We are no longer “IBM captives”
The CFO of Kyndryl – the spin-off of IBM’s managed infrastructure services business that began life as an independent business on Thursday – told CRN in an interview that the company plans to utilize its intellectual property portfolio, nearly 90,000 employees and $ 19 billion. revenue to overcome the increasingly competitive digital transformation market.
“We are taking what we already are – which is a No.1 player in the IT infrastructure services space … by becoming an independent company, and it gives us a new freedom to no longer be a captive of IBM, “said David Wyshner, whose company debuted on the New York Stock Exchange on Thursday under the symbol” KD “.
Wyshner continued, “We are able to expand what we do in the future to participate in a broader set of technology ecosystems, to provide a broader set of capabilities to customers and, in the process, to unlock a larger addressable market and growth potential for us. as a business.
[RELATED: Kyndryl Executives Predict ‘Positive Revenue Growth’ In Four Years]
Wyshner joined New York-based Kyndryl earlier this year from contract transportation and logistics company XPO Logistics based in Greenwich, Connecticut.
Wyshner previously worked as CFO of Wyndham Worldwide, leading the company’s split into one privately held and two public companies. He also led the nearly $ 2 billion acquisition of the La Quinta hotel chain in 2018.
Wyshner’s experience includes working on the spin-off of a multi-billion dollar subsidiary of Cendant and the split of the travel services company into four independent groups in the mid-2000s, according to his LinkedIn. He became CFO of Cendant’s successor, Avis Budget Group, including leading the acquisition of Zipcar by Avis in 2013 for approximately $ 500 million.
Wyshner and the other Kyndryl executives have a lot of work ahead of them. Kyndryl disclosed a range of details about its business and operations in a recent regulatory filing, including declining revenues in recent years, downsizing, competitive landscape (including with competitors such as DXC Technology) and partnerships with vendors beyond IBM (such as with VMware and Microsoft).
In the regulatory filing, Kyndryl said it plans to participate in a $ 415 billion market to provide “innovative services to design, run and modernize customer technology environments.”
“Kyndryl is uniquely positioned to meet these IT service needs, as a natural extension of the role it plays in supporting the critical technology infrastructure of the world’s largest businesses and institutions,” the file said.
With the spin-off, IBM goes from # 1 on the 2020 CRN Solution Provider 500 list of North America’s largest solution providers to # 2 behind Accenture. Kyndryl will enter the CRN SP500 list at No. 5 behind Accenture, IBM, Tata and DXC Technology.
Here’s how Kyndryl plans to compete.
What people should know about Kyndryl
One of the main reasons we are so excited about this opportunity is that we are taking what we already are – which is a # 1 player in the IT infrastructure services space, which we believe to be a truly space. important because of the mission the essential work that we do and the trust that we have developed with our customers and that you can see in the performance of our service level agreements, in the NPS (net Promoter Score) that we have and the long-term relationships we have with our customers – so we take that # 1 position in an important space with very strong customer relationships, becoming an independent business, and this gives us a new freedom to no longer be a captive of IBM.
(Being an IBM captive meant being) really, really good at delivering services that have a big IBM technology component or a large IBM hardware component. But we are able to expand what we do in the future to participate in a wider set of technology ecosystems, to provide a wider set of capabilities to customers and, in the process, to unlock a more addressable market. vast and growth potential for us as a company… (as a) publicly traded company with $ 19 billion in revenue, we’re kind of a unicorn.
And we’re able to combine that foundation we have with a whole new potential for growth, a new freedom to pursue a somewhat different mission, to reinvest in our business, and to grow over time. This is what I hope people will take away. This is what we have been discussing with investors for the past few weeks.
Kyndryl’s competitive advantage
It’s in the scale that we have, and the investment that we make in the data… the intellectual property and the expertise and the constant learning that comes with it.
Being twice the size of anyone else means that we are able to learn twice as fast and generate more information, more learning and we can apply. When it comes to development, you start to apply AI with data, we put ourselves in a position where, ideally, we are able to identify issues before they arise.
And in complex IT environments with a variety of technologies and hardware rebuilt around the world, being able to identify problems before they even arise is extremely valuable.
What People Should Understand About Kyndryl’s Assets and Operating Expenses Over Time
From a financial perspective, one of our big goals is to increase margins over time. We will have a greater portion of our income to decline in the form of profits.
There are a number of initiatives that we will have in place… we are getting lighter and lighter over time, and we will continue to be… it is happening in all areas of technology.
You can see that the capital intensity is decreasing in our numbers every year. The amount we invest in new capital expenditures is less than our depreciation expense, due to this trend. I think it will come in handy over time.
We plan to take advantage of additional automation in our business, which will save us money. Our aim is to develop in our employees new and additional skills to develop the consulting and implementation services of our company in order to stimulate revenue growth over time and, therefore, to also offer a large number opportunities for our employees.
When we look at the overall goals for us, one of the things we want to do is whether they are customers and technology providers, be a partner of choice, be an employer of choice. and to be an investment choice. These are three guiding principles for us… These themes that we all know impact our activity.
The lightness of the assets, the rapid and explosive growth of the data available, which has a significant impact and which will allow us to move forward. The increasing digitization pursued by almost all organizations, along with the need for cybersecurity and cyber resilience.
These trends will continue to play out in our business. And part of what makes the space in which we operate important and, depending on the day, difficult and a whole opportunity because of these challenges.
Opportunity with Kyndryl for small partners
As Martin (Schroeter, CEO of Kyndryl) likes to say, almost all of our customers have chosen a primary cloud provider.
So we’re already part of their tech stack, but not necessarily able to provide as large a service pool as possible when we build these partnerships.
If we will see the number of Kyndryl employees decrease
This is not our objective, seen from this angle. It’s about having the right amount of resources to be able to serve our customers. One number we are focusing on is revenue and increasing that revenue base over time.
And that’s one of the things that gets really exciting here. Our addressable market is growing (breaking away)… We have a market of $ 415 billion that is growing faster, which brings us to half a trillion (dollars) by 2024. It takes advantage of these opportunities on which we focus.
And as far as our employees are concerned, it’s exciting, # 1, because we are an independent company
# 2, because the transformation we are undertaking involves developing a broader skill set among our employees, especially in something like cloud related certifications in a variety of different ecosystems. I think it’s going to be very exciting for our people and exciting as we recruit people.
What is important to understand about Kyndryl’s ongoing relationship with IBM
The important thing to know about the relationship with IBM is that it will continue to be important. We’re going to be one of IBM’s biggest customers. And we will provide a large amount of customer service based on IBM hardware and software.
This is our legacy, our starting point, and we expect this to continue in the future as well.
There is a lot of work to be done for which a mainframe is a damn good solution. There is a need to process incredible volumes of transactions. This is the way to do it. And that will depend on IBM.
TSAs are utilitarian things that need to be done for a while until we go our separate ways. It is quite normal to have this in a spin trade.
With respect to the continuing 19.9% stake, there is no control associated with this. There are no seats on the board or anything. This is a financial decision that IBM made, and I expect them to sell this stake within a year and probably even less.
(CSTs) help us do what we need to do. Household type stuff. This business was closely tied to all of IBM’s processes, people and finances, etc.
What Makes Kyndryls Intellectual Property Portfolio a Competitive Advantage
There is risk management and mitigation… You know how important ERM (enterprise risk management) is to organizations.
These technologies, and our ability to connect them as we do using the IP we have, provide major risk mitigation for our clients when they think about their technology stacks and what they need for their business.