The Great Separation
In 2021, IBM made official its separation from its infrastructure services arm and Kyndryl was born. On his first visit to Cyprus, Davor Malojcic, Kyndryl’s Managing Director for Central Eastern Europe and the Eastern Mediterranean, speaks to GOLD about the new opportunities that this separation presents for the spinoff. He also explains why Kyndryl has been dubbed ‘the 100-year-old startup’.
The food is just amazing!” says Davor Malojcic. Resting on a straight-backed sofa in the refurbished lounge of the Hilton Nicosia, the Managing Director of Kyndryl for Central Eastern Europe and the Eastern Mediterranean recounts, with an ear-to-ear smile, his experience with Cypriot hospitality on this, his first visit to the island, which naturally includes copious amounts of delicious local cuisine.
In October 2020, technology behemoth IBM announced its intention to spin off its managed infrastructure services unit into an independent company and part with a considerable chunk of its revenue – the unit had been raking in some US$19 billion. The new company would be given the rather odd name Kyndryl and its mission would be to transition its large customer base to the latest ways of doing business.
But why the separation?
“Well, the first word that comes to mind is focus,” Malojcic says. Shortly after IBM’s intentions were made official, Kyndryl struck a historic deal with Microsoft to help accelerate the digitization of its customers’ legacy systems. “One might ask: couldn’t you have done it before? And the answer is yes, of course,” he says. “And, we’ve actually been partnering with third-party vendors. But the fact is, in the past, it was a little bit different due to our history, to joint sales and management structures.” With Kyndryl disengaged from the IBM brand, it is free to don a technology-agnostic hat, which, Malojcic argues, will make it faster, nimbler and a lot more cognizant of its clients’ issues. “And I assume that our culture will also change somewhat,” he adds.
One way or another, Malojcic has been with IBM his entire career. Before he started working for the tech giant, he was conducting exploration surveys for the London-based company Western Geophysical – the company builds software using IBM technology. In the mid-‘90s, he returned to his homeland, Croatia, and took up a position as project manager with IBM. He stayed loyal to the company for almost two decades, wearing five different hats and getting to know Big Blue’s culture inside and out.
Besides the Microsoft deal, Kyndryl has agreements in place with AWS, Google, SAP and VMware and is building a pipeline of more than US$1 billion of opportunities related to hyperscale. According to Malojcic, the company is also looking at many associated and lucrative opportunities in the AI and data space, as well as in cybersecurity, which goes together with the cloud much like Cypriot hospitality and truckloads of food. “You will also see us much more in the containerisation space,” he says. If virtualisation is the backbone of cloud services, then containerisation is the backbone of application services: it allows companies to deploy several applications on the same operating system on one virtual machine.
Kyndryl’s first full financial results for 2021 showed a 5% dip in revenues, which might allude to some of the challenges the company has faced in trying to manoeuvre in such a congested space, but Malojcic prefers to focus on the fact that it has been growing 27% year-on-year in newly signed contracts. “It is also a fact that by the end of March, the company had US$2.1 billion in cash, which is a very good position. And the speed at which we are building alliances and partnerships gives us confidence that we are on the right track and our strategy is working,” he says.
Kyndryl has entered the market with a large base of existing contracts: 4,000 companies, including 75 of the Fortune 100, spanning over 60 countries. Of course, the vast majority operate in finance and highly regulated markets, the public sector and the telco space. So, how does it plan to acquire customers outside its traditional base? “Look, honestly, you’re right: most of our customers come from those spaces. But we are also present in retail and manufacturing. So, it’s hard for me to pinpoint our actual traditional customer base. The fact is that we are going to expand. And, these new offerings and new partnerships we have been mentioning are definitely going to be helpful,” he says. Having some 13,000 employees in Central and Eastern Europe certainly gives Kyndryl a massive edge here, as it can muscle through their highly congested industry, with hyperscalers and numerous smaller, cloud-native companies offering the same services it seeks to supply. It is also investing heavily in patenting innovation, which will be a great sales hook for acquiring new clients. “But I believe our biggest asset is our long-lasting relationship with those 4,000 clients,” he says.
So, what’s with the name “Kyndryl”? An IBM press release explains that “Kyn” derives from the word kinship and “Dryl” from the word tendril. To my ears, Kinship Tendryl sounds more like a late ‘60s rock band than a managed infrastructure services company but the name and its spelling are certainly in line with how today’s startups approach branding. Kyndryl has consequently been described as a “startup with a century-old history” and Malojcic explains that the description alludes to the principles and culture of the startup model that Kyndryl has incorporated. Since the divorce from Big Blue, the company has adopted a flat hierarchy system that allows information to flow seamlessly between the various departments. Decision-making has improved, he says, and people feel more empowered. And, of course, Kyndryl has adopted a growth mindset similar to that of startups: bet big, win big.
“All these are ingredients that place Kyndryl where our customers and employees want it to be: a world leader in infrastructure IT services,” he says.