IBM Spinoff Kyndryl Forms Global Alliance with Microsoft

Marking its first strategic alliance since becoming a standalone company, IBM spinoff Kyndryl has formed a global partnership with Microsoft. The pact, announced by the two companies on Friday, makes Microsoft for now the only Kyndryl Premier Global Alliance partner.

Kyndryl, which reported revenues of $19.1 billion last year, calls itself the largest provider of managed infrastructure and implementation services. Its revenues are more than double those of its largest competitor, DXC, according to Kyndryl’s investor presentation. But Kyndryl’s revenues are trending to decline 2.6% this year, and analysts don’t expect to see growth for the company until 2025.

The partnership with Microsoft comes just we week after IBM finalized the divestiture of its managed services business, now Kyndryl. On Nov. 4, Kyndryl began trading under the “KD” ticker on the New York Stock Exchange. Kyndryl shares have declined over 16% since last week’s spinoff, through increased slightly on Thursday.

Partnerships

One benefit of Kyndryl as a provider of managed services decoupled from IBM, is it can structure partnerships more freely. An alliance of Kyndryl and Microsoft is hardly a surprise. IBM and its managed services business have been partners for over 30 years. Kyndryl was already a Microsoft Gold Partner. Now the two companies are committing to a “long-term” partnership to expand into new markets.

The companies said they will jointly build modern solutions on Microsoft’s cloud and on expanding hybrid cloud migration. Kyndryl and Microsoft anticipate that the alliance will create billions of dollars in incremental revenues for both companies.

Cloud migration, data, security and intelligent automation are among the opportunities the two companies are targeting, according to Kyndryl chairman and CEO Martin Schroeter. Specifically, Kyndryl and Microsoft will focus on data modernization and governance, AI-based implementation within specific industry verticals, resiliency and migration of critical workloads to the cloud.

Kyndryl’s Martin Schroeter

“In this landmark relationship with Microsoft, Kyndryl is matching our deep expertise in mission-critical IT systems with the benefits of Microsoft Cloud to be at the heart of progress for our global customers,” Schroeter said.

“As Kyndryl’s only premiere global alliance partner, with the power of the Microsoft Cloud we will help customers across every industry manage and modernize their business for the era ahead,” saidMicrosoft chairman and CEO Satya Nadella.

Modern Workplace and SAP Migration

The two companies were already promoting their work together. At last week’s Microsoft Ignite virtual event, Kyndryl held sessions discussing its modern workplace collaboration and SAP migration practices. Tony Savoy, who oversees the partnership between the two companies, noted that IBM spinoff Kyndryl has 90,000 employees.

“What we do best in the industry is we design, build, manage and modernize the world’s most mission critical technology systems, the things that you and I depend on every single day,” Savoy said at Microsoft Ignite. Kyndryl has “helped many customers move their SAP mission critical workloads to Microsoft Azure,” Savoy added.

Kyndryl has 1,100 Azure-certified architects, workplace architect Ron Xavier said during a Microsoft Ignite session.  Also, Kyndryl has 4,700 experts globally, 40 delivery centers and has professionals who speak 55 languages, he said. “We have unmatched global scale.”