IBM has just consolidated this important business

International Business Machines‘ (NYSE: IBM) The strategy centers around hybrid cloud computing and artificial intelligence (AI). In the cloud computing market, IBM acquisition Red Hat forms the foundation for its hybrid cloud platform. For large companies and organizations looking to modernize their infrastructure and applications, with the goal of saving money, removing the burden of legacy technology, or deploying new technologies like artificial intelligence, IBM’s hybrid cloud platform provides a way forward.

IBM’s AI strategy is similar. The company launched its Watsonx AI platform last year, providing enterprise customers with a platform to develop, train, deploy and manage AI models and agents. Since this launch, IBM has booked approximately $3 billion worth of AI-related business and is now adding more than $1 billion in new business each quarter.

While these software platforms are at the center of IBM’s overall strategy, it is the consulting business that ultimately does much of the work. Large organizations need not only software, but also guidance, solutions, implementation, and other services as they undergo complex and lengthy modernization efforts. A company with on-premises servers running legacy applications needs a lot of help moving to hybrid cloud and deploying new AI workloads.

Remember that $3 billion AI-related business? About 80% of this total was booking advice, while the remainder came from programmes. IBM’s consulting business is a key differentiator for the company as it pursues the hybrid cloud computing and enterprise AI markets.

An important aspect of IBM’s consulting business is that he has the freedom to create solutions for clients that include non-IBM products and services. Through a wide range of partnerships, IBM’s consulting arm builds solutions that incorporate competing cloud platforms, e.g Amazon (NASDAQ:AWZN) Web Services (AWS) and Microsoft (NASDAQ:MSFT) Azure, and competing software from companies like oracle. This agnosticism is one reason for the success of IBM’s consulting business.

IBM announced Thursday that it plans to acquire Applications Software Technology, Oracle’s global consulting business. IBM competes with Oracle in multiple areas, but the company also recognizes that armies of potential customers currently use Oracle software. By serving these customers and their Oracle-related needs, IBM can bring on new customers and potentially sell them additional products and services in the future.

Because much of Oracle’s software is mission-critical, a customer going through modernization efforts will likely stick with Oracle’s software. With this acquisition, IBM expands its ability to serve these customers.

IBM’s growing portfolio of strategic partnerships, such as the one with Oracle, is just as well Bringing billions of dollars in business IBM wouldn’t win otherwise. In the cloud computing market, these partnerships are especially important. While IBM has its own public cloud platform, a potential customer will likely want to use AWS, Azure, or a combination of the two. By building solutions that include technology that customers want or need, IBM opens the door to much more business than it would otherwise win.

While IBM shares are trading near all-time highs, the company is performing well as its advisory platform and strategies pay off. The company expects to generate more than $12 billion in free cash flow this year, and this number has the potential to grow even more in the coming years. Based on these forecasts, IBM stock trades at about 17 times free cash flow.

This acquisition of consulting firm Oracle may not be a major development, but it is another step that moves the company’s consulting strategy forward. As companies race to modernize, IBM is increasing its appeal as the partner of choice.

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Timothy Green He has positions in international business machines. The Motley Fool has and recommends positions in International Business Machines and Oracle. The Motley Fool has Disclosure policy.

IBM has just consolidated this important business Originally published by The Motley Fool

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