IBM CEO Arvind Krishna: We’re A ‘Catalyst Of Progress’ Thanks To AI, Hybrid Cloud, Red Hat, Partners

‘We are ready to be the catalyst of progress for our clients as they pursue the digital transformation of the world’s mission-critical businesses,’ IBM CEO Arvind Krishna said in his annual shareholder letter.

IBM CEO Arvind Krishna said his company enters 2022 “more strategically focused and more technologically capable” because of investments in artificial intelligence and hybrid cloud, services provided by its subsidiary Red Hat and growth in its partner ecosystem.

Krishna touted the Armonk, N.Y.-based tech giant’s accomplishments from fiscal year 2021 in his annual letter to shareholders published this week. He called hybrid cloud and AI “the two most transformational technologies of our time,” labeling hybrid cloud a $1 trillion opportunity. IBM now has more than 3,800 hybrid cloud platform clients.

Among the company’s biggest achievements in 2021 were a strengthened portfolio, an expanded partner ecosystem and returning the company to growth, according to his letter. The company has also amassed almost 3,000 clients co-creating with IBM Garages.

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“As a result, we enter 2022 more strategically focused and more technologically capable,” Krishna said. “We are integrating technology and expertise—from IBM, our partners and even our competitors—to meet the urgent needs of our clients, who see hybrid cloud and AI as crucial sources of competitive advantage. And we are ready to be the catalyst of progress for our clients as they pursue the digital transformation of the world’s mission-critical businesses.”

Krishna said that IBM’s investment in ecosystem partners is “designed to accelerate the delivery of value to our clients and partners, part of a larger cultural shift at IBM toward total client-centricity.” The goal is to build a company that solves clients’ business problems whether the hardware, software and consulting comes from IBM or a partner.

“To improve how we deliver the value of these offerings to our clients, we have updated our client engagement model to emphasize experiential selling and co-creation,” he said. “We have also greatly expanded our partner ecosystem. This network of systems integrators, independent software vendors, service providers, channel partners and developers has been carefully selected to deliver value to our clients, our partners and IBM.”

Last year, the company strengthened relationships with companies such as Adobe, Oracle and EY. Among its acquisitions in 2021 were the Adobe Workfront consulting unit and assets of Rego Consulting.

IBM also created new consulting services with SAP and a new analytics service with Deloitte and unveiled new partnerships with Cisco Systems, Palo Alto Networks and Telus focused on 5G, edge and network automation.

IBM’s partnership revenue with Amazon Web Services, Microsoft Azure and Salesforce grew more than 50 percent, Krishna said.

$3 Million In Incentive Plan Cash

Krishna’s performance in 2021 netted him almost $3 million in cash as part of IBM’s non-equity incentive plan compensation.

According to documents filed with the U.S. Securities and Exchange Commission this week, IBM’s board granted Krishna that incentive payout due in part to his work restructuring IBM into four reporting segments —consulting, software, infrastructure and financing—and spinning off the managed infrastructure services business as the independent, publicly traded company Kyndryl.

Other accomplishments under his watch in 2021 include IBM closing 15 acquisitions and deploying the Eagle 127-Qubit system, the first quantum chip that breaks the 100-qubit barrier.

IBM’s acquisitions in 2021 include Waeg, Bluetab and Taos for boosting IBM’s cloud consulting business; Turbonomic, which integrates with Instana and Watson AIOps for an improved automation software suite; Envizi, which adds to IBM asset management and supply chain services; and ReaQta, which builds on IBM Security’s AI-based threat detection and response capabilities.

Under Krishna’s watch, IBM also improved its executive diversity, with representation of women executives globally improving by 1 point, Black executives in the U.S. by 1.5 points and Hispanic executives in the U.S. by 0.4 points, according to the documents.

In his letter, Krishna said that IBM delivered operational quantum computers to Japan and Germany and is on track for a 1,000-qubit processor by the end of 2023. The company also has long-term partnerships with universities, governments and hospitals to develop quantum-based applications.

The company also saw breakthroughs in semiconductor design last year with the world’s first 2-nanometer chip technology, allowing 50 billion transistors on a fingernail-size chip. Krishna expects the chips to reach 45 percent higher performance than 7-nanometer chips. Samsung and IBM research also created a new semiconductor design approach dubbed Vertical-Transport Nanosheet Field Effect Transistor (VTFET), according to his letter.

IBM generated $57.4 billion in revenue during fiscal year 2021, with $12.8 billion in cash from operations.

The company saw 8.6 percent growth in the fourth quarter, with 3.5 points from incremental external sales to Kyndryl, the spin-off of IBM’s managed infrastructure services business.

Hybrid cloud revenue grew 19 percent in 2021 and comprises 35 percent of total IBM revenue. More than 70 percent of annual IBM revenue is in software and consulting.

IBM Software revenue grew 4 percent, and Red Hat revenue grew 21 percent in the fourth quarter.

In addition, IBM Consulting revenue grew 8 percent and IBM Infrastructure revenue,declined 3 percent, “reflecting product cycle dynamics,” according to Krishna’s letter.

“Clients continue to leverage our Power servers, storage and IBM Z systems as foundational elements of their hybrid cloud infrastructure,” he said. “In fact, we have shipped more MIPs [millions of instructions per processor secon] in the z15 than any program in our history.”

He continued: “IBM now has a higher-growth, higher-value business, with strong and growing free cash flow, lower capital intensity, and attractive shareholder returns.”