IBM (IBM) could be set to cash in on consumer and business trends as its cloud-based consumer and blockchain-based supply chain solutions take off.
"The reality today is that enterprises are only 20% into their cloud journey, focused on getting the "easy" cloud native workloads up and running," IBM said in a statement. "To get through the next 80%, which will be the critical, more complex workloads, they need to be able to move and manage data, services and workflows across multiple clouds and existing IT systems."
The statement adds that the emerging hybrid multi-cloud opportunity is estimated to be $1 trillion market by 2020, something that IBM's Red Hat (RHT) acquisition is aiming to seize upon.
Presumably, the still-nascent blockchain effort is even further under-penetrated, offering yet more growth prospects for those eyeing the long term shift.
Sector Specific
Amazon (AMZN) has long been the king of cloud driven eCommerce solutions, but IBM could be adding some jewels to its own crown soon enough.
Chris Wong, Vice President Strategy and Industry Ecosystem at IBM, highlighted customer facing and sales focused sectors as key targets for IBM's initiatives.
Wong told Real Money that the biggest secular shift among retailers, for example, is the move to cloud and AI-driven ecosystems that can support store traffic, ecommerce, and delivery capability that are all pivotal to performance for retailers.
"Almost every retailer is looking at using AI and cloud," he said. "It's a lot like the shift to digital in the first place."
As was seen in the shift to digital initially, those that embraced the change succeeded while those that denied the trend languished. Sears is likely the most visible casualty of the ecommerce era.
Wong explained that the shift to these platforms is no longer just about buying and selling conveniently, as has been displayed by ecommerce growth in China and East Asia specifically through Alibaba (BABA) , but also about retailers understanding their customers.
"We can create solutions for consumers based on what they are looking for," he added. "A store next to a college versus next to a retirement home will be different and have different needs. This is one of the key reasons that IBM acquired Red Hat; to accelerate the multi-cloud solutions that allow flexibility to meet hyperlocal consumer demand."
The personalized product presentation tailored to each consumer will be the key to the success of retailers in his view and thus necessitate a growing pipeline of partners for IBM.
For retailers moving forward, a bird's eye view of their operations in terms of both demand and supply as well as security will be pivotal to separating themselves from their competition, Verizon Enterprise Solutions Vice President Michel Dupre told Real Money.
"Data analytics is foundational to both front and back ends," she explained, "Connecting with shoppers to fulfill the buy online trend is key. The bar will continually be raised for retailers."
She indicated that the technological execution will be a key factor for retailers, both online and in-store, especially as the consumer remains strong. Of course, cloud and artificial intelligence will be a prime aspect of this effort.
The prospects for IBM specifically are bolstered by the reticence of retailers to utilize Amazon, given that the Jeff Bezos-led behemoth has beaten down the industry for years. That removes the largest competitor in the space from the competition in cloud.
The cloud focus is only further brought into focus as the company offloads non-core ecommerce platforms that are more aligned with the initial shift to digital rather than where Wong anticipates the industry heading.
WebSphere Commerce, the company's suite of digital commerce solutions, is moving to HCL Technology after a $1.8 billion deal with the Indian ecommerce leader announced in December.
"After the deal closes, IBM will no longer have a commerce platform," Forrester Research director Allen Bonde pointed out. "IBM is continuing to reformulate its strategy as an end-to-end enterprise solutions provider, even as it doubles down on open source and cloud development tools and technologies such as AI and blockchain. Selling off these collaboration and experience assets should help to clear out space for investing further in these areas and more rapidly executing its SaaS vision."
Building on Blockchain
The company's big bet on blockchain could also be a big payoff.
"We see a strong pipeline as clients are interested in the benefits of blockchain behind their firewall," CFO Jim Kavanaugh told analysts on Tuesday.
The efforts in supply chain solutions with blockchain specifically, which were recently highlighted by IBM's partnership with Ford (F) to track cobalt sourcing and Walmart (WMT) to track food supply chain, indicate that some of the biggest players in the retail and automotive spaces are certainly buying into this vision.
The initiation of blockchain supply chain with Walmart has reduced its contamination response time from days to mere seconds, highlighting the value in the technology.
"Walmart has really leaned in with its use of technology," Wong commented.
For reference, ReportLinker has forecasted the global blockchain market size to grow from $1.2 billion in 2018 to $23.3 billion by 2023, at a Compound Annual Growth Rate (CAGR) of 80.2%.
The focus of IBM on retail giants is also apropos judging by the forecasts of the report.
"The retail and eCommerce industry vertical is expected to grow at the highest CAGR in the blockchain market by vertical during the forecast period," the report states. "Retail and eCommerce organizations are making huge investments to enhance customer experience."
The investments will likely aid IBM, which is quickly establishing itself as a leader in the space.
Broader Lens
The ability of a cloud and blockchain provider like IBM reaches beyond simply retail as well, as deals with multi-million-dollar, multi-facted agreements with, BNP Paribas (BNPQY) , Vodafone (VOD) , and Juniper Networks (JNPR) show.
Wong said he expects the horizontal integration of technology into these numerous industries, both in supply chain and customer facing business categories, to maintain a strong pipeline of business for the IBM ecosystem to branch out.
For those looking for practical applications of Red Hat's integration, the thesis on the primed pipeline in cloud provides a potent one, especially if the cloud shift is as underpenetrated as IBM suggests. If one is bullish on blockchain, that segment only bolsters that positive outlook.
So, while the tech giant drops some of its ecommerce oriented aspects, the company could be positioning for a much more pertinent paradigm shifts that are still developing.
