Cloud Wars CEO Outlook 2025 with IBM's Arvind Krishna

Top 10 CEO Outlook 2025 series. Krishna shared with Cloud Wars
Founder Bob Evans the company's optimistic outlook for 2025 amid
geopolitical and economic uncertainties. They also discuss IBM's
shift towards software, its AWS and Palo Alto Network
partnerships, and how Red Hat has flourished since joining IBM.


Highlights


IBM's Optimistic Outlook (01:18)


Despite current geopolitical and economic uncertainties, Krishna
remains optimistic about technology's role, especially in terms
of automation and AI, in driving business transformations. He
notes there's an increased appetite for technology globally,
including in Europe, as a response to these uncertainties.
Technology is a way to deliver better services at lower costs,
which makes it an exciting time for the technology business.


Focus on Delighting Clients (03:41)


IBM exists to serve clients, focusing on delighting them through
technology deployment and support. Krishna discusses the
importance of taking risks to innovate and the need to cut
bureaucracy and unnecessary processes. He emphasizes that
partnerships should be win-win scenarios. "Can we expand the pie
in which case we both win because the client is happier?"


IBM's Shift to Software and Impact on Clients (06:36)


There's been a significant shift in IBM's revenue mix, with
software now accounting for almost half of IBM's revenue. Krishna
explains that software's flexibility allows for incremental
improvements, unlike hardware, which often require more
disruptive changes. IBM focuses on software and providing unique
value to clients in automation, hybrid cloud, data, and AI.


Enterprise Adoption of Large Language Models (10:05)


Krishna talks about the current state of enterprise understanding
of large language models, or LLMs: "If I look at the enterprise
understanding of large language models and what we can do for
them, it's like we're in the first innings of a baseball game."
Krishna advises enterprises to move forward in three steps:
First, start with low-risk applications like customer experience
functions such as answering service calls, as well as internal
enterprise functions. Second, move to a little more risky but not
totally risky use cases, like accounts receivable, procurement,
and supply chain. Then, step three is applying LLMs to things
like oncology and diagnosis in healthcare --
vertical-industry-specific functions. The excitement is more on
step three, but customers should initially focus on the first
two, where there's a lot of value.


Leveraging Automation to Drive Innovation (15:04)


All enterprises understand the importance of running lean and
using productivity gains to focus resources on high-value
activities. Krishna shares that IBM has freed up resources by
automating tasks, allowing for more R&D to develop innovative
products. He notes that overall employment has increased, but
more focus is on high-value activities that enhance growth rates.


Red Hat's Growth and Role in Hybrid Cloud (16:59)


Red Hat has had impressive growth since joining IBM. Krishna says
it has more than doubled its revenue since joining IBM in 2019,
now exceeding $6 billion. He explains that Red Hat is the leading
hybrid cloud platform, allowing for flexibility in deploying
workloads across data centers and cloud environments.


R&D as a Growth Engine (21:40)


R&D should focus on innovation and quickly bringing those
innovations to clients. R&D is about identifying unmet needs.
"Henry Ford was asked like, how did you think of the Model T? And
his answer was 'Look, if I had surveyed my customers, they would
have said they wanted a stronger horse or a longer whip, but the
automobile was the right answer.' Krishna mentions that quantum
computing is a key area of focus for IBM in terms of research and
development.


The Benefits of Strategic Partnerships (24:56)


IBM's strategic partnerships impact client value and IBM's
growth. Krishna notes that half of IBM's consulting team's
revenue now comes from these partnerships. He provides the
example of IBM helping Delta Airlines move to AWS, while
integrating Red Hat and other tools to enhance the client's
experience. Krishna talks about a new partnership with security
software provider Palo Alto Networks that's expected to generate
significant pipeline for IBM's consulting team.


Final Thoughts and Future Outlook (27:56)


Krishna encourages clients to assign technology the same
importance as other critical functions like finance and
marketing. "Do you give tech the same importance that you give
your CFO?" He reiterates the importance of technology and the
need for businesses to adapt to its rapid pace of change. Evans
closes by observing that in 2025, there's potential for the Cloud
Wars Top 10 companies to exceed $10 trillion in combined market
cap.


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