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

And now our next guest is a leader from an iconic technology company. He oversees a team of more than 125,000 consultants who partner with companies around the world to set detailed strategy and reinvent business processes. Please welcome Mark Foster, Senior Vice President, IBM and Head of IBM Global Business Services. Hey, Mark, how are you doing today? Where are you, by the way?

Hi, Miguel. Yes, I'm very well thank you. I'm here. I'm in New York. I'm in New York today.

So let me start, Mark, with some personal questions to break the ice, if you don't mind. So you've been described as a classical futurist, love the words, because of your degree in classics from Oxford and your love for Shakespeare, okay? How did you go from this artistic side, the dead languages, the ancient history to the cutting edge of technology with IBM?

Well, the interesting thing, when I was leaving university in 1983, there actually weren't so many jobs for people who had ancient Greek as their main skill set, first of all. But secondly, I had a real recognition that the world of technology was opening up and that technology was going to be really important for the transformation of what -- everything that was going on, on the planet. And so I found myself joining what was then Arthur Andersen management consulting, where I was whisked off for training. And within a few weeks, I was learning to code in COBOL, went on to COBOL -- code in RPG III on the AS/400. Before I knew it, I was fully immersed in the world of technology. Fast forward through a long career in, first of all, Andersen Consulting and then Accenture. And now I find myself running IBM Global Business Services. So an exciting journey.

Wow, very exciting, quite visionary also. Now following with the topic of education -- by the way, for those of you who don't know it, Mark has a passion for early years education. And for over 25 years, he has funded, operated and led a community-based school in Surrey, England. Mark, this is very inspiring. Tell us a bit more about this. Inspire us, please.

Well, again, back in the early 1990s, my wife and I moved to a small village nesting in the hills in Surrey. And within the first month of us being there, we heard that the government was about to shut down the local village school as part of a rationalization program for local village schools. This was going to mean that the children from the village would have to get in the bus and travel in different ways or be driven to other local schools for their education, particularly the young children in the village. We were very clear that this was a very important part of sustaining a community. So I made the big mistake of thinking that because I'm a management consultant, I can probably help in some way here. So I went along, I volunteered to be on a work party. Within a short period of time, I was Chairman of a new charity. And actually, I've been Chairman of the charity now for 28 years. And during that period of time, we managed to take over running the school. We bought the school buildings, we operated the school, entirely funded by the local community. And then over the last recent period, ironically, the policy change in the U.K. government has meant that it's now back in the government system in the U.K., but I'm still running it. And in fact, just yesterday, I was chairing the latest governance meeting from my home in Connecticut with the team over there in Peaslake. But it's been great to see the role that it's played in holding a village together. And it's only a school of just over 50 children, but it makes a real difference to the cohesion of our community.

I'm really touched. Amazing experience. Thank you for sharing with all of us. Well, let's switch now to business. Let's switch now to IBM. So IBM is known for reinventing itself over 100 years to compete and win against up and coming disruptors. So let's talk now about IBM Global Business Services, the unit that you are -- that you lead. For those in the audience who may not be familiar, what is the GBS mission?

Well, the GBS mission is to be the journey partner for organizations as they go on the kind of business transformation that I was outlining before. We see our opportunity to help clients co-create those business platforms they're going to need to win with, help them build the kind of intelligent workflows that will underpin them and do that all through being enabled through the new hybrid cloud architectures, which are underpinning so many of the transformations that we see out there right now. So we're bringing together that end-to-end capability of business transformational skills, industry insight, process understanding and reengineering, together with the ability to bring to bear world-class ISV solutions as well as connecting our clients, the various cloud service providers and clouds that are out there to allow them to be successful, including, of course, the IBM cloud.

Thank you, Mark. That's great. So your CEO, Arvind Krishna, recently, in his letter in the annual report to shareholders, he said that hybrid cloud and AI are the 2 next great technological shifts. By the way, I've heard you say that companies, they cannot access nearly 80% of the data that is available to them so that they cannot really improve performance using that data. So what are you seeing around these trends, hybrid cloud, AI, data intelligence, when you talk to customers around the world?

Well, again, it's been very clear that the COVID crisis and all of us in the new ways of working that we've been actually forced to experience has made all of us very much more aware of the technology that underpins all the work that we do. I think it is also borne out, though, how important it is for us to take advantage of the raw material, which data is inside all of our organizations, but also the data that's outside of our organization and putting that together with the internal data to create new value. And this is where the massive marketplace of AI clearly plays across that, extreme automation, very important, all of it in service of what we call these intelligent workflows, the critical processes. Whether it's customer service processes, supply chain processes, back-office processes, all of them are now -- have the ability to be massively improved through the smart application of data, the smart application of new algorithms in AI and all of it brought to life an access to the flexible architectures of the hybrid cloud.

Perfect segue to my next question, Mark. So last month, we were thrilled to announce an incredible groundbreaking, multifaceted, new partnership between Celonis, IBM and Red Hat, bringing together execution management, data intelligence with the open hybrid cloud approach of IBM. What is the most exciting thing about this partnership in your eyes?

It's a really exciting partnership because to some extent, it's one of the deepest partnerships I've ever seen in my long career in working in this kind of industry. I think it's deep because it does cover so many facets. Clearly, there's a strong relationship around our ability to create practices, skilled practices to implement Celonis and help our clients get the value from this capability. But the fact that it's also including a very strong commitment to Red Hat OpenShift as an underlying architecture, which will increase the ability for clients to use Celonis even more in an open way with the different applications and solutions they're looking at to allow them to really focus on driving value out from their processes wherever they may lie and whatever applications they may lie upon. But I'm also excited because we're embedding Celonis and its way of working and capabilities into our Garage methodology, the way that we work with clients around the world to co-create, co-execute and cooperate these intelligent workflows. And we're going to be embedding Celonis as a capability in that process to allow us to help our clients find out where those processes have breakpoints, to understand where we can fix them and drive value and really use it as an optimization capability that will sit at the heart of the way that we're going to work. So it's very exciting to see all those facets coming together in one partnership.

Yes. Thank you, Mark. By the way, I would agree with you 100%. In my 28-year career, this is probably the most complete partnership that I've ever been a part of. So thank you. So one final question. So your CEO, Arvind, in the same letter to shareholders, in the annual report, he talks very clearly about the elevated role of partners in this new phase of IBM. And he even talked about his commitment to invest $1 billion in the ecosystem. So can you give us an insider view perspective on what is going on? Why is this ecosystem strategy so important to him, to IBM, also to you? And what do you have to -- will come out of this large investment?

Well, I think we should really focus on the fact that the concept of openness is absolutely the heart of Arvind's strategy for IBM. It lay behind, of course, the acquisition of Red Hat, which was a very important point in creating the new platform that's at the center of all that IBM does. That openness automatically leads us to focus in on the opportunity of ecosystem. And indeed, if we look at what's coming out from all the transformations that clients are going through around the world right now, every client is now looking to expand their own business platforms into their own related ecosystems as well. So it's not surprising that IBM is looking to the ecosystem even more powerfully as part of the way that it's going to reinvent itself, but more importantly, work with the other partners and operation and technology players in our industry to help clients accelerate the value they can get from this unique moment when technology really is becoming at the heart of every business.

Well, Mark, you've been a great champion for this partnership. We are so humbled and thankful for having you with us today here at Celosphere. I really look forward to working with you, your teams and bringing business value to our joint customers, which is what really matters. So thank you very much. Have a great day.

Well, it's been a real pleasure for me to join Celosphere as well, Miguel. And I look forward to catching up soon. Cheers.

Cheers. See you soon.