When Arvind Krishna took over as CEO of IBM in April 2020, the world was in the first throes of the Covid pandemic and his company was struggling. He spent most of the decade reports a decline in income and it desperately needed a change of direction. Whatever IBM did, it didn’t work very well.
He definitely had his work cut out for him.
However, in one of his last acts as CEO, his predecessor Ginny Rometty gave him something to work with by pulling the trigger. $34 billion deal buy Red Hat. As Krishna oversaw the current state of his venerable organization, he probably knew this: Red Hat was to be the centerpiece of any effort to transform.
He also knew that he had to start dropping the dead weight that was dragging his company down. In his boldest move to date, he announced in October 2020 that he intends to go big. IBM’s $19 billion infrastructure services business. This transaction produced by Kyndryl last November when the allocation finally became official.
As I wrote at the time from the original announcement, it was about saying goodbye to the legacy business and focusing entirely on the modernization that Red Hat represented.
But he didn’t just throw away the old. He also abandoned some of the new AI developments. In particular, he took the knife to Watson Health, a conglomerate of companies that Rometty acquired between 2014 and 2015 thinking she was ahead of the game by focusing on healthcare data. This market turned out to be more difficult than she imagined.
So Krishna refused to divide in a deal with Francisco Partners supposedly valued at around $1 billion, well below the combined cost of the components the company purchased to create the division.
These steps and more seem to nudge Big Blue in the right direction, at least initially as the company reports growth. 6.5% and eight% for the last two quarters. This is the beginning, and this is the kind of steady, albeit slow growth that Krishna would probably be happy to support in the future.
Yesterday, Krishna hosted a virtual roundtable discussion with several reporters ahead of the IBM Think Conference starting today in Boston. He spoke on a range of topics, from the role he hopes AI will play for his company in the future, to the organization’s efforts in quantum computing and the growing market for ESG and sustainability.
AI becomes more practical
While Watson, the company’s artificial intelligence brand, may have lost some of its luster over the years, Krishna still believes that AI plays a key role in its future success. However, he made it clear that he was no longer interested in “successful projects”. Today he wants to focus on use cases with practical business applications. He gave several examples, such as helping McDonald’s train a model to cook a Big Mac, helping workers improve productivity, or using intelligence to predict machine breakdowns.
“So these are examples of how you solve problems. People are ready to put them into production. People want to try them,” he said.
He believes that healthcare and artificial intelligence will be delayed in the future, and this is the main reason why he decided to abandon the Watson Health division.
“I believe some of the examples in health care will come to fruition, but it could take half a century or another ten years for them to materialize, just considering how complex these issues are. And the consequences are life and death,” he said. In other words, it’s not something you want to be partially correct, and a wrong answer can damage your reputation.
The future is quantum
Krishna said his company has made some progress in quantum computing, although there are major challenges before scaling up what they’ve done in the lab.
“There are quite a few problems that we need to solve. How to start scaling these systems? How do you start to communicate between them? How do you get the software to scale and run from the cloud on these machines? These are all issues that we believe are in our line of sight, and as such, we have full confidence in our 4,000-strong roadmap for 2025. qubitsand it’s on the physical core of the computer, not on a simulator or software,” he said.
That’s pretty ambitious considering he says the company only hit 127 qubits in 2021 and hopes to hit around 400 this year and nearly 1,000 in 2023.
As the company looks to the future with quantum computing, he might envision them providing quantum machines as a service in their own cloud and possibly competitors’ clouds, as well as selling physical machines to certain companies. Regardless, he doesn’t feel like the technology will be that far before we move from the experimental phase we’re currently in to something more practical and sustainable.
“I think it will happen between 2023 and 2025. These are not all use cases. That’s why I want to be careful. I think some simple material use cases and some optimization use cases will be around that time period. But if you’re thinking about pharmaceuticals, an area where we’re very interested in quantum technology, I think that’s probably going to happen a little later,” he said.
Building a sustainable company
Krishna believes that helping companies build more resilient operations will boost big business, and he wants IBM to be part of that trend. To this end, he seeks to ensure that IBM net zero by 2030, well ahead of the Paris Accords’ 2050 target, and he says it will be a true Net Zero, not one achieved through carbon offsets. He has a short term goal and a long term goal to achieve these milestones and believes the company can be an example for others.
“We also believe that a simple goal at the end of the decade is not enough. Therefore, we also set a goal of reaching 65% by 2025 because we believe that the last third is more difficult than the first two thirds. So these are clear targets,” he said.
The company also bought Envisi earlier this year, a startup that helps measure emissions data to provide companies, both customers and IBM itself, with real numbers to work with, and believes it is a key tool in helping companies achieve their sustainability goals.
“When we do our polls, I think at the moment 48%, maybe 51%, somewhere in that range, of CEOs and corporate executives agree that sustainability is a big business topic right now. Not just a tick. Not just a small paragraph at the end of a long ESG report. Given that sustainability is important, Envizi is starting to offer what I think people need in the first place, which is reporting, data collection, pure data analytics, and ways to start making progress on this topic,” he said.
Finally, he sees the role of AI in helping to sift through all the data that tools like Envizi and many others produce and use that data to take meaningful action. “What people don’t realize is when you start putting it all together, the positive impact on the environment can be huge. And for the vast amount of data and the vast amount of analysis needed, AI is the only answer. Otherwise it is impossible to solve these problems.”
As the company looks to the future, these are the things Krishna is focusing on as he attempts to steer his company towards stability after a long and bumpy journey.
Credit: techcrunch.com /