The reporting of IBM 17th quartet decline in revenues down 2.8% in Q2 to $20.24 billion while Microsoft earning $25.7 billion in Q2 exceeded in fourth Wall Street expectations in revenue and profit. Both companies reported shares rise of around 2% but different success rates to divest the old world and move to the cloud centric operating model.
Both companies reported heavily investing in Cloud centric technologies and associated machine intelligence and analytics as future big bets that have nascent road maps so far. The shift from the ownership licensing model to the annuity revenue stream now in full swing. In the case of IBM the heave restructuring of its hardware business continues to impact event with the 12% growth in what Martin Schroeter, CFO may term strategic imperatives of cloud, analytics and consulting services delivering $31 billion in revenue to date, and now represent 38% of IBM business model. Yet in context it's a fall of 25% lower revenues than the 2011 figures.
Microsoft is a different business in that it's core capabilities of office software and its struggle to be a mobile device player has see significant shifts by Satya Nadella, CEO to invest and move into productive cloud services in what they describe as productivity and business services and intelligence cloud. The battle over personals computing with the relaunched Surface tablet as well as the Windows 10 operating system remained a work in progress that this quarter maybe on the increase in growth compared to previous quarters at last.
IBM seem to place more faith in strategic partners such as with examples such as Box , Apple, VMware and several others to expand the IBM cloud portfolio as well as its focus on what it describes as cognitive computing to sell package and sell machine intelligence as a service.
A crux issue is the need to invest in building cloud capability data Center scale 247 around world that can match Google or Amazon while moving up the technology services stack for enterprise services. This remains a difficult trick in deciding to invest and play the product-platform game or to be the glue to connect systems and services.
This is the difference in strategic imperatives and success of the two companies. The shift in hardware and software models seem to contrast in Microsoft seeking to be the cloud platform and productivity ecosystems whereas IBM remains a hybrid and perhaps a little schizophrenic in developing and offering services and cloud solutions.
The battle will be in rationalising the need to create new digital product strategies that can hyper scale, it is still a work in progress as the customer IT investments and landscape moves into a blended portfolio of digital and infrastructure capabilities. Trying to be a one stop shop in services and solutions may work in some accounts but the challenge will be in competing with the likes of Google or Amazon in the new world of on demand services and Internet of things product devices and systems. Trying the ride both races and unlearning old habits while protecting the existing customer base and growing new revenue models is the disruptive dance of the digital era.