Highlight Report

Kyndryl must convince enterprise customers of its relevance post IBM

December 14, 2021

The Bottom Line: The elephant in the room is how successful Kyndryl will be in separating itself from IBM and establishing itself as a bona fide independent firm

Too many of its current services scream “me too” and lack the compelling uniqueness required for the market to come knocking on its door. Enterprise customers must see how Kyndryl will go beyond systems management and optimization to enhance experiences and drive market innovation or higher margins for their own business.

Enterprise customers with solid ties to IBM, its hardware, and its solutions should ask the hard questions around how their relationship will evolve and how Kyndryl will make it better than it was with IBM. Barring clarity from Kyndryl on innovation, next-generational thinking on AIOps, cloud, and edge, they may begin their journey looking elsewhere.

Kyndryl, IBM’s $19 billion spinoff, rolled out its vision statement and new executive team to articulate Kyndryl’s direction, passion, and what’s next for its customers. IBM veteran Martin Schroeter, along with a host of industry leaders, will lead Kyndryl. Most pressing is the firm’s need to begin its independence by establishing how it will create innovation for its customers, establish its North Star, and prove it isn’t there to hold IBM’s coattails. Failing to do so may leave Kyndryl in a race where the lowest-cost provider wins, competing on price with many vendors who already have a head start.

For Kyndryl to evolve post-IBM, it needs to pick its North Star

Sure, the not-so-new company is led by venerable, experienced professionals with pedigrees from IBM, private equity, and Fortune 500 firms, but the question remains as to how they’ll cultivate the dynamic culture needed to attract new business in the crowded, managed services provider market. Getting this right will be essential to emerging from a traditional services market beginning to face changes driven by a convergence of software and services.

The Maypole Kyndryl’s executives are rallying to is their belief that as an independent company, Kyndryl will bring higher value to corporate data engineering services. Crucial to achieving this aspiration will be how quickly Kyndryl can become a recognized leader in emerging opportunities in AIOps, networking edge solutions, and cloud transformation.

While initial momentum may come from IBM heritage solutions, Kyndryl must establish new partnerships quickly to provide advanced and sustainable managed services to global Fortune 5000 firms needing to harness their data, take control of supply chains, and bring more value to their internal and external customers and partners. However, as there are already multiple providers with the same aspiration, Kyndryl must improve its conciseness when articulating what makes it special to its customers. The firm must focus less on what it can do and more on how it will help customers gain an advantage by working with Kyndryl.

Kyndryl says its relationship with IBM will be complementary

Kyndryl will need IBM for the next few years. These two firms and their customers are deeply intertwined, and it will take time to detangle the procurement and contractual agreements. To this effect, Kyndryl is pitching a relationship to help customers running IBM technologies continue to do so at scale. It sees itself as the “run agent” of the pair and defines its role as a partner to the technology team, focusing on optimizing, improving, and supporting existing systems and software needed to run the business.

Both firms’ focus falls heavily on AIOps, and Kyndryl must excel in its ability to combine cloud, core, and resiliency as foundations where applications, data, and artificial intelligence (AI) provide enhanced services for the digital workplace or, as HFS calls it, the OneOffice™. A solid business book based on its IBM relationship may be a benefit and a challenge; it could end up fighting a battle between allocating resources to existing opportunities and attracting new customers.

Kyndryl offers its services up as a market six-pack

Kyndryl ticks all the boxes for a managed services firm in a cloud-native market. As captured in exhibit 1, Kyndryl’s executive team highlighted how it will deliver services encompassing the cloud, digital workplace, applications data, AI, security, and network edge.

Exhibit 1: Kyndryl’s outlines six areas of focus and services delivery

Source: Kyndryl, 2021

While there wasn’t much new in its approach to these now, a couple of areas piquing our interest are the evolving markets of applications, data, AI, and the network edge. Specifically, we see the potential for Kyndryl’s 5G edge capabilities. As enterprises demand data and solutions that traverse clouds extend to the edge, increasingly using 5G, Kyndryl should jump on this with more gusto.

The leaders in each of these six services areas will need to articulate how the business, not just the technology team, can benefit from their deep capabilities in each of these silos. While all of these are crucial to delivering services to the business the current messaging is heavily focused on sparking conversations with the technology leadership. Lacking a clear message to the business sponsors of these projects weakens the engagement.

Takeaways

To get customers excited about Kyndryl’s offerings, the management team must clarify which markets it wants to be #1 in and how it will benefit its customers. The management team must establish this North Star quickly to generate trust and ensure continuing loyalty. Kyndryl needs to avoid the generalities it has offered in briefings about being innovative, multi-cloud, and more customer-centric; these are well-worn platitudes that should be sent to pasture.

Many of the six pillars outlined above are good foundational aspects for the firm, and the momentum around helping customers adopt software-defined networking and 5G is gaining traction. Yet, Kyndryl needs to do more than just articulate how it can help its enterprise customers overcome the challenges of making connections between 5G services technologies and multi-cloud connectivity. It must quickly show how its deep technical knowledge can support the scale and velocity of adoption that customers clamor for.

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