International Business Machines (NYSE:IBM) reported its third straight quarter of growth earlier this month, partly because of better performance in its services segments. Services account for around 60% of IBM's total revenue, so even modest growth can move the needle for the company.
IBM's ability to sign big, broad deals with major organizations is helping to drive growth in its services businesses. Significant recent deals include a $320 million pact with Denmark's KMD, a $750 million Whole of Government agreement with Australia, and a $500 million joint venture with Italian bank Banca Carige.
The spigot of deals is showing no signs of slowing down. IBM announced two more agreements today, one with U.S. healthcare company Anthem (NYSE:ANTM), and another with Bank of Ayudhya, a financial institution in Thailand. With IBM's mainframe business expected to decline in the second half of the year, new deals like this will help the company offset that lost revenue.
Expanding with Anthem
IBM is expanding its existing services agreement with Anthem, one of the largest U.S. health insurance companies. The value of this expansion wasn't disclosed, but the previous agreement struck in 2015 was worth about $500 million. That deal was itself an extension of the two companies' existing partnership.
Under the new deal, IBM will provide enterprise services for Anthem's mainframe systems, as well as data center server and storage infrastructure management services. The two companies will also work on an artificial-intelligence initiative aimed at providing an automated infrastructure for Anthem's customers, care providers, and employees.
IT automation is another area of focus. IBM and Anthem have created more than 130 bots as part of their 2015 agreement aimed at automating certain repetitive IT tasks. One example IBM gave was a bot that can identify when a server is close to full capacity and move workloads accordingly. That work will continue as part of the new agreement.
"Our latest agreement will accelerate Anthem's growth strategy and continued leadership as one of the largest healthcare insurance companies and provide a solid path to bringing new efficiencies in driving digital transformation," said IBM Global Technology Services SVP Martin Jetter.
A $140 million deal
Bank of Ayudhya, also known as Krungsri, is one of the largest banks in Thailand. The company has been working with IBM since a 2012 infrastructure-as-a-service agreement. The relationship expanded in 2017, when Krungsri and IBM's Cloud Garage completed a blockchain pilot that successfully made certain related-party transactions more efficient for the bank.
The relationship is now expanding further with a five-year, $140 million deal that will help Krungsri become a leading digital bank. IBM will provide managed services for mainframes, storage, servers, and ATMs. The goal is to allow the build-out of a cloud-ready infrastructure that can support the bank's digital ambitions.
"Our vision of becoming a digital banking and innovation leader requires Krungsri to have strong and stable technology partners. This extended IBM Services agreement ensures our technology platform is not only stable but can thrive through the introduction of new technologies such as AI, cloud, and blockchain as we build out the best digital bank in Thailand," said Krungsri CEO Noriaki Goto.
Helping IBM win these types of deals is the company's vast base of existing financial industry customers. Ninety-seven percent of the largest banks in the world rely on IBM products, according to the company's 2016 annual report, and 90% of all credit card transactions run through IBM mainframes. IBM is deeply entrenched in the banking industry, giving it a leg up when banks look to embrace new technologies.
Services are picking up
IBM signed 13 services deals worth more than $100 million in the second quarter, and its total signings grew 6% from the prior-year period. Around 30% of IBM's services backlog is now related to cloud computing. That backlog was down 1% in the second quarter, but it still sits at $116 billion.
IBM's greatest strengths are its deep relationships with longtime customers, its entrenched status in a variety of industries, and its broad portfolio of products, services, and technologies. Those strengths helped the company win the Anthem and Krungsri deals, and they'll help keep IBM's revenue growing as it continues its transformation.