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Yahoo Finance Presents: IBM CEO Arvind Krishna

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On this episode of Yahoo Finance Presents, IBM CEO Arvind Krishna sits down with Yahoo Finance's Alexis Christoforous to discuss IBM's global annual conference, Think, where the company has announced new advancements in AI, cloud, and quantum computing. He also discusses the global chip shortage and IBM's new 2 nanometer chips, IBM employees returning to the office, and how IBM is tackling the COVID-19 Pandemic.

Video Transcript

[MUSIC PLAYING]

ALEXIS CHRISTOFOROUS: Hello, everyone. I'm Alexis Christoforous. And joining me for this edition of "Yahoo Finance Presents" is Arvind Krishna, CEO of IBM. Arvind, it's great to see you again. Thanks so much for joining me.

ARVIND KRISHNA: Alexis, it's a pleasure to be here with you.

ALEXIS CHRISTOFOROUS: I'd like to begin with some news that IBM is making at its annual Think conference. You've announced several initiatives regarding artificial intelligence and hybrid cloud-- two areas I know you are very committed to and invested heavily in. And in the past, you and I have talked about how the pandemic has really hastened companies' ability to go digital by at least five years. So tell us how some of these new products are helping your clients do that.

ARVIND KRISHNA: So, Alexis, when we think about it, I believe that 10 years of digital acceleration has come forward into the first two-- meaning 2020 and 2021. So we are going to look at this moment in history and perhaps call it as the moment when the world came into digital all the way. We have all embraced it.

We can think of the examples, whether it's telemedicine, whether it's retail on a corner restaurant-- the examples are all, all around us. So as we look upon that, there's a huge issue around unlocking value from all the data the enterprise collects.

And so the first set of advancements we have made are around artificial intelligence that can really automate that whole task of unlocking value from the data, collecting the data, moving the data. I get geeky for a moment when we talk about technologies like auto SQL which come inside our products. But they really help our clients unlock the value of data, whether the data resides on one public cloud, or another public cloud, or perhaps on a server in their own data center.

And that's an amazing set of technologies that our researchers have brought to market. Then it's also really important to worry about, how do you begin to really migrate the applications? They may be sitting someplace they need to go to a public cloud, and technologies like mono to micro, as well as what we're doing around cloud foundry, what we're doing around containers-- those all come to life to really help automate and really make it almost touchless in terms of how we modernize these applications. All of this together really, I think, brings the hybrid cloud to life.

ALEXIS CHRISTOFOROUS: And part of bringing that to life is having some leading brands jump on board with you. I know that you've got a partnership with CVS Health. They're using your Watson Assistant when it comes to the rollout of their vaccination program. Can you briefly tell us about that partnership.

ARVIND KRISHNA: Sure, Alexis. So Karen Lynch will be joining me, actually, on stage. Karen is the CEO of CVS Health. When they began to look at COVID-19 vaccines back in December, the thought of giving tens of millions of vaccines over the year either meant they would have had to dramatically hire more people into their call centers to take care of all the people calling and asking, am I eligible, what's the rule in this state, can I take it?

Instead, we worked with them and within three weeks, put in place a Watson conversational agent which actually could go handle about 2/3 of the calls. So you think about that-- in health care, in regulated industries answering really precise questions and being able to handle them with an AI agent, that, I think, is the power of enterprise AI and the power of what Watson can bring to them. As Karen and I joke-- how often do you get a technology that delights people and saves costs both at the same time?

ALEXIS CHRISTOFOROUS: Yeah, sounds like a winning combination to me. I know another area that you've gone all-in on is quantum computing. You've introduced something called Qiskit One Time to make it faster and easier for developers to use quantum software. For those of us who don't know, what is the potential in this form of computing? And can you give us any real world use cases for it?

ARVIND KRISHNA: Sure. Alexis, I'll begin with the real world use case and then go into what's the potential for it in terms of benefits to the world. So think about electric cars. They need batteries. The battery has materials that are lithium hydride.

We actually cannot really model those materials at a battery scale on to super computers. It's impossible. The problem is too big. Quantum computers will be able to do that. That's one immediate advantage.

Then think about lightweight alloys maybe for aircraft. Think about materials in general-- the world around us is full of materials. Can we produce them with less pollution? So those are examples other than in the financial sector where price, and arbitrage, and simulations will also come into play. So given those use cases then, how big is that market?

And that market we measure is in the hundreds of billions of dollars for the value back to our clients before the end of this decade. And then you say, if you come back into the middle of the decade, that's where we believe this will become commercial, that's going to begin to solve really big problems. And so when we look upon all that quantum can do, which today's super computers absolutely cannot do, we get really excited by the ability to go solve these problems and bring them to bear with our clients.

However, quantum is very different than normal computers. The way that you program it is completely different. Qiskit, for our quantum software kit, really allows developers to get access to the underlying power. And what we just announced this week is 120 times faster than what we had before. So we can see that there's advances in software, there's advances in hardware, and they go together to make life really easy for developers so they can take advantage of all this incredible technology captured in quantum computers.

ALEXIS CHRISTOFOROUS: That sounds really exciting, Arvind. And I know that IBM has found a way to return to growth, but it hasn't been consistent. What's it going to take to have sustainable growth at IBM?

ARVIND KRISHNA: Well, I think that if you look at the last quarter, Alexis, it reflects a lot of what we've been working on for 12 months. We focus in on just hybrid car and AI. That implies that we spin out parts that are not that relevant to it. So we are spinning out Kyndryl, our managed infrastructure services business.

We've increased our investment, both organically in R&D and go to market, as well as in acquisitions. We have done 11 since last April. And fourth, we are investing in our ecosystem of partners-- really trying to create a win-win-win combination. You saw some early results from all that in the first quarter.

We'll keep seeing increasing results as we go down this year, and even more into 2022. And as you get to '22 and beyond, that's where we'll begin to see the sustainable return to mid-single-digit growth. That's why we're confident about it. But we got to keep going down the path and keep executing on the strategy we've laid out.

ALEXIS CHRISTOFOROUS: Arvind, as you know, there is a serious global chip shortage going on right now impacting dozens of industries, including the auto industry. And I know that IBM recently came out with a very powerful 2-nanometer chip. Is that going to help in any way alleviate the shortage, do you think, going forward? And what do we as a country need to do-- what does big tech need to do to lessen its reliance on foreign-made, high end chips?

ARVIND KRISHNA: It'll absolutely alleviate the shortage. But let me also caution-- it takes a year or two of investment to get there. In order to do that, I strongly urge our government to fund the Chips Act as well as the National Semiconductor Technology Center. Those monies and that investment will allow manufacturers in the United States to take advantage of technologies like the 2-nanometer and to create the manufacturing capacity on the United States' shores.

Now, it's not just automobile. The chip shortage, by the way, is impacting computers, impacting memory, impacting consumer electronics, impacting health care electronics. So it's actually across the board. The auto gets talked about a lot. It will, unfortunately, take a year or two to get there. But let's not face this yet again. So bringing 2 nanometers with one-fourth the energy consumption and double the power into our lives through things like the Chips Act and manufacturing onshore really excites me, because that means we'll be self-sufficient once again.

ALEXIS CHRISTOFOROUS: You know, another thing the pandemic has sped up is the need for security when it comes to big tech. And in fact, just this past weekend, we saw the cyber attack against one of our huge pipelines-- our oil infrastructure in this country. What do you see as IBM's role in working with the public and private sector to combat what many are calling our world's biggest threat right now?

ARVIND KRISHNA: Well, unfortunately, I have to agree with people that it is the biggest threat. I have called it is the threat of the decade. And why? Because the value often lies in what the cyber attackers can get hold of. It used to be in physical goods, now it's in cyber goods. So that's why.

Now, what do we do? By the way, we do monitor tens of billions of events a day for our clients on this to protect them against these cyber attacks. But I believe that we ought to step up as a nation-- much like we had a man on the moon program in the 1960s, we should have a similar sized program adjusted for inflation so that we can go do this as a public-private partnership.

We are certainly happy to share data-- anonymized. We don't want to ever reveal what happens to a specific client. But we believe that a program where public-private come together to go increase our cyber resilience will be what's called for. But all that said, there's a lot that can be done.

Look, we have known for a decade that infrastructure could get attacked. However, people didn't always step up to put all of the protections in place. And it's not easy to fix all the infrastructure to be cyber resilient. We ought to go do that.

When we talk about infrastructure, it's not just physical infrastructure. It's all of the cyber infrastructure that goes around the control of these elements. And I think this last attack showed that we should make the cyber a lot more resilient. So I call upon us to work together. There is a lot of benefit to us all in doing that. And a little bit of a public-private partnership can go a long way towards getting these things fixed.

ALEXIS CHRISTOFOROUS: Arvind, have you spoken to the Biden administration? Are you working at all with the federal government to help secure things and sort of lead the path forward there?

ARVIND KRISHNA: We have indeed-- we have-- I wrote a letter to them. We have spoken with some of them. But if you look upon it for the last few months, there has been a lot of focus on COVID, on infrastructure, and on getting going. I do believe that once we get past the semiconductor resilience, cyber will be up next.

We saw a small token measure-- I am using the word, token, because a couple of billion dollars to me is a token. A man on the moon card program should be more like $10 to $100 billion. And so I do believe that there will be resonance once we get past the current crisis.

ALEXIS CHRISTOFOROUS: You mentioned COVID. You've been with IBM, I know, since the 1990s. But you became CEO during the pandemic-- smack in the middle of it in April of last year. You've said that many of your 350,000 employees worldwide will be able to choose to go hybrid. How do you come up with that balance, that maybe other companies can use IBM as a blueprint, where you allow your workers to have freedom yet you continue to retain the IBM culture?

ARVIND KRISHNA: I believe that 10% to 20% who are remote permanently should be the limit of what we do. And when I use the word, hybrid, it's not that some are remote and some are in the workplace. What I mean is that they spend part of the time in the workplace and part of the time remote-- meaning most likely at home.

And so if 80% of our population is in that mode, they come into the workplace two, three days a week, in agreement with their management and their teammates so they're all there together. That allows creativity, culture building, learning from other people, the serendipitous hallway conversations all to happen. That said, the last year has proven to us we can be productive even when we are at home and remote.

And so that flexibility, then employees can take advantage of. By the way, all that said, I believe that 30%, 40% will want to be in the workplace all the time-- people in inner cities, people with maybe an environment at home that is not so conducive to work, as others who just love the environment of an office.

But we want to offer flexibility to some who want to be in a mixed-- not remote completely, but hybrid as in between the workplace and the office. All that said, Alexis, I would tell you nobody should make firm plans for another two or three months. As we have seen, if you're a global company, the rate of the pandemic when you look at certain countries in South America and certain countries in Asia, it shows that this thing is going to come back and back.

And so let's not get too firm on our plans. You've got to take-- you've got to be aware of the context as the pandemic is sort of rolling its way across the globe, which, unfortunately, I think is going to be with us for another year.

ALEXIS CHRISTOFOROUS: And, sadly, we're seeing that play out right now in India, which is getting hit very hard with a second wave. How is IBM using its voice and its influence to help India tackle COVID-19?

ARVIND KRISHNA: I think a great example is the creation of the global task force for pandemic response. About two weeks ago, and it's not just people like me who are of Indian origin-- Accenture, Microsoft, and us, we got together and we said, we need to convene a body of our peers. And so we got to 25 companies, we soon expanded to 40, and we all urged the administration from here to take action.

We urged the government of India to work with bodies like the US ISPF as well as the India Business Council. We all got together and said, let's agree on the response we're going to do. So, a, we used our voice. Two, we used our resources-- ventilators, oxygen concentrators, and things that we do for our own employees, stepping up to provide extra insurance, stepping up to do telehealth, stepping up to provide people with both monetary resources as well as access to these goods that can help them.

So work with government, convened resources, public-private partnerships, and go out of the way for your own employees, Alexis. I mean, it's not a perfect recipe, but let's do the maximum that we can so that people can feel comfortable about their employment and people can feel good about their health. And that lets them bring their whole self to work.

ALEXIS CHRISTOFOROUS: Challenging times, indeed, to be leading a business like IBM. Arvind Krishna, CEO of IBM, thanks so much for making time for us today.

ARVIND KRISHNA: Thank you, Alexis.