The IT services arm of IBM is gearing up to officially spin off from the rest of the company later this year under the name Kyndryl. The assumption is the parent IBM company will attain higher valuations if it is perceived more as a software company capable of double-digit growth rates than what might be achieved by an IT services business currently growing at a single-digit growth rate.
However, as the relationship between internal IT teams and IT services providers continues to evolve in the wake of the COVID-19 pandemic, the rate at which IT services are being consumed is increasing. Many organizations increased reliance on IT services providers during the pandemic as they shifted workloads to the cloud to advance digital business transformation initiatives.
The rate at which Kyndryl might grow as an independent company might be greater than many anticipate as more IT services are consumed by potential more customers, says Maria Bartolome Winans, chief marketing officer for Kyndryl. When the new company formally launches it will have more than 90,000 employees servicing a global base of 4,600 customers, making it one of the largest IT services firms in the world.
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Building IT Services Relationships
In fact, a recent report published by the market research firm Information Services Group (ISG) notes that revenue generated from enterprise-class technology, business, and IT services reached an all-time high in the first quarter of 2021.
The report also reflects the growing relationship between IT services providers and internal IT teams as more organizations rely on as-a-service platforms. For example, the cloud-based, as-a-service market rose 15% to a record $9.9 billion in the first quarter. In many of those cases, the as-a-service platform is managed by the cloud service provider rather than by an internal IT team or an external IT services firm.
As a result, both the internal IT teams and the external IT services providers are shifting more of their focus toward managing applications that, thanks to the rise of DevOps best practices, are being deployed faster than ever. That increased rate of development can be attributed to more reliance on automation to manage many of the processes that previously would have required manual effort — an unscalable approach that would not meet the pace at which applications are now being rolled out and updated.
In some cases, organizations are shifting the bulk of their internal efforts to focus on internal application development, while relying on service providers to manage the underlying IT environments in collaboration with multiple IT vendors. In other cases, the service providers are building applications on behalf of IT teams that manage the underlying infrastructure in collaboration with IT vendors. In most cases, the demarcation between where the responsibility of an IT team leaves off and tasks handled by external IT services providers has become blurry as they co-manage the IT environment. “It’s a fluid conversation,” says Bartolome Winans.
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Evolving IT Culture
There is no shortage of IT service rivals and the relationship between internal IT teams and IT service providers can become quite strained. Many Kyndryl rivals are already knocking on the doors of those 4,600 customers.
Arguably, the most important attribute for evaluating an IT services firm is how good a fit they are for the internal IT culture. While that may be difficult to assess before two organizations start to collaborate it usually becomes apparent how big an issue that may be a few days into the relationship. The challenge, of course, is determining to what degree the two organizations are willing to adapt to ultimately make that marriage work or, in the case of Kyndryl, stay married as priorities change.
