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Profits v. Growth

IBM’s Virginia ‘Ginni’ Rometty sees profits — not growth — as the priority, and investing in data analytics as its biggest profit center, reports Steve Lohr in The New York Times (5/12/14). "Profit trumps growth at IBM," says Ginni, adding: "We don’t want empty calories. So, when people keep pushing us for growth, that is not the No. 1 priority on my list." Revenue growth has proved elusive for IBM, largely because of the trend toward cloud computing — "in which processing and software is delivered remotely over the internet."

The trend toward cloud computing has depleted sales of IBM’s "hardware, software and services." IBM is also now pursuing its own cloud computing solution, SmartCloud, albeit a bit late to the game. However, "IBM’s largest single investment in growth is in helping companies exploit the digital data deluge from corporate databases, sensors, smartphones, the web, social networks and elsewhere" — otherwise known as big data. Indeed, "IBM has invested $24 billion in the data analytics business" since 2005.

As of 2013, IBM’s big-data initiatives have "generated nearly $16 billion in revenue." IBM’s plan is "to make more money helping its customers make sense of data, to cut costs, increase sales, innovate and personalize product offerings." Central to the strategy is Watson, a technology that stands "at the summit of the new field of data-driven artificial intelligence." IBM is investing "$1 billion to create a separate Watson business unit, and fund startups that want to build applications on the Watson technology."