Bloomberg Audio Studios, podcasts, radio news. Alvin Krishna joins us, it is a joy to have you on our network, Ovin and look, speed is the name of the game. This deale has completed swiftly. And indeed Confluent is all about speed and data analysis. How is that important in this age of AI?
Yeah, so, Karlin, it's great to be here with you and on Bloomberg. So just look at what Confluence does. Moving data in real time so that it gets available both for the enterprise for analytics, but more importantly for AI agents and doing that in a way that is the most capable product in the world. Is why it
is so exciting to get it done. And your point on speed, I think the regulatory environment is definitely friendlier where we got this done in just under four months, whereas it used to take a lot longer a few years back.
If regulatory environment is friendlier, should we be doing more of it? Should there be more m and a particularly with some beaten up overall valuations of software companies At the moment.
I'll just say, what's the space, Oh, what's this space?
Okay, but where would you want to add on in this moment? I mean what would make sense to be adding to your portfolio.
So we are very focused hybrid cloud and AI and the intersection. So if you look at Confluent, some of the data is in cloud, some of the data as in SaaS property, some of the data is on premise. An AI agent needs to get hold of it wherever. So that's the hybrid piece combined with the AI piece. Our speet spot is going to be hybrid cloud, AI automation are the areas where we are very very focused on M and A activities as well as organic development.
If you look at what we have done around are what's the next product products, what we've done around mainframe modernization. These are all things that we have built organically, but then we supplement it with targeted ACQUA positions where the multiple makes sense, where it fits our strategy, and where we can normally increase the growth rate of the target property, which we certainly hope to do in the Confluent case.
Let's talk about what's at X a little bit. Let's well more at partnerships, because of course that's what was announced A little bit more of a deeper partnership within video yesterday helped your stop. We're seeing expanding collaboration. Again, this is about faster data analysis, but cheaper, more more effective. How does that help you seal more deals?
So in that one, actually the work we're doing together with Nvidia was a five times speed up, so five times, not five percent, not a little amount, but five times. So there we began to leverage the Nvidia GPUs together with some of their CUDF or software, combining you with our WHATSONEX to our data. And the example we used was our client Nesle, where together we managed to get
that speed up across their massive amounts of data. And that really is important case combining some of the technologies we work on also an open source with the Presta Presto data engine Nvidia and the example at Nesle. But then we're very excited we're going to do more work on that and then take it into the market and take it out to hundreds of clients.
From there, you're offering these tools.
We're also helping companies like Nesle just embed AI make sure they're using in the most effective manner possible. When your consultants go in, how much does a Nesle want to use your offerings? But those of anthropic of open AI, of others. How much do you see that as a competitive force or a competitive threat.
Look, our goal has always been that we want to help our clients integrate the best capabilities from where they come. And the word integration comes in here because to some extent be a model agnostic. We believe that our clients are going to use the frontier models from all three or four of the main providers, They're going to use open source models, and they're also going to use models from us, though we tend to make much smaller models
helping them really get value. And I really believe twenty twenty six is the year when enterprises are going to be focused and obsessive on ROI or what they're doing on AI. And so if you take Nestley, how do you take cost out of procurement? How do you take costs out of HR, the finance function, procurement, all of
these things? And that's where our consultants and our technologies come together to help them do that, using both technologies from IBM, but also in the case of Nestlayer, from many other of the partners and the software vendors that they use.
So do you think the investor base and just more broadly your customers as well, see that AI is in a.
Double edged sword forew.
But actually that competitive threat that sunk the shares so much on the twenty third was a misunderstanding of what anthrobert could do with COBYL.
I'm going to be much more straightforward.
I believe that the investors and parts of the media misunderstood what that blog said and did. I actually am convinced AI is the tailwind for us. It's not a mixed half headwind half tail win. AI is a tailwind for us in terms of how our technology will get adopted.
In terms of what we do with our clients.
And by the way, we had put our tools to convert and modernize scoball two and a half years ago, so there was no new news in that blog. But they certainly can get a lot of.
Attention you talk, though, what also gets attention is being able to become more productive take costs out of the business using AI. A lot of people see that as the costs of people. We're seeing Block remove forty percent of their employee base. You hear about tire headline after headline is that what's going to happen to the labor force?
Haven't so I'll take ourselves.
We have been very public that we have taken four and a half billion dollars out of the enterprise with the mixture of AI and automation. That's a hard number. Now over three billion of that got reinvested into the business in more R and D, in more sales, in more marketing, in more delivery, in more what we would call client engineering, where clients love the fact that our engine can work with them to help them solve problems. So there is reshaping of the workforce, but there isn't
a net decrease. And to put our money where our mouth is, we will do two to three times as much entry level meaning college hires this year as we did last year.
Wow.
So you're still seeing that demand for that level of technical prowess coming straight out of University of in But I mean you have said in the past, look you see job displacement, your term and phrase of five to ten percent. Is that done now at IBM?
Do you think?
I think that we are probably halfway down that total journey and I still stick to my total numbers in that range, and I think we're halfway through that journey. But our total employment has remained roughly stable, So to the point that I make about how there will be more opportunities, but you've got to be willing to obscale yourself and recrail yourself.
What's not stable is the geopolitical environment of in How is that affecting you? How is that affecting the consulting part of the business in particular.
Look, let's acknowledge there's a lot of pain and disruption that's going on in the Middle East right now. I think we should feel a lot of sympathy for our people.
We have thousands of employees in that region.
The vast majority I think are reasonably stable and are getting their work done. There are about twenty percent of the people in the Middle East who are disrupted, who are not able to get to their clients, who are not able to get the work done.
I think within a quarter is going to.
Be very, very minor, because most of this work is much more long cycle than short cycle, as in days or weeks. If this goes on for many more months, then I do think that we will take a slight headwind. But in the end of the day, our consulting business in the Middle East is only a few single digit percentages of our total business, So it won't impact IBM's top line and bottom line, but it is going to be impactful to some of our people and some of our clients who are.
In the region.
Thanks for that new once and I'm interested just on the nuance of total sales growth in consulting. Will that come back to growth do you think in the near term?
I think when I was talking in January and also in October, I felt that the second half of this year will be a lot better on consulting growth. Then right now we kind of said that we could see it inflection coming, where the first half of last year was negative, the second half of the year turned kind
of flatish. I think that you'll see continued improvement in that inflection to maybe slight growth in the first part of the year, but true growth, I think is still out in the second half of the year.
True growth, true excitement about quantum always seems to be in the second half of the decade or the millennium. But you really are putting your money where your mouth is when it comes to quantum computing becoming you know, really tangibly useful by the end of the decade. You want to have a fault tolerant quantum supercomputer by twenty twenty nine. How on track are we there? How on track are we to integrate in quantum within the day Center.
So in all three of your questions, Caroline, I think we are completely on track with what p had said. We said that we're going to have better cubits, better quantum processes, and our processor at the end of last year is now being used. Whether it's for medical work at Cleveland Clinic, whether it's for bond pricing at HSBC. Those are real use cases that are coming out. We expect to see error correction between this year and next year demonstrated and out.
There, so that'll be another big plus.
We're investing very heavily in how we bring together our normal computers and quantum computers. We put out a roadmap for quantum centric supercomputing that has gotten a lot of attention or partnerships with academia, with institutions.
I'm so excited.
About what we're doing in Illinois, but also at RPI with MIT, and in other places we have done work with the National Labs. This is all tells us how tangible it is, and you can feel it. People are not realizing this is not science fiction. This is not engineering to get through the next two or three years.
I think I can feel your energy today. Congratulations on the completion the Confluent deal and we are staying tuned from any more m and a come back on when it happens IBM, CEO OF and Christna is great speaking with you.