web analytics

IBM cloudIBM’s reinvention as a software and services business still serves as an object lesson in turning troubled technology companies around. It switched from dependence on mainframe and servers to selling software, services and outsourcing.

At the time, the turnaround seemed miraculous. Now IBM needs to pull another rabbit from the hat.

The technology market is going through yet another transition. IBM has placed plenty of bets in the brave new world. It even has an acronym for these markets: CAMSS (cloud, analytics, mobile, security and social). They are all fast-growing areas, but IBM’s efforts are not growing fast enough to offset declines elsewhere in the company’s portfolio.

Worse, these new lines of business have lower margins than existing lines, which in turn have lower margins than IBM’s mainframe-era businesses.

This IBM reinvention is late to market

IBM was late to all these exciting new markets. Take cloud: In the latest financial report IBM says cloud revenues climbed 50 percent year on year. We need to be careful with these numbers as IBM has a habit of bundling hardware sales services into its cloud revenue numbers.

To put IBM’s figure in perspective, Amazon recently announced 80 percent year on year growth in cloud services.

Despite billion-dollar investments and Softlayer (a cloud business) acquisition, IBM trails a long way behind Amazon and Microsoft in market share[1]. Gartner also marks IBM behind Google and Rackspace on “ability to execute”.

To be fair, IBM isn’t a plain vanilla cloud company. It often wraps cloud with other sophisticated services. That sounds good, but it could be a problem. IBM doesn’t have the culture needed to run the commodity cloud infrastructure customers demand.

The cloud market looks set to shake down with a handful of global giants emerging along with specialist and geographic niche players. IBM doesn’t rate in the top five cloud companies. Its best hope is to be a specialist cloud niche player.

The other new markets are similar. IBM isn’t doing well in analytics and apart from a deal with Apple is nowhere in mobile.

IBM has yet to explain what the social part of CAMSS means, which leaves security. Now there’s no question security is an important and growing market. There will be fortunes made in this area, but security alone is not enough to sustain IBM. At least not the company we know.

Low margin business

One odd aspect of IBM’s strategy is the company is throwing money at risky, low-margin areas that don’t suit its culture. The cash might be better spent leveraging strengths.

Sure, the mainframe market is in long-term decline, but as ZDNet reports revenue from IBM’s latest mainframe was up 9 percent year-on-year.

IBM’s strategic problem is that it has no answers for the changes taking place in the industry. The people able to make the right decisions are the kind of people who don’t rise to the top of the company’s conservative culture.

The company’s stock response when a market turns into a low-margin commodity business is to sell it off and breath a sigh of relief that it doesn’t have to get dirty down there. It’s done that with printers, PCs and more recently, with servers. Then, every so often, it embarks on another session of masochistic cost reduction, which means sacking workers and making those who remain less motivated and even more risk averse.

This approach avoids difficult questions like “how can we adjust our business model to deal with the new realities?” It’s a question IBM can’t put off any longer.


  1. Although market share can be misleading in technology discussions, it is important in cloud computing because of economies of scale.  ↩

Mike Murphy gets to the point for Quartz when he writes Google will strip Google+ for parts.

Stripping for parts is a delicious metaphor — the tech industry just can’t get away from car analogies.

The deal is this: Google will pull the Photos and Streams components from Google+ and set them up as two new products.

… and Google Hangouts?

There’s talk elsewhere the company will do the same for Hangouts. I’ve never had success with Hangouts but I know many readers love the application and prefer it to alternatives like Skype and FaceTime.

In some ways Google+ is a better social media tool to use than either Facebook or Twitter. It has a clean interface and offers greater flexibility.

I’ve found engagements with others can be more enlightening than the terse 140 character limit Twitter imposes. And there’s a higher signal to noise ratio than you’ll find on Facebook.

Google+ easy to read, navigate

Best of all, you can quickly read back through discussion threads. That can get tricky on Twitter when talks take off in multiple directions. And, of course, being Google means you can find things fast.

The problem is that Google+ never managed to get past the feeling that there’s tumbleweed blowing down empty streets.

Google says there are billions of accounts. That’s sort of true. Signing up for the service is more or less mandatory if you use other Google products or even an Android device.

Yet estimates say there are only a few million active users. That’s about two percent of Facebook’s active users and, maybe, five percent of Twitter’s.

Twitter grumble

There’s a joke that you go to Twitter to listen to people grumble, go to Linkedin to listen to people pretending to work hard, go to Facebook to watch people play and go to Google+ to see what Google employees are up to.

Google+ wasn’t Google’s first attempt at social media. You may remember Buzz and Wave. Both were awful, but they had fans. Google+ was a better experience, the basic idea and code were sound enough. It’s just that Google never seems to have got social media.

Commentators are writing Google+ obituaries. That may be premature, although one never knows with Google. This is a company that has no compunction about taking lame horses behind the stable for shotgun practice.

What is clear is that Google+ will change.

Yahoo was a name to conjure with.

It sat near the centre of many people’s internet experience. That’s no longer the case. Yahoo’s glory days are in the past.

In the time before Google, Yahoo’s directory was a popular jumping-off point for finding web content. Google sucked all the air out of that business and the rest is history.

Yahoo remains popular  – especially in the US. Today it is a content portal. It has strength in a handful of areas including sport and entertainment news. And it owns the popular Flickr photo-sharing site.

Yahoo can’t be described as hip or happening. It looks fogyish. The company’s revenue has been in decline while its online rivals continue to grow.

Tumblr: the illusion of hipness

Tumblr, however, is hip. And happening. At times it can be edgy. It is popular with a younger audience than most of Yahoo’s current fare.

So spending over a billion dollars on the business could make sense. Observers expect Yahoo to find ways to make money from Tumblr. This looks unlikely. Until now Tumblr has not paid its way.

Yahoo’s challenge is to parlay all it gains from Tumblr back into the mothership without killing the hipper, younger brand. The company will want Tumblr users to link to its content channels and advertising is going to play a bigger role on their sites whether they like it or not.

Presumably part of the goal is for the lively social media blogging site to pump some adrenaline back into the tarnished Yahoo brand. There are some lucrative big data opportunities lurking in this mix as well as all those hip young things leave trails across the webs for Yahoo’s servers to mine.

The danger is that Yahoo will stifle Tumblr. That would be like watching a billion dollars flushed down the gurgler. It’s also the most likely outcome.

Tweets began appearing within minutes of yesterday’s yarn about the launch of a New Zealand book on managing reputation risks. At the bottom of the page was an advertisement for Nickelback’s Auckland gigs. For those who don’t know, Nickelback is a Canadian faux rock band that most rock fans regard as, well, let’s just say dubious .

The advertisement damaged my reputation as a cool dude around town. There’s a lesson in that.

I’ve experimented with WordPress’ WordAds programme. WordAds is like Google Ads, serving up advertisements to readers based on words found in the posts.

Google Ads gives users a little control over the ads it displays, WordAds gives you no control at all.  Given the choice I’d prefer not to promote Nickelback on my site, after all I’ve a reputation to protect.

I fail to see how the WordAds algorithms made a link between reputation management and Nickelback. Ah, hang on, no perhaps it isn’t.

Either way, the important point is advertising is yet another avenue of reputation risk for online publishers to worry about. It was easy in the old days when publishers sold their advertising directly, but there’s less scope to reduce risk when using an automated service like WordAds.

Jokes about Nickelback aside, WordAds hasn’t shown anything flaky so far. I’ve used Google Ads on other sites and some advertisements have been extremely embarrassing. So, if you’re  worried about your online reputation, you may need to accept you can’t afford to display advertising.

Writing at Reportr.net Alfred Hermida says most journalists approach Web 2.0 services like Twitter with a 1.0 mindset. He’s right, my personal bugbear is that many media organisations insist their reporters use Twitter as a broadcast media and not for dialogue.

Hermida, a journalism professor, looks at a list of best practices guidelines for journalists using Twitter. Top of the list are two I consider the most important:

  • Have a voice that is credible and reliable, but also personal and human
  • Be generous in retweets and credit others

Too often media tweeters come across as cold and impersonal. In some cases the Twitter accounts feel robotic, because that’s exactly what they are.

And media outlets are often the least generous when it comes to crediting sources. Perhaps they fear they’ll lose readers if they point them elsewhere. Of course, they will lose some traffic that way, but they’ll gain more in terms of credibility by being more open and generous.

Reportr.net » 10 best practices for Twitter for journalists.