Since International Business Machines (NYSE: IBM) began its latest transformation, the tech company has been building up its capabilities in fast-growing areas. These areas include cloud computing, analytics, artificial intelligence, security, and blockchain, to name a few.
The breadth of what IBM can offer its clients and the company's global reach are two of IBM's key advantages, putting it in the running for big contracts that span multiple technologies. A recent $320 million deal with Denmark's KMD is a prime example. IBM has announced a handful of additional international deals this month, made possible by the company's investments over the past few years.
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A 40-year partnership
The Australian federal government announced on July 5 that it had signed a five-year, AU$1 billion deal with IBM. That translates into about $750 million at the current exchange rate. This is a Whole of Government agreement, meaning that all government agencies will have access to the technologies IBM is providing. It's also the highest-value contract ever signed by the Australian Government.
IBM has a 40-year relationship with the Australian Government, and it has existing deals with some government agencies. This new deal covers IBM hardware, software, cloud-based solutions, and artificial intelligence, as well as initiatives in quantum computing, cybersecurity, and blockchain. The main goal is to digitize government services by introducing more self-service and automation.
The Australian Government expects to realize significant cost savings over the course of the five-year agreement, driven by new efficiencies enabled by IBM's solutions. "For agencies it will be more simple and cost efficient to engage with IBM, while our technologies make it possible for government to deliver smarter, integrated, always-on digital services for citizen," said David La Rose, managing director of IBM Australia and New Zealand.
Signing deals in Europe
Also on July 5, IBM announced the launch of Dock, a $500 million joint venture with Italian bank Banca Carige. Dock's purpose is to "improve the competitiveness of Carige's more than 500 branches and over 1 million clients" with artificial intelligence, big data, and analytics.
At first, Dock will be focused on Banca Carige. The bank expects meaningful cost reductions as it shifts to a hybrid infrastructure, with some workloads moving to the cloud. The bank also plans to automate some branch processes, which could improve service and introduce additional cost savings.
But Dock's potential goes beyond a single bank. In the long run, IBM is positioning Dock "to lead the region's banking sector toward a future full of new professional skills and opportunities such as digital banking and Cloud storage."
This joint venture wasn't the only deal IBM signed in Europe this month. The company announced on July 3 that six large European companies that already use IBM Cloud had signed agreements involving artificial intelligence, analytics and blockchain. "Enterprises across Europe are gravitating to the IBM Cloud because it helps them modernize their existing infrastructures by gaining access to exciting technologies like AI, blockchain, IoT, analytics and more," said Sebastian Krause, general manager of IBM Cloud Europe.
Koopman Logistics in the Netherlands has implemented IBM Blockchain technology to track its supply chain and digitize records. Italian publisher Gruppo 24 Ore is using IBM Watson to allow tax professionals to search through 1.5 million documents related to the Italian tax code. French bank Credit Mutuel plans to deploy IBM Watson virtual assistants across all of its business lines. Spain's Teckel Medical is running its AI symptom checker on the IBM cloud. The UK's RS Components launched an IBM Cloud-powered peer-to-peer marketplace. And German lighting solutions company Osram AG has opted for a hybrid cloud solution from IBM.
Financial information wasn't disclosed, but it's safe to say that these deals are much smaller than the Dock joint venture and the Australian Government agreement.
Momentum going into earnings
IBM is scheduled to report its second-quarter results on July 18. Investors will be expecting revenue growth — the average analyst estimate calls for a 3.6% increase year over year. The company's first-quarter results were somewhat disappointing, with revenue adjusted for currency roughly flat.
IBM's ability to win large deals involving the hottest technologies should give investors confidence that the company is on the right track. IBM will face a revenue headwind later this year as it laps the launch of its latest mainframe system, but new business could be enough to offset that decline.
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