How IBM Makes Money

The software segment is IBM's biggest source of revenue and profits.

Reviewed by Somer Anderson

International Business Machines Corp. (IBM) sells products and services, including software, consulting, infrastructure, and financing. IBM has two powerful platforms to capitalize on the strong demand for hybrid cloud and AI: watsonx for AI, and Red Hat OpenShift for hybrid cloud.

Key Takeaways

  • IBM sells software, offers consulting services, and provides hybrid cloud infrastructure solutions.
  • The software segment is IBM's biggest source of revenue and profits.
  • IBM strives to be a leading provider in the hybrid cloud and AI.

IBM's Industry

IBM operates through four business segments: Software, Consulting, Infrastructure, and Financing. IBM's competitors include Alphabet Inc. (GOOGL), Cisco Systems Inc. (CSCO), Microsoft Corp. (MSFT), Amazon.com Inc. (AMZN), Oracle Corp. (ORCL), Salesforce.com Inc. (CRM), and Hewlett Packard Enterprise Co. (HPE).

  • Software: Bridges IBM's software solutions with its hybrid cloud platform to help clients with their data needs and automate and secure their systems.
  • Consulting: Transforms businesses and implements digital technology like hybrid cloud architectures.
  • Infrastructure: Provides hybrid cloud solutions to meet the new requirements related to hybrid multi-cloud and enterprise AI workloads. IBM offers hardware, such as high-performance servers, storage solutions, and cloud infrastructure-as-a-service (IaaS).
  • Financing: Facilitates IBM clients’ acquisition of hardware, software, and services through its financing solutions.

IBM's Financials

In 2023, IBM generated $61.9 billion in revenue. IBM's strongest financial leaders were its software and consulting segments. Software revenues increased by over 5% due to advanced software capabilities across hybrid cloud, data & AI, automation, transactions processing, and security, led by Red Hat.

Consulting revenues rose above 6% year over year for 2023. IBM focused on digital transformation and AI deployment, with services in data and technology consulting, cloud modernization, application operations, and business transformation.

History and Leadership

As of Apr. 2024, Arvind Krishna serves as IBM's Chairman and Chief Executive Officer, headquartered in Armonk, New York. IBM began in 1911, with the merger of the Hollerith Tabulating Machine Company and the Computing-Tabulating-Recording Company, under the leadership of Thomas J. Watson who would lead IBM as its CEO for forty-two years.

In 1952, IBM introduced digital storage via magnetic tape data, marking the transition from punched-card calculators to electronic computers. IBM built the computers and software for the Apollo missions in 1969. In 2024, IBM integrates technology and expertise through software, consulting, and infrastructure services.

Recent Developments

In 2023, IBM aimed to become a more innovative company, focusing on the transformational technologies of hybrid cloud and AI. IBM spent nearly $7 billion on research and development, acquired nine companies, and returned more than $6 billion to stockholders through dividends.

What Industries or Sectors Do IBM Products Support?

IBM products can be implemented across many sectors, such as helping to digitize and connect new automotive technologies and standards, or enhancing supply chain automation for consumer goods.

How Does IBM's Hybrid Cloud Technology Work?

IBM Hybrid Cloud Mesh is a networking solution designed to allow organizations to establish secured application connectivity across public and private clouds, allow for network control to CloudOps, and interfaces to DevOps teams.

How Is IBM Incorporating AI Responsibly?

IBM's Institute for Business Value understands that organizations must consider AI ethics and data integrity with this new technology. According to IBM, 58% of executives believe that major ethical risks exist as generative AI is adopted.

The Bottom Line

Since its founding in 1911, IBM has provided technology solutions for government agencies, healthcare, consumer products, automotive, and other sectors. As a leading technology and software solution provider, IBM focuses on hybrid cloud and AI services.

Read the original article on Investopedia.

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