IBM prioritizes SaaS and High Margin Returns

As the post-digital age begins the technology sector is experiencing a shift from low-margin hardware to high-margin software and services, such as cloud platforms which can engage AI capabilities to bolster business agility and innovation. Microsoft, Google, and Amazon have realized favorable returns on their cloud investments, and considering the utility of the cloud, many companies are investing in the emerging industry.

Gartner predicts that, by 2020, 90 percent of organizations will adopt these hybrid infrastructure management platforms; however, analysts opinions vary as to the growth potential of this market. Furthermore, data suggests that 28 percent of IT market spending will shift to the cloud by 2022.

Microsoft’s cloud computing service, Azure, is trailing Amazon as the dominant player in the cloud services market, however, since 2015, both companies have recorded positive cloud-based revenue trends. In the fourth quarter of 2018 alone, Microsoft reported intelligent cloud revenue of $9.6 billion with revenue associated with Azure was up 89 percent.

In 2004, IBM sold its PC group to Lenovo; this sell off initiated the company’s disinvestment in their hardware supply side segment. Last year, IBM acquired RedHat, the leading provider of open source cloud software, in the third largest technology merger in history.

Although Amazon’s and Microsoft’s overwhelming cloud market share generates resistance in the market to new players, RedHat’s hybrid cloud is unique and has the potential to complement and improve the cloud’s current services. With this said, the cloud market is emerging and the future is uncertain.