At this point, IBM's (NYSE:IBM) struggles have been well documented. As CEO Ginni Rometty and team continue the company's transition from old-school technologies such as hardware and PC-related solutions -- IBM's former bread and butter -- anxious investors are quickly running out of patience. One look at IBM's stock price, which is hovering at or near 52-week lows, speaks volumes.
The problem isn't that IBM is working without a net -- it has a definitive plan to turn the tide, and management is trying desperately to kick-start its "strategic imperative" business units. These include cloud, Big Data, business intelligence (BI), security, and mobile solutions, all high-growth markets with a world of upside. But similar to Microsoft (NASDAQ:MSFT), IBM was slow to initiate its transition, and is playing catch up. A recently announced solution could help, and it fits perfectly in IBM's strategic imperatives wheelhouse. However, Big Blue's new Verse solution also puts it directly in Microsoft's sights. Again.
Welcome to the world of Verse
At first glance, rolling out a new email service in this day and age might seem a bit underwhelming. After all, most everyone who wants or needs an enterprise-based email solution already has one. But it's worth looking under the hood of IBM's new Verse, the "email that understands you," because it could light a fire under what is already a surprisingly large user base.
Verse is capable of incorporating business communications with social media, intuitively organizes users' incoming messages by "learning" which are of most interest based on prior usage, and then prioritizes inbound messages across multiple devices, all while employing enterprise-level security functions. In other words, Verse incorporates each of IBM's strategic imperatives: it is cloud-based, uses learning algorithms similar to those of the infamous Jeopardy-winning Watson supercomputer, has built-in BI intuitive capabilities, is mobile-ready, and comes with stringent data security features.
As it relates to IBM's key initiatives, perhaps none is more important than delivering solutions like Verse via the cloud. IBM and Microsoft both "get it" when it comes to successfully driving cloud revenue. Cloud hosting, an area of focus for many existing cloud service providers, is not where substantial revenue growth will come from as the market expands. Cloud-based software solutions, like Microsoft's Office 365, among others, are where the real opportunities lie. Now you can add Verse to the list.
It might come as a surprise to some, but IBM is hardly bringing up the rear in cloud revenue, though you wouldn't guess it by investors' angst of late. Though Microsoft's $4.5 billion annual revenue run rate is near the top of the cloud heap, IBM's $3.1 billion is nothing to sneeze at -- and that amount is expected to jump to about $7 billion next year, of which $4 billion will be new cloud sales. How? Introducing solutions such as Verse.
IBM isn't new to enterprise communications solutions, either. Already, the company boasts over 25,000 business customers around the world that use its Notes mail service, and over 50,000 communicate via its social platform, Connections. IBM has no interest in becoming a leading provider of personal email services, at least for now, and that's not what Verse is designed for. Verse is a means of collecting, collating, intuitively analyzing, and ultimately delivering a better enterprise communications experience.
The elephant in the room
It's no secret that Microsoft's Office 365 in general, and its Outlook email solution in particular, rule both the personal and business communication roost. Microsoft CEO Satya Nadella is pushing hard to shift solutions to the cloud, and that includes commercial Office 365. Last quarter's 5% improvement in Microsoft's commercial products and services revenue was primarily due to enterprise customers shifting to the cloud. And with Nadella's plans to open the app development doors across devices and operating systems, in addition to forming strategic partnerships, Office revenues aren't likely to slow anytime soon.
An IBM social solutions exec made it clear Verse wasn't designed to be the usual email service in a different package, saying"We came at this from the perspective that this is about changing the game, not just incremental improvements in email." By delivering a solution that incorporates the cloud, BI, intuitive analytics, mobile, and enterprise security, Verse could make the kind of impact IBMers have been clamoring for. Is Verse the end-all, cure-all to IBM's woes? No, but it's another step in the right direction.