The IBM tightrope

BusinessWeek’s recent column on IBM is meant to be generous, but it highlights the chasm between how Wall Street appreciates it for steady results and how many customers see it as stodgy and un-innovative as I have written here and here

Here’s how big the disconnect is. In my new book, I have a section on Warren Buffett

Can any industry hide from technology-driven disruption? Some would argue the legendary investor Warren Buffett has done well by staying away from investing in tech companies (or those susceptible to technology-driven turmoil). In his words, “In business, I look for economic castles protected by unbreachable moats”

Well, Buffett invested in IBM late last year, and an IBMer reading that excerpt from my book proudly sent me a note about Buffett. He missed the irony. Buffett invested in IBM because it has a predictable business model like Coke or GEICO.

But CIOs don’t like the predictable annual IBM charges on DB2 licenses, SAP application management and data center charges especially when they benchmark against declining SaaS and Amazon storage charges.

That is the tight rope IBM has to walk. Predictability from old assets, versus growth from innovative, new assets.