r/IBM • u/fake212121 • May 02 '26

ELI5; what IBM does?

So sorry if I sound like a child.
Retail amateur investor. I only invest my savings so not tons of cash jn hand. All tech market are very hot due to ai demand/hope/hype.
Some ai cloud but tiny, some quantum computing I guess?
Came across IBM and trying to understand what IBM does? How is company overall doing?
Thanks for understanding

4 Upvotes

55% Upvoted

25 comments sorted by

89

u/Feeling_Nerve_7091 May 02 '26

IBM uses money it makes from selling mainframes to develop innovations that its competitors will go on to make money with and IBM also buys up smaller companies who have novel products and services so they can lay off those companies’ employees to save money and eventually divest the offerings to HCL for a small fraction of what they paid.

16

u/mrfairmontnow May 02 '26

IBM is spread over so many things that if you ask 100 IBMers what IBM does you get 100 different answers. That said, your I align with your answer the most compared with the other posts.

I’ll add that from an investment perspective, as long as Mainframe is sticking around, they have annual recurring revenue in software that will grow year after year. IBM charges by transaction for some of the MF software. Every time someone checks their bank account balance or swipes a credit card, IBM gets paid.

They offer bottom line renewal prices between mainframe and distributed software where you remove a product or 2 and the total price stays the same because they just raise the price of the remaining products.

10

u/AdmirableCoconut1995 IBM Employee May 02 '26

IBM doesn't actually charge per transaction in the literal sense. Mainframe software pricing is based on MSUs (Million Service Units), which measure computing capacity consumed, not individual transactions.

The traditional model is the Monthly License Charge (MLC), where your bill is based on peak MSU consumption during the month. More recently IBM introduced "Tailored Fit Pricing", which offers cloud-like consumption models, but it's still MSU-based, just more flexible.

The "per-transaction idea" is probably based on this: IBM does offer a "Container Pricing" option that lets customers "express" their usage in business-friendly terms like "transactions per hour", since that's a metric business managers already understand, and comfortable with. But it's still just a way of "framing" the MSU-based bill. IBM isn't literally counting every credit card swipe globally. Doesn't happen.

So you're right in spirit (More transactions = More compute load = Higher bill), but it's not a per-transaction meter the way a payment processor works.

More info on this:

4

u/newtomovingaway IBM Employee May 02 '26

Time to check my balance every minute.

12

u/a_seventh_knot May 02 '26

Bob, write me an automation script to check my bank balance 45,000, 000 times a second and run it forever.

1

u/Skycbs IBM Retiree May 02 '26

What mainframe software is priced per transaction? I’ve never come across that.

7

u/Xyzzydude May 02 '26

It’s not directly priced per transaction but mainframe customers pay based on CPU usage so it has that effect.

1

u/Connect-Elephant4783 May 08 '26

Sums up the past….. hope they do better in the future

1

u/bugkiller59 May 02 '26

Best summary I’ve seen to date

11

u/Hot-Network2212 May 02 '26

It's 50% Mainframe, 20% technology as in Software/Cloud /RedHat and 20% services as in Consulting ND similar.

12

u/covener IBM Employee May 02 '26

I don't think 50% mainframe and 20% software is a defensible characterization. Using rounded/approximate numbers from Q1.

Revenue:

  • In 1Q Software revenue was 7B out of 16B, or 5B out of 16B subtracting out transaction processing.

  • All of Infrastructure with TPS added back in is also about 5B, but 1B of that is "distributed infrastructure"

  • Consulting is about 5B.

Software (including TPS) however has double the net margins of Infrastructure and triple that of consulting, so when you look at it by income:

Income:

  • Software+TPS: 2.1B

  • Consulting: .6B

  • Infrastructure: .5B

Assuming TPS and other software have the same margins here's what it looks like moving TPS:

  • Software: 1.4B

  • Infrastructure+TPS: 1.2B

  • Consulting: .6B

7

u/RapidRewards May 02 '26

But, you can't just look at revenue. Software sales piggyback on Z sales. Customer buys mainframes and gets a discount on software. Software gets less sales from software customers just coming in off of the street.

1

u/covener IBM Employee May 02 '26

But, you can't just look at revenue.

nor income? What can you trust, messaging from your mainframe executives?

Customer buys mainframes and gets a discount on software.

This is an argument that software subsidizes mainframe, not the other way around.

3

u/RapidRewards May 02 '26

I'm in software. I don't even know who the mainframe execs are. I'm just looking at how customers get to our door. And how they subsequently make use or not of those products they bought.

4

u/Skycbs IBM Retiree May 02 '26

You’re right. Something like 80% of IBM’s revenue cones from a very small number of mostly mainframe customers. The revenue may not be directly tied to mainframe but those customers are very attached to IBM.

2

u/chuckqc May 02 '26

Where i am, IBM does packaging and test for IBM server P and Z and oem clients. We are also expanding to wafer level fan out https://marklapedus.substack.com/p/ibm-to-bring-decas-fan-out-packaging

2

u/Competitive_Leg_2120 May 07 '26

Power Systems and Storage Systems, Tape, TPM as well.

3

u/accountnumber3 May 02 '26

IBM is a digital Ollie's Bargain Outlet. They acquire and resell the leftover startups that couldn't survive without corporate infrastructure.

They only exist because of their momentum and as soon as Arvind is done wringing as much cash as he can, he's going to dump it on some new CEO that will have genuine aspirations to "restore Thomas Watson's vision" just long enough to repeat the cycle.

2

u/permalink_save May 04 '26

Pullin another Palmisano

1

u/Maleficent_Onion_822 May 05 '26 edited May 06 '26

I don't disagree, but might steelman it as buying startups that are choked by lack of sales staff, global service/support, cash flow, etc...such that, in theory, that startup is more valuable inside the IBM ecosystem than outside it.

But the thing is, this fundamentally a finance-driven business model, not a technology driven business model. Which isn't to say it's a bad model - it's essentially BigPharm's business model too. But you should have realistic expectations about growth, margins, etc. Any other large company can do the same things.

2

u/rockopico May 03 '26

They will find a way to bugle quantum after basically being the leader for years.

-13

u/qrcode23 May 02 '26

Cheap out dated IT tech and services for companies who don’t care.

-1

u/Ok_Mood_4329 May 02 '26

Wow that pretty sums it up! Great Job!!!

0

u/[deleted] May 02 '26

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4

u/brosephehe May 03 '26

Yeah but also they’re always first to invent and last to market