In an effort to accelerate its hybrid cloud growth strategy, IBM has announced that it will spin off the Managed Infrastructure Services unit of its Global Technology Services division into a new public company.
The new company has been given the placeholder name of NewCo and the separation is expected to be achieved as a tax-free spin-off to the company's shareholders which will be completed by the end of 2021.
IBM's CEO Arvind Krishna provided further details on the reason for the spin-off in a press release, saying:
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"IBM is laser-focused on the $1 trillion hybrid cloud opportunity. Client buying needs for application and infrastructure services are diverging, while adoption of our hybrid cloud platform is accelerating. Now is the right time to create two market-leading companies focused on what they do best. IBM will focus on its open hybrid cloud platform and AI capabilities. NewCo will have greater agility to design, run and modernize the infrastructure of the world's most important organizations. Both companies will be on an improved growth trajectory with greater ability to partner and capture new opportunities – creating value for clients and shareholders."
NewCo
While IBM will focus on its open hybrid cloud platform that represents a $1tn market opportunity, NewCo will immediately become the world's leading managed infrastructure services provider once its spun-off.
NewCo already has relationships with more than 4,600 technology-intensive, highly regulated clients in 115 countries, a backlog of $60bn and more than twice the scale of its closest competitor.
The new company will focus on managing and modernizing client-owned infrastructures and according to IBM, this represents a $500bn market opportunity. NewCo will leverage its expertise to provide hosting and network services, services management, infrastructure modernization and migrating and managing multi-cloud environments.
NewCo's streamlined business model will allow it to create value by helping enterprises optimize their performance using AI and automation. The company's services will also enable enterprises to build agility and and efficiency into their infrastructure and data centers.
IBM's Executive Chairman Ginni Rometty explained how IBM and NewCo will capitalize on their respective strengths, saying:
"We have positioned IBM for the new era of hybrid cloud. Our multi-year transformation created the foundation for the open hybrid cloud platform, which we then accelerated with the acquisition of Red Hat. At the same time, our managed infrastructure services business has established itself as the industry leader, with unrivaled expertise in complex and mission-critical infrastructure work. As two independent companies, IBM and NewCo will capitalize on their respective strengths. IBM will accelerate clients' digital transformation journeys, and NewCo will accelerate clients' infrastructure modernization efforts. This focus will result in greater value, increased innovation, and faster execution for our clients."
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