Kyndryl CTO talks strategy for the '$19 billion startup'

Almost a year after IBM announced plans to spin off its Global Technology Services unit, the newly formed company made its debut today.

Billing itself as a $19 billion startup, Kyndryl will continue as primarily a services company but with the freedom to focus on creating new partnerships that were either impossible or difficult to establish under IBM. The company, which has nearly 90,000 employees, claims to be the "world's largest IT infrastructure provider" and plans to focus on emerging markets including edge computing, hybrid clouds, 5G and security.

Antoine Shagoury, Kyndryl's CTO, spoke with SearchDataCenter about the company's plans to help organizations launch digital transformation projects more quickly, how it will either invest or acquire technologies it needs to better compete with emerging technology competitors, and how Kyndryl will handle the competitive relationship with IBM.

Antoine Shagoury

Only half of all companies have started digital transformation projects. What are the top couple of issues holding them back, and why do you think Kyndryl can help them over those barriers as an independent company?

Antoine Shagoury: The first challenge for them is a lot has happened with technology. The amount of solutions has grown exponentially. Discussions have moved from how to enable cloud journeys to how the cloud is now taking on the responsibility of the core business. If you think about it in that context, the market has actually added more barriers for our clients. Another barrier is finding a partner with the right approach to modernize their business. All this has slowed adoption rates.

You have talked about making Kyndryl a flatter, faster organization to move more quickly. What changes have you made there?

Shagoury: When we were part of IBM, our products drove a limited set of applications that were a part of clients' operations. We were basically working inside a box.

Now we work with larger partners, which is creating new opportunities. For instance, now we are working with the hyperscalers directly. Now we have a view across the entire hyperscaler universe, and we have specialty providers involving Z mainframe migrations all the way to application migration teams. So, we are seeing huge partner opportunity. Our target market literally doubled in regard to the opportunities.

IBM has acquired and also invested in companies ranging from startups to mature companies. How will Kyndryl decide on whether to simply invest in another company or acquire it?

Shagoury: We're in a great position to start looking at companies that complement our service portfolio. There are just as many opportunities in partnering rather than investing or purchasing a company outright. But that gets into a different conversation in regard to where that strategic value falls as we get deeper into what we're delivering as part of our corporate strategy.

Our job is to build trust among clients to make sure we have the right ingredients and capabilities for what they're looking for. We want to help them stay current so they can better compete in their respective markets.

We are moving very aggressively on building out our partner network across hyperscalers, data providers and hardware providers. But we are also extending those conversations down to startups. Our job is to build trust among clients to make sure we have the right ingredients and capabilities for what they're looking for. We want to help them stay current so they can better compete in their respective markets, but also help them adopt new technologies, applications, methodologies and automations.

What technology areas are you targeting to better round out your portfolio?

Shagoury: First, we look at where we are strong as well as where we are not as sharp as we want to be. Application modernization is an area we certainly want to continue to invest in, and we will continue that investment with partners. Some may not believe it, but IBM will still be a strong partner for us. We have a shared client base, so think about all the things that come along with that -- both the good and bad. With IBM there's an opportunity to continue to help those clients navigate the path to application modernization. We are investing aggressively in training our own staff in this area. We have 65,000 people with the proper certifications and growing.

Some wonder if there is an unspoken gentlemen's agreement between IBM and Kyndryl that says you will stay out of each other's way to avoid competing against one another.

Shagoury: We have to pursue our own strategies. We have a commitment to our shareholders and our customers to maximize our value. If you think about the market that we're operating in, there's always going to be a certain amount of overlap and a certain undertone of competition or coopetition between us. I can say as an officer of the company, there's no gentlemen's agreement between us. We are a commercial entity with commercial relationships. There are gaps to be filled here.

When you think about small and emerging companies and even midsize enterprises, they're struggling with a variety of issues so there's definitely a role for us to play. We have put a lot of work into organizing this as a services company as well as to create an ecosystem that can minimize the complexity facing small and midsize enterprises, such as dealing with payment service providers.

We have a client base of large-scale, blue-chip organizations around the globe, and we've garnered a tremendous amount of metadata from them in terms of how they operate and how we can help them transform.

Are you considering an education program for your sales force that better prepares them to sell emerging technologies like AI?

Shagoury: In previous jobs [as CIO of State Street Bank and the London Stock Exchange] the best salespeople I've had were technical salespeople rather than someone who was just managing a relationship with a client so he could just close the deal. The great thing we have now with this new freedom is to apply our best front-end client teams' talent toward our clients. The best foot forward for us with our clients is to present the talent we have and bring them into relevant discussions. That to me will demonstrate we're not just selling a magic-wand solution.

In the latest earnings call, revenues for IBM's Global Technology Services unit (now Kyndryl) fell 5%, largely because users delayed purchasing decisions with the pending Kyndryl spinoff. What do they tell you about how long will it take to feel more comfortable to resume spending?

Shagoury: Having been a former IBM customer I can see where some users might pause spending, but I can see that softening over time. I think there's something else at play that's relevant to your question.

There are a lot of companies that have rethought their investment strategies. They're looking at their asset investments more from a cloud investment point of view. I think we're going to see a shift in the market. Whether it's pandemic or economic related, there are so many different macroeconomic and microeconomic influences going on. We will see that shift start to play out on its own. Does this mean we can predict when they might start feeling more comfortable? I don't think we can.

Do you see any special challenges as an independent company going into geographic markets where IBM has been traditionally strong with its legacy systems?

Shagoury: There's a presence we will have to establish by demonstrating our capabilities through traditional marketing. I think that's a challenge; we're creating our own brand. When you think about the opportunity -- and that's the exact challenge you want to have -- you want to build your brand and value message and really demonstrate what you can offer. We're definitely going to benefit among these countries from IBM's brand awareness.

As an independent company now, do you have the financial wherewithal to make acquisitions and do research into emerging technologies?

Shagoury: We are well capitalized enough to deliver on our strategy. I think that's a great position to go into on day one as a business.

Innovation research is very much a part of our DNA through our lineage with IBM. It's something we are cautiously going to continue to invest in. That's something our clients are expecting, too. It's not like we can go out and buy everything that we need as a company or that our clients need. But we can help close the gap between what customers have now and what they need by investing in people and technology and co-creating with partners.