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IBM CEO Krishna: Hybrid Cloud ‘Transformation’ Already Yielding Results

As IBM pursues greater partner engagement around the hybrid cloud opportunity, the company reported a 21-percent increase in total cloud revenue during the first quarter of the year.

IBM’s investments into its hybrid cloud business and elevating the role of partners are already starting to pay off, IBM CEO Arvind Krishna said Monday.

The company reported that revenue for the first quarter of the year, ended March 31, grew 1 percent from the same period a year ago to reach $17.7 billion. That was a reversal from the previous four consecutive quarters of year-over-year revenue declines for IBM.

[Related: IBM CEO Arvind Krishna’s ‘Deeply, Deeply Passionate’ Plan To Make IBM-Red Hat No. 1 In Hybrid Cloud, AI]

Driving the overall revenue gains was a 21-percent increase in total cloud revenue for IBM during the quarter, from the first quarter of 2020, to reach $6.5 billion.

During IBM’s quarterly call with analysts, Krishna said he knew that the January change in IBM’s go-to-market strategy to involve more ecosystem partners would “take time for results.” He and CFO James Kavanaugh said multiple times on the call they are “confident” that IBM is making the right investments to further penetrate what they call the $1 trillion hybrid cloud total addressable market.

As part of the go-to-market investment, Krishna said IBM has invested in “pre-sales garages” to co-create with clients earlier in the sales process.

“While it’ll take time for these changes to yield results, we are seeing some green shoots from our transformation,” Krishna said.

“We do see our clients accelerate their digital transformation,” he said. “As they accelerate their digital transformation, our hybrid cloud pieces come into play very strongly.”

Revenue for Red Hat grew 17 percent during the first quarter from the same period a year ago, according to IBM, which did not disclose a dollar figure for Red Hat’s revenue.

Acquired by IBM for $34 billion in 2019, Red Hat is at the core of IBM’s transformation, executives have said.

Earlier this month, Rob Thomas, senior vice president of cloud and data platform at IBM, told CRN that the Red Hat OpenShift hybrid cloud platform has helped to fuel more partner engagement. “We see a big uptick in partner engagement at this stage because people have realized that having an aligned technology platform strategy like this gives them a lot of leverage on their investments,” Thomas said during the interview.

For Q1, IBM reported $5.4 billion in revenue for its Cloud and Cognitive Software segment, a 4-percent increase year over year. The cloud and cognitive software segment includes cloud and data platforms, cognitive applications and transaction processing platforms.

First-quarter revenue for cloud and data platforms grew 13 percent year over year, with growth driven by Red Hat and Cloud Paks, while 4 percent growth in IBM’s cognitive applications’ segment was driven by security, the company reported.

IBM’s Global Business Services segment — which includes consulting, application management and global process services — grew 2.4 percent during the quarter from the year before, to $4.2 billion. Consulting and global process services drove the growth, IBM said, though application management revenue declined by 8 percent. Cloud revenue within this segment grew 28 percent year over year to $1.7 billion.

IBM’s Global Technology Services segment, which includes infrastructure and cloud services and technology support services, fell 1.5 percent year over year to $6.4 billion in revenue during the first quarter.

IBM’s Systems business, which includes systems hardware and operating systems software, grew 4.3 percent year over year to $1.4 billion in revenue, led by growth in the IBM Z mainframe business. Cloud revenue in this segment grew 21 percent to $500 million.

IBM’s stock price was down less than 1 percent in after-hours trading Monday, to $137.31 a share.

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