Kyndryl, the managed infrastructure services business spun out of IBM in 2021, earlier this month repeated its somewhat glum prediction that its revenue will shrink by two to four percent for its fiscal 2025, the year ending March 31., which saw constant-currency revenue slippage of eight percent and seven percent, respectively. But it's consistent with the previous four years, in which
When the corporation was spun out of IBM, it inherited Big Blue's outsourcing work. Kyndryl thus has been fulfilling multi-year managed service contracts for various customers, yet many of these IT deals are either barely profitable or unprofitable. We're told Kyndryl is just taking from managed service accounts and counting that as consulting work.
"They call it co-design," Noah explained."They say, 'we now co-design with our customers,' which means they just shift the risk." "Maybe if you'd be able to provide some higher-level commentary what you're seeing for growth between new logos and existing customers and then secondly, maybe how those margins on those consult signings compared to managed services and some of the other work," Sellhausen queried.
"Once it's hosted on Amazon, they're not getting the hosting fees anymore. So they're just converting the business from outsourcing. They've got this transactional consulting business that they're winding up, but they're losing that annuity, that five-year outsourcing deal. And that's what's going on."
Another complication is Kyndryl's mainframe business, which came from IBM."Nobody has as many mainframes as Kyndryl does," said Noah."That's probably the only thing we're big at." Noah disputes the claims about customer adoption of Bridge."They keep saying they have thousands of accounts using it," we're told."They don't. They're overselling Bridge and they're creating a technical debt that's enormous. It's all bespoke. They're tweaking the heck out of it. They're trying to get customers pregnant on it. And then customers can't get off. Kyndryl needs it so they can do a single-pane delivery service.