Kyndryl Hopes to Reverse Sagging Fortunes in Spinoff

Kyndryl hopes its newfound independence from IBM will lead to a turnaround in its sagging revenue.

With the spinoff complete as of Nov. 4, the former IBM services business now has the freedom to form partnerships outside of IBM, with the goal of reversing revenues that fell from $21.8 billion in 2018 to $19.35 billion in 2020. The services business’ annual net loss ballooned to $2 billion during that time.

“We are thrilled that Kyndryl is today an independent company, with 90,000 of the best and brightest professionals, a strong balance sheet and a path to growth,” Kyndryl CEO Martin Schroeter said in a statement.

“There is a large and growing need for digital transformation services, and our unrivaled global expertise in creating, managing and modernizing mission-critical information systems positions us well in a market that will expand to more than $500 billion by 2024,” he added. “We look forward to the path ahead, with a flatter and faster company that is at the heart of progress for our customers and for the world.”

Also read: Top Channel Partners & How to Find the Best One

Channel Opportunities Elude Kyndryl

While Kyndryl has struggled, many of its competitors have been posting solid revenue growth. While DXC Technology has seen a modest revenue decline, Accenture, Wipro and Tata have been among the names finding channel opportunities and growing their services business.

Part of the reason for Kyndryl’s struggles is the company is playing in the wrong part of the market, said Jay McBain, Forrester Principal Analyst for Channels, Partnerships & Ecosystems.

“While the broader MSP market is growing in the low-double digits, Kyndryl will struggle to keep pace as the growth is mostly coming from SMB and midmarket-sized customers,” McBain told Channel Insider. “They will continue to compete strongly in the Fortune 2000 and the flexibility to get closer partnerships built with IBM competitors will strengthen their hand.”

Channel industry veteran and Channel Insider contributor Howard Cohen said he sees the Kyndryl spinoff as having little impact on the services market.

“How many channel partners actively compete with IBM Global Services today? Why will they start just because of a branding action?” Cohen told Channel Insider.

Cohen said 40 years ago, his IBM rep advised him that IBM “‘will always compete with us. We have the price advantage, but what we need to do most is to continue innovating to stay ahead of them.’

“In large part, that advice has driven my entire career,” he said.

Hot Channel Markets

Kyndryl plans to focus on hot markets like the cloud, artificial intelligence (AI) and security.

“If you think about it, IBM is simply following the channel,” said Cohen. “Since cloud diminished all hardware sales, we’ve all turned to managed services. Now, so have they.”

The challenge, then, for channel services companies won’t change – they’ll still need to creatively market how they’re different (see The Channel Has Changed. Channel Marketing Needs to Catch Up).

Paul Shread
Channel Insider editor Paul Shread has covered nearly every aspect of enterprise technology in his 20+ years in IT journalism, including award-winning articles on endpoint security and virtual data centers. He wrote a column on small business technology for Time.com, and covered financial markets for 10 years, from the dot-com boom and bust to the 2007-2009 financial crisis. He holds a market analyst certification.

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