Rivals eyeing IBM spinoff Kyndryl’s sub-$50 million clients, experts say
The company should, however, be careful about its sub-$50 million clients, which are on the radar of peers, they said.
“Kyndryl’s clients were briefly quite confused about its future performance and the uncertainty impacted some opportunities. There were instances of some customers not renewing contracts or going over to rivals, who were able to convince clients about their stability,” DD Mishra, senior director analyst at tech consultancy Gartner, said.
The initial hiccups have, however, faded and clients are increasingly confident about its prospects, he added. “The company’s confidence in its roadmap over the past six months is helping it on its way to win back clients. However, execution prowess will still determine its future growth and recovery,” Mishra said.
According to technology research and advisory firm ISG, around 200 IBM managed services awards will come up for renewal in the next 24 months. This represents about $34 billion in total contract value (TCV) across both IBM and Kyndryl.
Kyndryl has an integrated global practice for customers, combining managed services, advisory services, and implementation, where it competes with other global IT services providers like Accenture, Tata Consultancy Services (TCS), Infosys and Wipro.
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For a company that started its journey with $19 billion in revenue, about 90,000 employees and over 4,000 customers, the stakes are high and retaining customer trust is critical, analysts said.
A significant percentage of its employees and market share is from India.
The company has forged major technology solutions partnerships with Microsoft, SAP and VMware to offer greater flexibility to clients, something that was lacking under IBM.
Its access to a massive partner ecosystem due to its association with IBM has kept it on a strong footing.
“We see multiple instances where clients are looking to restructure existing contracts with IBM for Kyndryl. One of the biggest pain points of IBM’s clients was the lack of flexibility in managed services which Kyndryl can offer now. The recent Microsoft partnership is a great example,” said Mrinal Rai, principal analyst at ISG.
Kyndryl has also implemented many transitions through IBM Watson for clients over the years and these clients may not want to spend on transitioning to another service partner where Kyndryl already has strong expertise.
“More than 20% of IBM services deals are worth over $200 million in TCV where Kyndryl is well positioned to win back the clients when they come up for renewal. It is the contracts below $50 million TCV that are likely to see action from competition. It is an opportunity for Indian as well as global players, but Kyndryl is well positioned with its software partnerships,” Rai added.
Kyndryl itself is confident that it would be able to retain customers efficiently as it continues to broaden its partner ecosystem.
“Our customer retention rates and satisfaction scores are very high because our customers trust us, and rely on us to handle their most mission-critical IT infrastructure needs. As an independent company, we are using our freedom to broaden our ecosystem of strategic partners …all of which open up new sets of potential customers,” a company spokesperson said in response to ET’s queries about its pricing and contract negotiations with clients.
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