBM's software revenue fell 1% per cent year-on-year, largely because of the weakness of large infrastructure projects that helped run traditional applications. As a result, IBM's share price fell by 5% in Thursday, which is also under great pressure from the overall trend of the market.

For IBM and other big technology companies, this is a dilemma for the typical innovator. IBM, HP, Dell, Microsoft and other business technology providers have come to realize that they must embrace cloud computing, but at the same time they are trying to protect the huge profits from selling traditional software. IBM's current challenge is that smaller deals will make it hard for the company's proud sales team to advance cloud computing services.

"IBM has to transform its business and not to significantly reduce traditional revenue sources," said Ed Anderson, a market research firm Gartner analyst Eder Anderson. For IBM, this is a revenue transformation. In cloud computing, revenue will be very, very small. This is the dilemma IBM is facing today. ”

IBM's cloud-computing rivals are not facing this dilemma. They do not need to protect traditional business. They are focused on providing complete technology in cloud computing. "The reality is that IBM has not honoured its promises," Salesforce.com chief executive Benioff Marc Benioff. The company has been focused on other things, such as professional services and outsourcing. ”

As the cloud industry continues to grow, investors may need to focus more closely on the trend of big technology companies in this major technological direction.

(Responsible editor: Lu Guang)