As tectonic change in the form of artificial intelligence and an effluence of data reshape the global technology industry, IBM, a 107-year old veteran of change, is betting on its pedigree as an enterprise service provider to beat competition from the likes of Amazon to Google. With new products and services launched in the last four years — accounting for about 40% of overall revenue, BigBlue will now take significant bets on artificial intelligence, blockchain and quantum computing as it fashions a worldwide profile as a responsible steward of technology. In an exclusive interview to ET’s
, IBM chief executive officer
said it was important for companies to contribute to the community. In India, IBM will launch an advanced diploma in collaboration with Industrial Training Institutes to help offset job losses that follow in the wake of any technological change. Edited Excerpts:
How do you see the transformation of IBM?
We are the only technology company that is 107 years old and is still around. If I have to say in one word what this reinvention has been about, I’ll say it’s about data. We are at an inflection point. It’s a great moment for incumbent companies to be disruptors.
Data is a natural resource and has been growing so fast. (To economically mine it) will be the greatest opportunity of our time and also our greatest challenge. We had to build a new technical architecture — IBM cloud and Watson. Cloud could handle data anywhere, secure to the core and built for AI. Watson is built for enterprises.
The biggest difference is that in enterprise you protect the intellectual property, it belongs to the client. IBM cloud is $17 billion. Watson has touched a billion people.
In my tenure we have acquired 60 companies, divested $10 billion of businesses and reinvested to build what’s called the strategic imperatives — cloud, data, security, mobility.
But growth has been a challenge…
I would not call it a challenge. Our model has always been about high value. It means the business model is low-single digit revenue growth and mid-single digit pre-tax income growth. We are moving to high-margin businesses.
That’s the primary axis. We are the most international company and the dollar has been so strong. We had $10 billion of divestitures and $15 billion of currency headwinds. Under the covers we have transformed our business at the same time. No other company has done that. Other companies are either out of business, have been bought or have gone private.
Is it in some way a disappointment for you that IBM is not considered to a be part of the big four — Apple, Amazon, Google, Facebook?
What we aspire to be is a high value company. If I had aspired growth then there were many ways to do that and sacrifice the margins. We chose not to do so. That’s a different business model. I am quite pleased with where we are at and what we have done to reinvent.
We have reinvented ourselves with our own funding, are still producing earnings per share, and returning value to shareholders. It is a different model and it is a good model for some people.
There is a convergence towards enterprise technology, Amazon has its cloud business and even Google is targeting the enterprise, your view?
Others would like to always aspire to enterprise. But I have watched them struggle to understand what an enterprise needs. We are the ones running things like Lloyds Bank; 90% will go to our cloud because we understand the regulatory environment. You can’t have data go to any centre in the world and not know where it is. It’s a different world. So do they (competitor clouds) exist? They do and clients will use many different clouds and parts together.
Warren Buffet, even though he made money on IBM, said his bet was a mistake because while IBM was strong, you had strong competition too. What do you think about your competition?
We’re $17 billion on cloud already. And I appreciate that others want to aspire. That’s a good thing. They come from the consumer angle and we come from the enterprise angle. And I want to underscore this other point about trust and responsibility. It’s one of things that came up in my meeting with Prime Minister Narendra Modi. We are in agreement on the (need for) responsible stewardship and data responsibility in this era.
What does responsible stewardship mean?
I was at the World Economic Forum, and one of the things we talked about yesterday, is that there are all these wonderful technologies — like artificial intelligence, the cloud and data. This is the opportunity and challenge of our times. They are going to change jobs. People talk about studies that say that 5-10% of the jobs will be replaced. In my view, this doesn’t matter. All technologies replaces jobs. There will be 100% change. These technologies will solve great things but it will cause a dislocation of skills. That is happening quite rapidly. So it is a question of responsible stewardship.
People like us in tech that are going to bring these technologies into the world, must usher them in safely. This is where, I think, companies will separate themselves.
You have to be clear about the purpose and transparency of these technologies. I should tell you that I am using artificial intelligence and who trained it and what data trained it. You can train bias. Do you want your oncology diagnosis trained by the internet? No, you want dedicated centres training it. This will become a very big issue.
How does IBM manage these challenges?
In this era, you have to live by a set of data principles and we have always lived by these. You own your data, the company owns its data. I don’t demand that you give it to me, to give you value. It’s secure, it’s transparent. I don’t give the government access to it. We are the only technology company that has never given a government backdoor access to our technology.
Have governments asked you to share data?
Over decades, certainly they have, and we have never shared data. And I give that original wisdom to my predecessors who always said no. We have the licence to operate because people trust us. Think about what we hold. We operate nearly every bank in the world, credit cards transactions and airlines. People trust you and you have to internalise that at a pretty deep level. And newer companies need to learn that and step up to those responsibilities.
But you’ve probably said no to the US government. Does that work with other governments?
No, no, no… you can say no to any government. It’s your choice how you choose to operate. We published this a few years ago when it came up, we have never given the government access to any of our systems.
You’ve talked about IBM’s transformation. What role has India played in that change?
I am very pleased with our investments in India. And, in fact, I have shared that after Prime Minister Modi focused on ease of doing business, I have absolutely seen an improvement in the simplicity of our ability to work here. So that is a good thing when you want to continue investments. India has played a really important role for IBM and I expect it to continue.
You’ve also had a few tax demands in India, have those issues with the tax department been solved?
We are in a good position. Our issues have been resolved here. That’s not unusual given that we are a big taxpayer in all countries. I feel good about the business here.
IBM earns about $5 billion in revenue from India. What is your view about the domestic market? Where are the further avenues for growth?
We’ve grown for several years here. We are investing here in the domestic market, not just as a hub globally. I think this idea of the incumbent disruptor and why I think India could lead on this thought. What people don’t normally think about is that only 20% of the world’s data is public and searchable.
So you named all these other companies, they only command 20% of the world’s data. And other 80% is far richer and it’s in the enterprises. Having a past might turn out to be quite an advantage.
The businesses (in India) are technology literate and the country is creating a lot of digital data now at a rapid rate with Digital India and Aadhaar.
Two years ago, when I came here, we had just done a study on India and it was said the 21st century would be the Indian century because you had less government regulation, better and better governance and you had the entrepreneurial spirit of the people and the ability to harness the data. And your GDP forecast of 7-8%, even on a bad day, that’s a good day. So I am very optimistic and invested in the domestic market.
What’s your view of the Aadhaar programme?
If properly governed, I think it could be an excellent thing for this country. But you would have to have great stewardship over the data — in how it is treated, handled and cared for. Trust is earned by people’s actions. And the benefits could be quite profound as long as there is data stewardship under this.
What do you feel about AI? Elon Musk has a particularly apocalyptic view of it…
I feel we brought AI out of its winter by what we started with Jeopardy and unleashed it one more time.. I think there are benefits to come from this. But we believe strongly in purpose and transparency in how these things are handled and that this be ushered in properly.