IBM Flourishing with New Business Models: IBM-Maersk Joint Venture

IBM Maersk Partnership

International business machines corporation (IBM) is an American multinational technology company headquartered in the United States. It has operations in around 170 countries. The company manufactures and markets computer hardware, middleware, and software and also provides hosting and consulting services in various areas from mainframe computers to nanotechnology.

Now it is undergoing a 360-degree change in its business model. The Company has started understanding that the falling demand for software-hardware services, is being replaced by cloud computing and artificial intelligence. As such, the company has started focusing on the latter, in addition blockchain technology. For this reason, we classify it as one of our large-cap blockchain stocks. IBM experienced a plummet in its revenue over the last few years, but it has made it a point to keep consistent and increasing dividend outflows to its shareholders.

Let us dive into what the company is doing right now and how it is about to flourish in the coming future, withstanding its rivals.

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IBM: Second Quarter 2018 Results Analysis

IBM’s Technology Services and Cloud Platforms Segment contributed 43% of its revenue. Over the years from 2015 YTD, this business segment has been slightly more profitable than other segments. Its gross margin has fallen only by 2.8% from 2015 YTD.

The second segment to consider is IBM Cognitive Solutions Division and this has contributed to approximately 23% of the total overall revenue collected in Q2’18. This segment has been badly beaten over years. In 2015, Cognitive Solutions had a whopping profit margin of 85.7%. This number reduced to 82.2% in 2016, followed by 79% in 2017. And now, its gross margin has landed to a 77.7%. So It can be clearly seen that once the most profitable segment, is now morphing to the least position over the years.

The third largest business unit of IBM to be taken into account is IBM’s Global Business Services which contributed 21% of the Total Revenue for the quarter. Its Gross Margin has decreased from 29.7% in Q2’15 to 25.9% in Q2’18.

The positive side of the Results, mentioned by IBM’s CFO Kavanaugh, is that IBM’s selected business which it quotes as-a-service contributed to approximately 60% of IBM revenue on a yearly basis. This might be their trump card in the coming years.

Also, IBM’s Cloud Operations Segment contributed 23.5 percent of IBM’s total revenue in Q2’18. This segment has been burgeoning @20% TTM. This might act as a catalyst and might become their trump card henceforth.

IBM & Maersk collaborate for a Blockchain-Shipping Deal

Global Scenario Background

Supply chains play a vital role in the Global economy. Each year, 16 trillion dollars worth of goods travel cross each year and more than 80% of those goods are carried by the ocean shipping industry. Transmitting goods from one point to another involves many parties who are separate but dependent upon each other.

Current Problems

Source: Maersk Official Website

Importers and exporters, freight forwarders, Customs brokers, ports and terminals, ocean carriers, customs and government authorities, inland transportation providers, financial institutions, and others, are some of the parties involved in the whole transaction. There is an inconsistent flow of information observed across these organizational networks which leads to an inefficient flow of goods.

Many of the processes are manually done which have time-consuming and too often paper-based transactions. The shipments are often delayed because of a delay in paperwork. It also becomes difficult in tracking the goods in transit.

Solution to the Problems

If there is a reduction in the barriers within International supply chains, global trade could rise by up to 15%, estimates the World Economic Forum(WEF). The WEF also adds that this will boost the economy and create ample job opportunities.

Joint Venture of IBM and Maersk

Started in 2016 when both this company initiated with the goal of digitizing the Global supply chain. They began by analyzing the current challenges and specific areas of complexity, by taking a case study of the shipment of Avogadro’s moving from Kenya to the Netherlands. More than 100 individuals, 30 different entities, and over 200 separate exchanges of information documentation. The majority of the process where completely manual, paper-based and extremely time eating.

The underlying platform that upholds the whole process:

Blockchain Technology is the underlying technology that supports this process.

But this isn’t IBM’s first foray into the blockchain technology space. Earlier this year, IBM’s blockchain platform successfully completed it’s first trade on a joint venture between several high profile banks. The platform will follow the flow of cargo from source to destination as empty containers are taken and transported from a warehouse, and as they are filled with the material to be transported and then it is taken to the port. Every action is recorded on the open ledger of blockchain technology so that everyone involved in the same network can be able to view and understand the ongoing processes of the shipment. It establishes a secure and trustworthy system. Every location of the container can be easily tracked with this platform. The whole version of the transaction will be recorded as an original, immutable entity stating how the container was transported from point A to point B.

This will also showcase even a minor alteration done to the document that has been certified by a government agency, which will help address counterfeiting.

The IBM-Maersk Joint Venture is hence with an expectation of the growth upon the Shipping Industry by displaying transparency, thereby building trust among participants and leading to a further up-shoot in the Overall Global Economy.

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