IBM is struggling, having seen its revenue decline for 17 straight quarters. It is staking its future on several new technologies; particularly Cloud Services and Watson artificial intelligence applications (as symbolized by its win on the game show Jeopardy in 2011).
Concerning the fast growing area of cloud services, IBM has released details of how it is doing. It is in third place behind Amazon, the dominant player, and Microsoft. Unfortunately, IBM seems to be losing ground to those two; for perspective, in the past quarter, Microsoft cloud services grew 100% versus year ago, while IBM grew 30%.
In regard to Watson’s performance, IBM has been silent. You may have noticed the huge amount of national TV advertising that IBM is putting behind this service. IBM seems to be viewing Watson as an important differentiator that will drive its growth in the coming years. Unfortunately, it is very difficult to tell from IBM’s reported financials whether Watson is a success of not. Specifically, Watson revenues are split up and are buried in the revenues of three other IBM businesses. Some financial analysts suggest this is intentional so it is not known that Watson is struggling.
As the press probes the Watson revenue issue, it was recently reported that one analyst claims to have come into possession of some internal IBM data concerning Watson product registrations (the first step for a customer to sign up to use the technology). Apparently this data shows that so far in the five year life of Watson (i.e., since the Jeopardy win), 500 customers have registered to use the service, but by this time in Watson’s life, the target for the cumulative number of registrations was 8,145. That is 6% of the goal! Once this information became public, IBM pointed out it was not correct, but it didn’t clear up the confusion about Watson’s performance.
Stepping back, IBM is not helping itself by not sharing data on the performance to-date of Watson and the role it will play in the near to mid-term future. If the above data is correct, IBM has a problem. If it isn’t correct, it loses with analysts and customers by not clarifying.
Stepping back, when you are not transparent, you lose in two critical ways:
1.) Wasting Internal Resources – Keeping certain data confidential can confuse employees, who likely know what reality is. It can cause losing projects to get inappropriate investment, and winners to be underfunded.
2.) Publically, People Lose Confidence In What You Say – If it is clear to the world what the situation is, and you pretend that things are different, people notice and you lose a bit of credibility.
Objectivity and transparency are critical attributes of a strong leader. Let IBM be a good reminder of this.
