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Kyndryl has spun off from IBM as a $19B managed service firm

News Analysis
Nov 04, 20214 mins
Cloud ManagementData CenterData Center Management

Kyndryl starts off big but faces challenges in a fragmented, competitive services market.

Kyndryl, formerly IBM’s Managed Infrastructure Services unit, is officially an independent company.

From the start the spinoff will be big, with more than 90,000 employees, $19 billion in annual revenue, operations in over 60 countries, and a customer base that includes 75% of the Fortune 100. Its goal of modernizing customer infrastructure will remain at the center of its strategy, but it wants to expand.

Company executives say by spinning out of IBM, Kyndryl will have more freedom to partner with other major tech companies and cloud hyperscalers such as Google, AWS, and Microsoft. Plus it can invest in its workforce as well as focus on developing services for hot markets such as 5G, edge computing, cloud, and security.

“We expect to continue helping some of the world’s really complicated, large organizations with their digitalization efforts and help them move forward and become more secure and resilient,” said Matt Milton, President, Kyndryl US.

Milton said the company and its customers have three core challenges to address: The general speed of digital transformation; implementing strong security, which includes  technology and skills; and the ability to gather and protect insightful information from the data many companies are unlocking.

Part of that effort is helping large firms add new technologies to their enterprises. “It’s difficult to imagine moving forward on digitalization and cloud computing without rearchitecting the network–it is a foundational component,” Milton said. “Using 5G at the edge to run the vast amount of data being unlocked in the cloud is just one of the transformational areas we know are important to customers.”

Kyndryl offers network-specific offerings including network consulting and fully managed network packages as well as  software-defined networking services that help enterprises build programmable network fabrics that include SD-WAN, data center, branch, and LAN technologies. 

Networking and edge technologies are just a part of the overarching Kyndryl business, which comprises six global managed-service practices including:

  • Cloud Services: Simplify complex hybrid IT management for greater visibility, manageability and flexibility.
  • Security and Resiliency: Enable resilient models to mitigate risks and ensure business continuity.
  • Digital Workplace: Enterprise mobility services to help you plan, manage and secure your digital workplace.
  • Core Enterprise and zCloud: Modernize and extend legacy IT to cloud-enabled hybrid, open platforms to gain agility and flexibility. zCloud is IBM’s mainframe-as-a-service.

Kyndryl will no doubt face challenges. Business in 2020 was down 4.5% compared to 2019, and it fell 7% from 2018 to 2017, according to a recen Network World article.  In 2018, the managed-services unit of GTS brought in $21.8 billion in revenue. By 2020 it was down to $19.35 billion. And for the first six months of 2021, revenue was $9.52 billion, which will mean $19 billion for the year if revenue stays constant. In addition, according to a recent SEC filing, Kyndryl had 5,100 customers in 2018, 4,600 customers in 2019, and 4,400 in 2020, the article stated.

It will too continue to face a phalanx of strong competitors such as Accenture, DXC Technology, Atos, Fujitsu, Infosys, Rackspace, Tata Consultancy Services, and Wipro.

Martin Schroeter, IBM’s former CFO, and the new Chairman and CEO of Kyndryl, said Kyndryl can expand its addressable market to more than $500 billion by mid-decade. 

“As an independent company, we will be flatter, faster, more focused and organized around high-priority customer needs and opportunities,” Schroeter wrote in the company’s  Form 10 Registration Statement with the SEC.  “We will also have more freedom to invest in and build on our capabilities to serve an addressable market that we expect to expand to over $500 billion by 2024, which is being driven by an explosion in data, migration to the cloud to manage all the data and analytics, and an urgent and obvious need to make information and technology systems more secure.”

IBM will be the company’s largest client and partner going forward. How it utilizes that partnership remains to be seen.