IBM to Spin Off $19 Billion Managed Infrastructure Services Unit, Focus on Hybrid Cloud

In a major move to further its hybrid cloud plans, IBM will spin off its $19 billion Managed Infrastructure Services unit. Part of the company's Global Technology Services division, the spinoff creates a clear delineation between the unit's focus on managed services and IBM's larger plans to focus on hybrid cloud computing and AI.

The as yet unnamed new company, referred to as "NewCo" is set to be created in 2021, and will focus on providing managed infrastructure services. It will start in a strong position with around 90,000 workers and more than 4,600 clients spanning 115 countries. The company will boast a backlog of $60 billion in orders, and more than 75 percent of existing customers are in the Fortune 100.

IBM CEO Arvind Krishna said the move will echo previous divestitures at the company, like the 1998 sale of IBM Global Network to AT&T as the company shifted away from networking. The company moved away from PCs with the sale of its Personal Computing Division to Lenovo in 2005. In this case, IBM will now focus on the $1 trillion hybrid-cloud opportunity, as well as AI, quantum computing, mainframes and consulting with an eye on enterprise-network modernization.

“Client buying needs for application and infrastructure services are diverging, while adoption of our hybrid cloud platform is accelerating," said Krishna. "Now is the right time to create two market-leading companies focused on what they do best.”

IBM has been steadily shifting its focus to the hybrid cloud since its $34 billion acquisition of Red Hat last year. The move enabled the company to build out its hybrid cloud platform in support of on-premises, private and public cloud environments.

The spinoff will enable the NewCo to focus on the potentially $500 billion managed services market. It will also be able to partner across an array of cloud vendors, enabling opportunities for stronger profits.

“Today, services account for more than 60% of our revenue," said Krishna. "When NewCo becomes an independent company, our software and solutions portfolio will account for the majority of our revenue. This represents a significant shift in our business model.”

To provide more information about the managed services market as well as education and networking opportunities, TMC is hosting its MSP Expo from June 22-25, 2021 at the Miami Beach Convention Center. The event will enable MSPs and technology companies to share strategies to drive revenues and grow their networks.