IBM looks at NFV and IoT to improve revenue growth

The communications segment of IBM continued to pace below corporate results due to a mix of unfavorable year-to-year comparisons and lower legacy sales.

IBM’s Q3 2015 performance in its communications segment continued to lag behind overall company results primarily due to the impacts of cloud on the data center, the exiting of lower-margin services contracts (i.e. outsourcing) and increased competition for services engagements from vendors such as Ericsson and Tech Mahindra.

IBM’s lower revenues are partially self-inflicted (services); however, as operators accelerate migration to cloud, IBM will face an uphill battle to reverse hardware revenue declines.

IBM enters the NFV and SDN competition with Dynamic Lifecycle Service Orchestration, while leveraging analytics and Dev Ops.

IBM’s relative silence on the NFV front ended in June with the application of its cloud-based networking concept to the telecom sector and NFV. The company presented its Dynamic Lifecycle Service Orchestration to address end-to-end orchestration for telecom cloud infrastructure. This product, together with its cloud infrastructure and DevOps tool set, positions IBM to address the opportunities being pursued by its IT and network equipment provider peers.

With its services capability, IBM is officially joining the competition for service provider transformation.

IBM’s entrenched position as a systems integrator, of which it has services alliances with Juniper, Cisco and Brocade among others, is viewed as a key requirement for service provider transformation.

IBM attacks the IoT market on several fronts by leveraging a mix of new partnerships and internal investment.

IBM is moving quickly in refining and executing its Internet of Things (IoT) strategy. In the six months since IBM announced it will invest $3 billion in IoT over the next four years, the company has formed several partnerships (ARM, HCL); joined several consortia, established vertically oriented IoT practices (Industrial & Manufacturing, Smart technologies), and launched its IBM IoT Foundation platform. Also of note, IBM is transforming itself to work across organizational boundaries.

However, IBM‘s later entry to the IoT market will test its ability to quickly integrate assets and enact a cohesive strategy. Key to the success of IBM’s overall IoT strategy is whether the company can successfully demonstrate value-add using analytics, security and services. IBM’s trusted brand in IT and business consulting expertise in Global Business Services (GBS) provide an advantage as the company looks to establish itself as the go-to vendor for IoT solutions.

Patrick Filkins, research analyst, Telecom and Enterprise Networking at Technology Business Research

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