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IBM appoints Arvind Krishna as CEO, and he has a big challenge ahead

IBM announced on Thursday that they appointed a new CEO, Arvind Krishna, an engineer from the Indian Institute of Technology and the University of Illinois, with more than 15 patents in his name. He will lead the company starting from April.

Krishna will replace the current CEO, Ginni Rometty, who spent 8 years at the head of the technology company in which sales fell by around 25% and their revenues plummeted 28%.

With the departure of Rometty, who has been in the company for almost 40 years, the number of female directors in charge of Fortune 500 companies will be reduced to 32.

It reminds how Satya Nadella was brought to the top from the head of cloud business

The appointment of Krishna, who heads the company’s cognitive and cloud software division, recalls when Microsoft appointed its cloud boss, Satya Nadella, to lead the company in 2014.

The commitment to the cloud helped boost the growth at Microsoft and exceed $1 billion in market value, 10 times that of IBM. Krishna’s main challenge will be to face the tech giants that have established themselves in this sector.

IBM has a long way to go with Amazon and Microsoft leading the cloud

In the cloud computing world, a model in which companies rent instead of buying computing power, IBM is far behind Amazon and Microsoft.

The pressure is increased with giants such as Alphabet and Oracle investing in strengthening their work teams in the cloud in an attempt to lead the competition.

This is the reason why the company plummets, since 70% of its business model is based on the sales of hardware, software and business services, areas in which the decline in revenue is 5% to 10% per year.

The Red Hat acquisition: A game changer for Krishna

The new CEO of IBM, Arvind Krishna, was the head behind the largest operation in the history of technology: In July last year, the company acquired Red Hat for $34 billion in an effort to shore up its cloud services.

With the change in direction, Jim Whitehurst, CEO of Red Hat, will become the president of IBM.

The incorporation of the Red Hat leader also means a way to leverage a much larger community of developers and attractive more people to innovate on their own technology to stay in competition with Amazon and Microsoft, according to the Financial Times.

When people call giant, they mean a workforce of 350,000 people

However, Krishna has another challenge which Rometty also inherited in 2012: To revitalize a workforce of 350,000 people and deal with units that do not generate as much money as they used to.

IBM’s information technology outsourcing business, which was once one of its most profitable sectors, has also slowed down, according to analysts.