Dark blue suit, white shirt – anyone who worked for the company had to dress properly. After all, the products were expensive, and it should stay that way. International Business Machines, or IBM for short, was a very well-known brand. And the group nicknamed “Big Blue” was the largest provider of computers, accessories and all related services.
One thing was considered almost sacrosanct: IBM, that was the provider who could deliver everything. In the 1990s a company boss wanted to give it up, but instead of going through with it, he was fired and someone else was brought in, who kept the tried and tested principle of “everything from a single source”. For a long time, however, it had been unclear to many which strategy IBM was actually pursuing. And now the group has done it after all. Has split up like HP, another large IT company, or recently Daimler. A large part of the company now has to assert itself as an independent company under the cryptic name of Kyndryl. Can that go well?
Markus Koerner is Kyndryl’s Germany boss. Of course he knows the old stories; he worked for IBM for a long time before that. That is precisely why he thinks the decision is the right one. “The idea of offering full service worked for many years,” he says. But the cloud and digitization trends have led to rapid changes. In addition, the sub-markets developed differently, says Koerner, but IBM has always wanted to “replicate ideas all over the world”.
On top of that. Because IBM had positioned itself as the last fully integrated IT group, Koerner’s department lost a lot of business. Because when it comes to technology, he was always tied to IBM products. Even if they weren’t what the customers wanted. In the automotive industry, for example, an important customer segment in Germany, the user promise is therefore “frayed”, as Koerner puts it. In other words: the customers just didn’t want everything from IBM.
Kyndryl has already secured a large order from BMW
Kyndryl’s business is what is called in the industry Managed Infrastructure Services designated. So the company runs the IT for its customers. It’s about servers, data centers, connections to large cloud providers, and data security. Detached from Big Blue, Kyndryl can now select the partners who are best suited for a project or who the customer prefers, for example because they have been working with this provider for a long time. Recently, for example, Kyndryl’s German subsidiary won a large order from BMW. Kyndryl now operates storage systems for the Bavarian car manufacturer worldwide. However, they do not come from IBM, but from Netapp – a well-known specialist for this technology in the industry.
Bert Stach is also familiar with the history of IBM. Stach is responsible for IBM in the IT specialist group at the Verdi service union. “IBM gave up its unique selling proposition as the last integrated IT group with the spin-off,” the unionist also analyzes. Stach is also of the opinion that IBM has recently been rather immobile, calling the group an “oil tanker with valuable cargo”, by which he means above all the numerous patents.
In the industry, stories are told such as the one of a failed server in a data center in Asia, which was only replaced after weeks because the internal structures of the large corporation would have prevented that with their encrusted bureaucracy. Koerner now hopes to be rid of such obstacles. In any case, the prerequisites for this have been created. One of the first official acts of Kyndryl’s top boss Martin Schroeter was to dissolve the European organization – so that the country leaders can react more flexibly to the peculiarities of their markets. “I will now report directly to the head office,” says Koerner happily, “the market is just volatile.”
It was only because IBM missed a crucial development that Microsoft only got this big
And the different traditions also play a role. “Germany is the largest mainframe country,” says Koerner. Mainframes are the central computers that are still used wherever payment processes are required, for example. Because they can handle such processes almost error-free and safely.
For many years they were the backbone of IBM’s business. As is so often the case, a corporation had made it a little too comfortable in its niche. The not exactly cheap hardware, plus service contracts with juicy and regular amounts, filled the coffers. Big Blue had slept through the development of a new technology with smart end devices that only obtained the data from the central server but did not need any computing power, just as it had overslept the personal computers in the early 1980s.
At that time, the IBM superiors could not imagine that these desk computers would replace their super-expensive mainframes. For example, they allowed a youngster named Bill Gates to charge a fee per PC for his DOS operating system instead of a one-off payment. Gates and his small team did not even develop DOS themselves, but bought it from a programmer and only changed it slightly. It was the cornerstone for the rise of Gates’ Microsoft to a global corporation.
Germany boss Koerner doesn’t want to know that Kyndryl is just IBM’s bad bank
But what is IBM actually doing? With around 260,000 employees, the group is one of the largest technology companies in the world even without Kyndryl (90,000 employees). In well-equipped research laboratories, including one for the Internet of Things (IoT) in Munich, renowned scientists work on future-oriented topics such as artificial intelligence, quantum computers and cloud software.
You could ask yourself: Is Kyndryl a kind of bad bank from IBM to which the less attractive business areas have been outsourced?
Kyndryl’s Germany boss Koerner doesn’t want to know anything about a bad bank. He is sure that with the separation you are in a better position than before, especially since it is also complete. In fact, Kyndryl has been listed on the stock exchange as an independent company since the beginning of November. The price plummeted right away, but has since stabilized at a slightly lower level.
Koerner took the employees from IBM with him, at least most of them. Very few had objected to the transfer of operations to the new company and stayed on the mother ship IBM. That was, of course, shaken up by a wave of layoffs – something that was unusual in this company, a position at IBM, that used to be a safe bet. Koerner therefore attaches great importance to keeping his team happy.
“Your experience and know-how are absolutely critical,” he says. Koerner has had one once a week since the split was announced office hour held, in which many employees would take part. “You can see that a lot is going faster now than it used to be,” he claims for the new company. And Koerner has already hired around 100 new employees. Trust and good employees are the most important things in this business. The negotiations for a collective agreement failed for the time being and were postponed until January. According to Verdi, the main point of contention was the regulations that protect the elderly from dismissal.
The old promise no longer counts
Kyndryl is now allowed to work with other technology partners. Agreements have already been reached with the storage specialist Netapp, with Microsoft, with the server virtualization specialist Vmware, Google Cloud and SAP. The general direction is to give the customer the choice of which partner he prefers. Kyndryl itself tries to score with many years of experience, but also with the fact that the group is active in 63 countries around the world – this is important for multinational customers who want to ensure that their IT is quickly up and running again in an emergency.
For IBM and Kyndryl, the old promise of “everything from a single source” no longer counts. From now on they have to convince with their products – against powerful competition.