Agree on these points. Also, across the dozens of businesses fully owned by Berkshire Hathaway, he has unique insight into the tech vendors that those businesses rely on. The rumor is that he polled a significant portion of the managers of these businesses which helped to inform his decision that IBM would be around for a long, long time.
This is funny because IBM is the best possible example of a sticky tech company. The company was originally founded in 1911 and made punch-card-operated tabulating machines.
Indeed, but I don't people are as locked in their services as they used to be. They've been resiliant, but it isn't like the 80s or 90s when a decision to buy IBM was a 20 year commitment.
Now the decision to buy IBM is more around software and services. Outsourcing contracts have long lives, but software and implementation less so.
This is where the Growth investor looks at something different than the Value investor. The growth investor says, "They're technologically irrelevant. They're still hawking Lotus Notes!" [0] The value investor says, "Their PE is 11, and they're buying back every share in sight." [1]
I'm not overly familiar with IBM Global Services, but from the contact I've had with them in the enterprise world I think you're undervaluing the stickiness substantially. For context, if I'm looking at the right numbers, IBM has ~USD$80B in revenue with ~USD$60B from services?
IBM realized a while ago that the actual machines were replaceable, but the expertise needed to do integration on the scale they operate at less so. And given the poor success rate of major upgrade/integration projects, I expect "hire IBM" is still a fairly safe decision at the C/VP level. Whether legacy enterprises* are running mainframe or fail-tolerant distributed infrastructures, most of them are more than happy to throw money at someone to reliably turn the crank and keep them working.
Edit Side note: Does Amazon actually not have a services org to build on top of AWS? Seems like they could create one just from IBM layoffs and start helping some of these sorts of customers migrate to AWS.
*Excludes the vast majority of companies mentioned on HN
Considering they do $60B worth of business in services, and given the poor success rate of major upgrade/integration projects, I'd say IBM is one of the culprits here.
I'm a BH investor, and frankly I don't like them going into this space.
Amazon has pop-up lofts (though, the one I've seen was in a very fixed looking building) where you can consult with Architects or take various technical workshops.
