International Business Machines Corporation (IBM) Earnings Call Transcript & Summary

Thank you, Jay, for your introduction, and thank you, everyone, for joining us today. This has been an extraordinary moment for government. This COVID-19, the ensuing lockdown, the rise of unemployment and our social unrest. So let me begin by recognizing the immense work done by the government and thanking all of you for your role in it. Your swift response have been absolutely essential in keeping the economy running and guaranteeing people safety. But movements of crisis almost always carry lessons and if there is anything the COVID-19 pandemic has taught us, it's the critical importance of technology solutions that enable speed, flexibility, insight and innovation. Choosing which technology platforms power your organization is one of the most consequential decisions you can make. Technology platform is determined how quickly you can pivot to new opportunities, how well you serve your citizens and how much you can scale. And today, how fast can you respond to a crisis. If you look at the technology landscape today, hybrid cloud and AI are 2 dominant forces that drive digital transformation. As I talk to clients, I see 4 underlying reasons that drive hybrid cloud adoption. I call them the 4 imperatives of hybrid cloud is the imperatives of history, choice, physics and law. Let's look at them one by one. First, the imperative of history. As an organization, you rarely start from scratch, you have complex workloads and applications. Your messaging, data and transactional systems are often well integrated into your operational and security systems. Hybrid cloud is about meeting you where you're at in terms of the IT infrastructure choices you've made and the various places you do computing, whether it's in a public cloud, a private cloud or on-premises. On to the second imperative of choice, relying on 1 public cloud alone would lock you in, and perhaps more importantly, it locks you into only 1 company's innovation, effectively a mono cloud. Hybrid cloud is about giving you the freedom to host your own software [ 1 day ], move that same set up to a cloud provider, the next year or sometime down the road. The third imperative of physics. You simply cannot run a factory floor with robotic arms that require a small response time, say 50 milliseconds, you cannot do that through the cloud. In many cases, your IT systems need to be physically close to your data and services. And finally, the imperative of law. There is the legal framework and data solvency issues that you all have to comply with. These imperatives are inescapable realities that are unlikely to change. And they suggest that hybrid cloud as a major force in technology is here to stay. Now to help you capitalize on the massive opportunity hybrid cloud represents we have made big bold bets. Notably, we have joined forces with Red Hat to give you the unique ability to build mission-critical applications once and run them anywhere. This is a game changer. As a result today, IBM is the only cloud provider that offers organizations the freedom to securely deploy, run and manage their data and applications on the cloud of their choice without running the risk of being locked in. IBM is committed to interoperability of cloud-native function across all clouds. But I'm here to tell you that some clouds are better suited to particular types of workloads, they're designed to do different things. And IBM Public Cloud is the best destination to deploy regulated workloads. We have completely reengineered the cloud on a foundation of open source software, security leadership and enterprise-grade infrastructure. The IBM cloud uses Red Hat OpenShift as one of its primary Kubernetes environments, that manages containerized software across the organization. It has 190 API-driven cloud-native PaaS services to create new and enhanced cloud native applications. And it is the gold standard for security, compliance and resiliency. As an example, we offer the industry's strongest commercially available state-of-the-art cryptographic technology, FIPS 140-2 Level 4, for those of you who worry about these things. We also give clients the ability to retain control of their own encryption keys and the hardware security modules or HSMs that protect them. This is unique, and I know how important security is for the government. So the second tectonic force, moving on to artificial intelligence or AI. It is one of the biggest forces driving change in the industry. The vast majority of you perceive AI as a strategic opportunity. Almost all of you see AI as a way to drive cost savings, but also how to give better service and to scale innovation and insight to help you seize on this opportunity and unlock all the value that lie inside your organizations, we have significantly bolstered IBM's AI capabilities. The result is that Watson today is the only AI platform that runs anywhere across clouds and vendors and protects you from vendor lock-in. I'm convinced this would help us make great strides in helping you go from experimenting to running AI at scale and embedding AI into your workflows and processes. This will allow you to optimize these processes and workflows, take away many of the mundane automations and instead have people focus on higher-value work. AI is so important in driving value that I'll make a prediction. 20 years ago, experts predicted that every organization would become an internet organization. I'll predict that every organization will become an AI organization, not because they can, but because they must. AI is the only way to extract value from the data and to then scale the innovation insight and expertise. With this crisis, the importance of hybrid cloud and AI has not changed. What has changed is the pace at which they are being adopted. I've said this before and it remains true. Transformation journeys that were going to last a few years are now being compacted into the space of a few weeks or months. Organizations are questioning and transforming their operating model. They're thinking about how to use technology to reassess and reimagine modes of consumption, supply, interaction and productivity. They're looking for long-lasting answers on what they can do with technology to address the key issues that COVID-19 has brought to light. They want the supply chains to become even more resilient and to be able to resist global chocks. They're moving workloads to the public cloud to keep critical functions up and running. Applications are being modernized to deploy them in a fraction of the time. IT tasks are being automated so that the workforce can focus on higher-value tasks. And everyone wants to secure their IT infrastructure so that remote work can be enabled while protecting 1 cells from growing cybersecurity threats. So organizations that use technologies like cloud and AI to deeply transform the way they work, become what we call a cognitive enterprise. You should think of this as the end state of a digital transformation. When your workflows and processes are reengineered, so your entire organization can move much faster and with a greater level of insight and flexibility. As we help you navigate this complex environment, our commitments are clear. We will continue to deepen our understanding of your needs, regulatory requirements, security postures but also help you identify opportunities that you can seize to transform how you deliver value to the people you serve. We will continue to be a leader in good tech and deploy technologies you can trust and to foster an entrepreneurial culture that moves us with greater speed and focus. Of course, the future does not depend on technology alone. It depends on people. Going forward, we are going to compete on trust more so than ever. And what's become increasingly important is our responsibility to the wider community of people whose lives we touch. And I'm proud to say that as we deal with this global crisis, IBM continues to be an important player -- player, not a spectator. A few examples. So far, we have made more than $200 million in global donations of money and technology. With the White House and the U.S. Department of Energy, we spearheaded efforts to create a consortia of U.S. national labs, universities and other IT leaders to pull more than 420 petaflops of supercomputing power that can be used to accelerate scientific discovery. Our Watson-powered chatbots are being used in organizations across the United States from the city of Austin and Texas to the Children's Hospital of Atlanta. We are also bringing trusted data at the fingertips of citizens and health experts. That is why IBM and the Weather Company created a new and precise incident map covering COVID-19. We are also leading a group of tech companies in the open COVID pledge making our 80,000 patents, yes, 80,000 patents available free of charge to researchers. At the same time, the tragic events that have happened in the U.S. is a reminder that it falls in all of us to do away with the legacy of bias, prejudice and racism. On that, IBM is committed to fighting discrimination. We have a long and deep commitment to diversity that goes back 109 years. IBM wrote its first equal opportunity policy in 1953. That commitment has remained steadfast, and we are going to continue to strengthen diversity and inclusion as fundamental IBM values. As difficult as these times may be, we do see light at the end of the tunnel. There is no question that this pandemic is a powerful force of disruption and an unprecedented tragedy, but it is also a critical turning point. It's an opportunity to develop new solutions, new ways of working, new partnerships that benefit you, your organization and the people you serve, not just for today, but for years and decades to come. Let me close with a few words of thanks to all of you for your trust in us as we navigate this unprecedented crisis together. This conference is designed to help you to help accelerate your path to digital transformation. I am confident we will benefit greatly from this time together. And with your continued faith in IBM, we will emerge from these challenging times stronger. Thank you.