IBM CEO Blames Execution for Software Shortfall
IBM CEO Arvind Krishna attributed the company's second-quarter software shortfall to 'execution,' stating that it came down to the vendor falling short in this area. The shortfall was largely due to a shift in customer spending from IBM's traditional software offerings to AI-focused hardware components and cybersecurity-focused software, which were prioritized by clients ahead of expected price increases.
The company witnessed a significant shift in client spending priorities at the end of June, with customers opting for servers, storage, and memory purchases to secure supply-constrained infrastructure. This led to IBM failing to close a double-digit number of large deals on the timelines expected, accounting for the majority of the shortfall.
Krishna noted that about one-third of the shifted deals had since closed, giving the company 'a good indication' that this was deferral and not destruction. The CEO expressed confidence in IBM's business, stating that the technology spending environment remains dynamic, and the vendor must continue to evolve how it engages clients.
Krishna also highlighted plans to increase the use of AI to help scale software development, bolster sales and marketing efforts, and optimize the supply chain. He pointed to recent software-focused acquisitions, including Red Hat, HashiCorp, and Confluent, which power a majority of IBM's high-margin subscription-based recurring software revenues.