All right. Good morning. Let's get started. Here we have Kyndryl up next for a fireside chat. My name is Tien-Tsin Huang. I come from the IT services sector. We'll be taking questions from the audience as I get through a few. Questions from the portal. We'll be, you know, taking questions there, for feel free to submit anything you have there. With us from Kyndryl, we got Martin Schroeter, CEO, Chairman, and David Wyshner, CFO. Like I said, I've collected a lot of these questions, so hopefully we'll get through the most relevant stuff, but don't feel afraid to ask. Welcome.
Thank you.
Thank you both for being here.
Thanks for the opportunity.
Yeah, absolutely. It's always my pleasure. I guess, doesn't feel like that long ago, Martin, when we were up here, you know, getting the updates, you pushing through some of the initiatives you've laid out. Yeah, I figured it was a good thing to just kick it off and have you share a progress report on some of your key initiatives.
Sure. Thank you. It feels about like six degrees ago maybe.
Yeah.
It feels it's a little, I don't know about out there, it's pretty cool. That's okay, it's good.
Absolutely.
Look, you know, we have laid out, we laid out, at the beginning of last year a strategy for how we were going to return to growth and how we were gonna improve profitability, and we shorthanded all of that, for those who know the story, to three-A's. We put a plus and a plus on it. From a progress standpoint, you know, we did a little bit more, but we did everything and maybe a little bit more than what we said we would get done in the first year. Those three-A's, are, I think we've proven those three-A's are the things that can turn this business around.
One of the A's, which is Alliances, this is us joining, if you will, the ecosystem that really matters to our customers, where we were not part of it before. As part of the IBM ecosystem, we were very, this business was very narrowly focused on IBM. We said last year at the start, we would sign at least $1 billion of new business with our three new hyperscaler partners, Microsoft, Google, and AWS, and we ultimately signed $1.2 billion last year.
To me, what it makes us, you know, feel really good about is that the nature of what we do, the role that we play in enterprise IT is important enough for the three biggest hyperscale cloud companies to wanna work with us and to create meaningful businesses. Really good start on Alliances. We laid out what we called Advanced Delivery, which for us is a way to use the intellectual property we have to automate workloads, to reduce the labor content and free up labor to go redeploy into new opportunities. We said that, you know, over the year, we would generate about $200 million in savings from that, and we finished a bit stronger than that.
I think finished, we think we finished at 275 or so. Finally, the third A is focus Accounts. When we were spun out, there are a series of relationships, about 40% of our business, about $8 billion of revenue, that are essentially no margin, zero profit. Think of them almost as cost recovery for, because it was on a different mission. We set out to improve the profitability of these relationships and we said we'd get about 200 done. We'd exit the year with about a $200 million run rate improvement, and I think we finished about $210-$220.
Again, it proved that not only do the partners, the most meaningful partners in IT space wanna work with us, and while I only mentioned the three hyperscalers, we also have meaningful partnerships and relationships now with Oracle and SAP and Cisco and VMware, et cetera, et cetera. It also proved that our customers really wanna stay engaged with us, and they want us to be successful, and they're willing to reimagine, if you will, the relationships we have because, again, the role we play in their systems. We're running what I would call hearts and lungs, what are commonly referred to as mission critical systems.
Those three-A's position us well now over the longer term to capture what we see as about $1.6 billion of gross profit opportunity for our business to improve from our current, you know, small loss, if you will, on the pre-tax line. I mentioned earlier the sort of a plus plus. We said we were going to move much more heavily into advisory, into consulting work, so we created something called Kyndryl Consult. That grew pretty dramatically, you know, solid very strong double-digit signings growth and revenue growth, and we see that well positioned for the future. We started to take steps.
The other plus would be to get our spending and our expense levels back to what we view as a competitive level because we were born, you know, we don't, you don't get to pack your own suitcase for this, right? They put in IBM put in and spun us out with, quite frankly, a pretty heavy E to R. We're now starting to address that as well. We announced earlier this year that, you know, we took some actions. We'll reduce the E to R over time as well. Look, for me, I think what we've proven is that our customers really want us to be successful, and they wanna work with us.
Our, we have the right alliance partners now that can grow meaningful parts of the business. We can address the Accounts. And importantly, from a progress perspective, everything we've put into the backlog since we've spun out, everything we put into the backlog now is in that sort of high single digit profit pool, which is what we see the business can ultimately deliver in the medium term. We got a lot done in the year. We've laid out now, you know, what I'd call an acceleration of all that progress across the three-A's and a continuation of growth in the alliances business and a continuation of growth in the consulting business.
Look, a really good start and certainly on track, maybe even a little bit ahead of what we think this business can deliver.
Yeah. No, the performance has been great. I think if I look back at the prior fiscal year, revenue did outperform. As we look to fiscal '24, I know you're guiding to revenue down 6%-8%. That's mostly low margin, no margin revenue runoff as part of the plan. Talk to us about the visibility of that runoff and this trade-off between revenue and margin.
Yeah. Look, it's an important. A good question. It's also an important question. A few things about our business, I think, just to make sure, again, we've said them before, just remind everybody, and you know this well, but when we enter a year, about 85% of our revenue is coming out of the backlog we started the year with. The in-year signings, and the in-year activity is really only about 15%. We also know, by the way, we know about two-thirds of what's happening in two years' time. About two-thirds of that's already in the backlog at the two years start prior, and that's important. I'll come back to why that's important in a second.
We start this year with about 85%, and we know that as we laid out in our, in our earnings discussion, that backlog that we were born with, the backlog that we inherited is down a couple of points. That's okay 'cause we're trying to get through that anyway. We also said that five to six points, as you said, about five to six points of revenue decline driven by our actions to either improve focus Accounts. Sometimes that means taking content out, which, you know, recasts the relationship in a much more economically viable long-term position. Some of it's about half of that's focus Accounts. The other half is just what we've called in the past, this kind of this OEM pass-through revenue.
Again, this business on a different mission was focused very heavily on revenue, and we're focused very heavily on margin at this point. We'll get back to revenue growth, as we said, in calendar 2025. Some of this year's impact due to the backlog coming down, which we're happy about, some of it's driven by actions. Obviously, we're pretty keen. Remember that, tinging to your question on margin, the OEM pass-through, that's kind of in their control, right? We just, we don't, we won't sign up to do anymore, and therefore, it'll run off. This is sort of a big year for that, for, to get that low-margin content out.
Mm-hmm.
The third element, which is growing, as I mentioned earlier, for the $1.2 billion of that we signed with our alliance partners last year, we said this year will convert into at least $300 million of revenue. We said, you know, Kyndryl Consult, our advisory business, will continue to grow as well. This year we have somewhat, some unique dynamics that are going on, really focused on us trying to get low-margin content out. A lot of that is in our control. I'm not worried about the margin side of this, because we'll just stop doing OEM the OEM resale stuff.
The reason I go through all of that is because where that positions us at the end of the year is in, I think, a fundamentally different spot, i.e., this year is somewhat unique. The backlog, which is down, that we inherited is down, it has a smaller and smaller effect on us over time. That's logical. The things we're putting, the signings that we're putting into the backlog, you know, we added a bit over $12 billion of new signings last year. As I mentioned, those are now in the kinda mid-20s GP, which is a good high single-digit PTI. Everything we're putting in the backlog has the margin profile that we like, and we'll have another year of that behind us as well.
The backlog that we inherited will continue to diminish in our P&L. Even if we don't grow at all in signings, we'll still double, right, we'll still double the impact that all the good stuff has in the following year. The OEM will be behind us, and Kyndryl Consult and the alliance activity will also then punch at another year's worth of weighting in our overall P&L. This year becomes a very unique year, and it sets us up for a much different construct for the following year, again, as we get back to growth in calendar 2025. Those are all the pieces. Anything you would add?
Nope. Nope.
Okay. It is, this year is a very unique year for us, different from what we see going forward.
No. Under-understood. Using the KPIs that we have, and I recognize signings are difficult to look at because we're cycling through the old with the new, which is higher quality. Just headline-wise, signings are down 8%.
Mm-hmm.
We look to book-to-bill as an important metric for the group. To get to calendar 2025.
Yes
when might we expect book-to-bill to be equal to or greater than one? Is that something we should be looking for as a guide for-?
Yeah, look, I think for pieces of our business, book-to-bill is really important.
Okay.
Kyndryl Consult, as an example, has been at a book-to-bill greater than one and will continue all throughout this year to be at a book-to-bill greater than one because we are relying on that for growth.
Yeah.
That will continue to reweight in our overall revenue stream. You know, as we bring revenue down, having Kyndryl Consult reweight because you're working on the denominator as well.
Mm-hmm
... but even after we stabilize and we start to grow again, I still see the advisory business consult growing. The focus we have on Kyndryl Consult's book-to-bill is really important, and I think investors should look at that as how is Kyndryl Consult traveling for the long term. Similarly, our Alliances business where, again, we signed $1.2 billion, we'll book at least $300 million in revenue, we will also obviously be focused on growing signings, but that book-to-bill should be greater than one for the, for a long time to come, not only because of the role we play in the world, but we have a lot to catch up here, right? We had a, again, a mission that was very focused on the IBM Cloud, no relationships with the, with the three hyperscalers. Now we've...
Again, we've proven that we play a really important role with our customer base here. The book-to-bill on Kyndryl Consult should be looked at as something that should be over 1 and keep growing. The book-to-bill on the Alliances activity should be well over 1 and keep growing. Then as you said, the rest of the business is going to take a, you know, a year and a half or so until we can sort out enough of that low margin, no margin content to get out...
Mm-hmm
... before it really becomes important to us as an element of growth. Even if we don't have a book-to-bill greater than 1 this year, in total-
Yeah
I don't worry about it. I don't worry about it at all because we still see growth in calendar '25 with the other dynamics going on after that. Once we get back to growth in calendar 2025, then we'll all be talking about a total book-to-bill. Still looking at the elements as well, but the total will also be more important to continue to drive growth. We're just not at that point of the turnaround.
Okay.
Yeah.
fiscal 2023 was.
Please
... was a great example of that, where our book-to-bill was below one, but, you know, our revenue-
Yes
... growth was, you know, solid, you know, flat to up 1%. You can really see that over the near term, we may have a disconnect between what's going on with our revenues and our signings. Over time, over the long term, that book-to-bill becomes important, but over the next 12 or 18 months, it's really, as Martin was saying, the components that matter.
Got it. All right, we've talked about revenue, signings, a little bit on margin as well, which you feel good about. Free cash flow. How does this all translate down to free cash flow? I know the quality of the bookings is improving, the signings is improving. What about the capital intensity on some of the deals? What can you tell us on free cash?
Yeah. Absolutely. On the margin front ends up being a big part of the cash flow story.
Sure
... as well. When we look at our margins last year, EBITDA margin was 11.6%. adjusted pre-tax was -1.3%. Our targets over the medium term are really for EBITDA to move up to the high teens, and we've been consistent about that, which will be roughly a seven-point increase from where we were this past year.
Mm-hmm.
We're looking for adjusted pre-tax income to move up by that much or even a little bit more, you know, ideally the 7%-9% range where we've been signing business over the last 12 months. That would be, you know, could be a nine-point increase associated with that. To your point about free cash flow, we've always said we expect pre-tax margin to expand by a little bit more than EBITDA.
Right
... as we become asset lighter and depreciation, amortization expense have less of an impact. That, you know, that margin growth is where over a longer period of time, we expect the free cash flow growth to come from. This past year, we were able to generate free cash flow even though we had an adjusted pre-tax loss because of how we manage CapEx and working capital, and we'll continue to do that this year, you know, getting benefits from working capital and having CapEx underrun depreciation. Over time, our expectation, and our goal and what we need to do is have more and more free cash flow come from the adjusted pre-tax income we're generating.
As we move adjusted pre-tax income up into positive territory, and then ideally up to the mid and then, upper, single digits, the opportunity for free cash flow to really accelerate, becomes pronounced.
Good. All right, let's dig into some of the details, and then I'm happy to take questions. Let's definitely talk about Kyndryl Consult. That's been a positive surprise from our side. I think signings I wrote down, what? Up 30%, now 13% of revenue. What % of revenue do you think Kyndryl Consult should represent for the total company? Martin, what kind of work actually?
Yeah
... is hot right now?
A few things on. Let me start with where you finished.
Yeah.
You know, when we, when we created Kyndryl, and we described the types of capabilities we would build, we did those obviously in conjunction with our customer base, to make sure that we sort of hit that Venn diagram between where they, where they're growing and where they give us what I'll call brand permission to operate, right? That's why we have a practice on cloud. That's why we have practice on Applications, Data & AI, Security & Resiliency, Network & Edge, Digital Workplace, et cetera, et cetera, et cetera. We created the practices with this idea that our customer base, now that we're independent, now that we can bring the sort of the best of, that they would be willing to basically expand, allow us to expand our wallet share with them.
We've been growing in all those spaces that are growing. Our Security & Resiliency business, our Network & Edge business, within Kyndryl Consult data, Applications and AI business. All of these represent not only places where we have near-term growth opportunities, but I'm sure as the participants in the conference, you know, these are the long arc journeys that every enterprise customer is on.
Sure
We are seeing really good growth around each of the practices that we're, that either we're, that we're still building in some case, but we've built and continue to build. Again, the good news is, the additional good news, not only is this a long-term growth opportunity from a revenue perspective, the margin for us is a bit higher than the average. What we showed in our earnings presentation was everything that went into the backlog, delivering a, you know, nine, I think it was 10% last six months PTI, which think of that as like a 25%-26% kind of a GP.
Yeah.
We're seeing consult margins a few points higher than that still again. We've got great long-term opportunities. As you said, we're at 13. We've said that we think this can get to be, you know, at least 15, but I gotta tell you, when we look at others, they're, you know, they're far.
Sure
bigger than that still. We're still look at our heart. When we were born, advisory, which is a little bit different than exactly what we're doing, it was run differently. It was 10% of the overall business. 90% of this business is run, and run is very sticky, and run has really good relationships, and run is how you build trust. Our consult business will still be a preface to the run business. I do think it has a good long-term trajectory here, where we can continue to see good growth in the practices where we have brand permission.
Yeah. I have to ask, right, when people, investors think about the consulting business, and it's performed very, very well for you, it is believed to be more cyclical. And tip of the spear to drive some of the run business as you just described there, Martin. I'm curious your I'm sure you're getting this question throughout the days, sort of the cyclicality of the business overall, cyclicality of the consult business. I've heard you say heart and lungs as well. Talk to us about the cyclicality.
Yeah. I think, look, a couple of things about, again, about the nature of what we do. Regardless of the economic environment, a credit card company, for instance, couldn't decide to run its infrastructure for six days to save money. It doesn't work that way, right? An airline can't decide to take down its infrastructure for a few hours just because they have fewer passengers flying. The nature of what we do, again, hearts and lungs, is, sits at the core of sort of... I wouldn't say we're entirely insulated from the macro because there is some of our business that is volume dependent.
We saw that in very strong seasonality in the third quarter, our third fiscal quarter last year, the December quarter, which tends to get driven by what happens in the retailers we run, et cetera, et cetera. There is some volume business, but by and large, the nature of the work we do insulates us from the extremes. Similarly, because our advisory business, because our Consult business is focused on positioning companies to survive and thrive in whatever the economic environment it is, infrastructure still sits at the heart of that. Our advisory, our Consult business is focused on infrastructure still. On top of all of that, because we are in many ways late to the game in building some of these practices, we still have a lot of catching up to do, right?
Right.
The thorniest problems that our customers have, the things that either they tried and couldn't get done or they didn't even wanna tackle because we were, you know, narrowly focused on IBM and they didn't see that as part of their future, they're now starting to tackle some of those things because now we show up with Microsoft in the lobby. Now we show up with Google Cloud and AWS and Oracle and others.
We still have a unique spot in what we do, and then on top of that, we have a unique opportunity to catch up, which I think is still, you know, a few years before we really have caught up in how important the cloud management business is to us relative to others and how important we are to the data architect work that has to happen as new innovation finds its way on cloud. We have a, I think, 2 different levels of sort of unique opportunity here, the role we play already and then how much opportunity we have just to catch up to what others have already, are already doing.
Yeah. It'll. A year and a half ago, when we said we wanted to get Consult revenues to 15% of our aggregate revenue, we were starting at 10 and going from 10 to 15. That 50% growth there felt like a lot and a good ambitious goal, I didn't expect us to be at 13%.
Yeah
... a year into that. That really highlights the, you know, the amount of catch-up, the amount of Kyndryl-specific opportunity that we have, almost regardless of the macro environment out there because it's infrastructure, because it's catch-up for us. This is really exciting, particularly when you layer on the higher margin associated with these sorts of revenue.
Yeah. No doubt.
Staying with the catch-up theme here, I know Alliances, when you were here last year-
Mm-hmm
... you talked a lot about hustling to get partnerships and hustling to get a lot of certified, people in, and it's worked.
Yes.
You're at $1.2 billion in signings. You're 20% above the target, as you said in the beginning. Same question. What's next? Is there still a lot more room to go in terms of getting the certifications and getting the people in place to do the work? 'Cause I know there's always, you know, debate around where we are with cloud and the whole journey, but, I'd love to hear your thoughts on that.
Yeah, yeah. The short answer is, yes, still a lot more to go here. We still in terms of cloud management, even in our customer base, forgetting about finding new customers.
Yeah
... in our customer base, we are still well under the kind of share that we experience and we have with them on their other infrastructure management. We do still have a lot to catch up on. We exited last year with 35,000 certifications, credentials across the three hyperscalers. You know, that
And we're still sold out, right? We're working as fast as we can. There's a path it takes to get someone credentialed, to get them experienced, and then they can show up and actually do real work for a customer. We are still on that path. We're focused now for our investors' perspective on how we convert that to revenue. As we said, you know, the next step is then to talk about how much profit we're making out of that.
Sure.
We said over the medium term that that business, again, $1.2 billion of signings, you do that a few years, and before you know it, you got a $1 billion business. That can generate, you know, $200+ million of profit for us. We are well on track to do that, but we still have a nice long ramp here just of catching up. Again, every one of our customers has made a cloud decision. Every one. Sometimes that decision is, "I'm gonna use Microsoft and AWS," or... They've all made a decision. We're finally now showing up, and they're sort of like, "Oh, thank God.
The people who know the most about my infrastructure today, the people who the engineers who make my stuff work today can now help me fulfill, you know, the, the real kind of hearts and lungs of where I wanna go, so I can get the innovation I need," and et cetera, et cetera, et cetera. This is a, this is a long arc. The, you know, the cloud growth, public cloud growth may be up or down a few points in a marketplace, but we've got a really long-term growth opportunity here, again, given the role we play, given the, the catching up we have to do with our customer base.
Good. Let's talk about the people side, and then we'll open it up, I promise, after this question. Just on the Advanced Delivery, the whole upscaling, rescaling, automation, you've driven a lot of savings there. We've been getting a lot of questions around generative AI and if that might have influence on your thinking with the labor pool, et cetera. Just asking both those things together, where do you think you are on this journey of reskilling and automating?
Yeah. You know, Culturally, and we have a lot of work to do on culture, but culturally, one of the things we brought with us from IBM was this culture of reskilling, this culture of education, this culture of credentialing, which is really powerful for our team. We brought that with us.
There's a lot about the culture we have to change, but we brought that with us, and what's really powerful now is that as we become a business that's investing, as opposed to one that's trying to, you know, to just focus on productivity and revenue, as we really start to invest in this business, the energy in, you know, in Kyndryl's around working with the enterprise IT companies that really matter, the energy around becoming far more relevant to our customer base is a real tailwind for us as we, as we create the skill base that we need to, in order to be as relevant in that future as we are in their past, right? This is...
For us, the ecosystem is important because it makes us part of our customers' future, not just part of their past. The energy around reskilling and the energy and the culture around reskilling has been a massive tailwind that allows us to go from. Look, we probably had fewer than 1,000 credentialed people on the hyperscaler clouds.
Right
...when we started this journey in November. Fewer than 1,000. I don't even know if it was higher than 500. There were very few. Again, we've invested. We've created the opportunities. We created alliances. Google's invested in us and our skills, Microsoft, AWS. All of that has to be met with people who are energized by doing the work and who are energized by being part of that future, and all of that comes together. We created 35,000 credentialed people, right? More to go still. We're still at the early stages. There are, as you know, there are layers of credentialing that are important. The deeper and deeper you go, particularly for the work we do, the more and more relevant you become for the customer base.
I will tell you, there is, like I said, a tremendous amount of energy within Kyndryl to take advantage of that, and there is a tremendous reception, again, from the customers. When our customers say, you know, "Martin, we trust you," they, definitely of course they trust me, but what they, who they really trust are the 50 or the 100 people who run their systems. There is nothing more empowering or comforting or enabling if you're a CIO. They know these people, right? They know the people who are running their systems. To have the person who they already trust to show up with new credentials, new experiences to help them on the different part of their journey, that is an enormous enabler for us to grow within these Accounts.
We've got a long way to go still on this, but it is really powerful, and it is the combination of what we do as a firm to create relationships. It's how our partners see us, given, you know, the importance of us to be able to work with them, and it's the energy of Kyndryl's to really bring this to life. That is part of why we can sign $1.2 billion in, like, a year, right? $1.2 billion in a year. We're a startup, right? I know we're maybe the world's biggest startup, but we're a startup. Starting a business and signing $1.2 billion says, "Man, the world is telling us something.
The world's telling us that this is important, we value it, and we see a good future here."
On the AI front-
Yeah
... I think there's a tremendous amount of opportunity still for us. I view us as an early adopter and pretty well along in terms of applying AI and machine learning to operating our business, to operating technology infrastructures. It's a core part of Kyndryl Bridge, for, you know, just to operate for doing what we're doing. We're leveraging it there. I think we're in the early stages of applying generative AI to our to elements of our business, and we're looking into the opportunities that will certainly be associated with that.
Third, as we go out to customers, we play a key role and will play a key role in enabling their use of AI, data availability and how various forms of data are accessed and used for them to apply AI in their business, in their applications. We're having a lot of discussions, as you could imagine, with customers about that, both about how to make it available and at the same time not make it more available than they want it to be.
Good. No, thanks for that. Let's take questions. Happy to take questions if there are any from the audience. I saw one in the portal. How much of the revenue decline is from clients lost to a competitor that you would have wanted to keep, that has separated out the voluntary loss versus the competitive loss? I can read that without reading glasses.
That's pretty good.
Yeah.
I can't even see you there holding an iPad without glasses on. Look, I would say that again, if we, if we look at this year, right? We said 5 to 6 points from decisions we're making, of that five to six, again, roughly half is just pass through OEM. None of our relationships are solely pass through IBM.
Mm-hmm.
We're not distributors of products.
Right.
None of those customers are lost. They will just go directly to the vendors and buy things. Zero on that side. Then on the other half, which are focus accounts, you know, we talked a bit about this and on the patterns that are developing. By and large, the patterns are either we're expanding the content, right? Now, expanding content means you know, they're happy, they wanna do more. The second pattern is we're reducing elements. You know, because of the way IBM spun us out, that, you know, we have to buy their hardware, we have to buy their software.
The single largest impact to us, the single largest reason that a focus account is a focus account is the amount of IBM content that sits in there and the commercial relationship that they created. For us, it's not about losing the relationship because our customers are just sort of pulling the IBM content out and going direct to IBM. Completely cool with us.
Mm-hmm.
Right? IBM seems to be okay with it, right? 'Cause they have a treatment that helps them. We get to do labor only. In very few instances do we see customers sort of leaving the platform. If they're leaving, it's, you know, they're leaving in sort of a, I'll call a mutual agreement 'cause we're losing a lot of money, we're getting our face ripped off, and they're like, "We can get a better deal," right? But it's pretty rare. The 2-3, I would say, you know, the half that is on focus Accounts is not losing customers. The half on OEM is certainly not losing customers. This really is about.
Again, I think we've proven last year that our focus account activity is not forcing customers off the platform. It is with their engagement, it is resetting these relationships so that they are comfortable and confident that they have an infrastructure service provider for their mission-critical systems that is on a sustainable economic footing. I think, I mean, look. I'm sure we can find a customer where we've you know, gone separate ways for all the right reasons. I don't think we can find a customer where they said, "You make a lot of money on us, and we wanna leave." That's not what I've seen.
Good. We're just about out of time. Do we have time for one question? Let's do a quick one. I think we hit the hard radio out already. We'll do a quick one. You just scream it out. We'll repeat it.
Cool, cool. Can you just expand on going back to kind of legacy IBM, you know, why the focus at the time was on revenue work, whereas, you know, now it's on margin? What are sort of the key factors why that is?
Yeah, look, you know.
You have the question? Want to repeat the question?
Oh, sorry. Yeah. The question was, you know, go back to why in IBM was maybe the focus was on revenue, and now it's on margin. Look, IBM has. At the time, it had a hardware, a software services business. IBM had an opportunity to engage with customers and to deliver, quite frankly, some of their products in the form of a services contract. Lots of customers wanna consume via services. Then they had an opportunity to figure out when you know, if you get one bill, who gets what, right, within that construct. So the economic relationship that was created in an old mission, it was part of a different mission, right? That's how mainframes got consumed.
We run more than half the managed mainframes on the planet because that's a really effective way to deliver. When you own it all, that's a really effective way to deliver the technology into the customer. All of those were created without having contemplated a spin, right? These are 20, 30, 40-year relationships where this part of the business was providing service and running the infrastructure. Not only were they created without contemplating a spin, the commercial relationship that they created, you know, further set back a number of these contracts because they created the commercial relationship. They decided what, you know, their software was going to be worth. They decided what their hardware was gonna be worth, et cetera.
It's as simple as just, look, this was part of a different mission. With a new mission, with an independent mission, you know, our role isn't to protect the mainframe. Our role is to bring our customers into the future. For us, we have to capture the value we create through services, through labor, through our IP, et cetera. It's really just, it's a, it's a different mission.
Great. We should end it there. Martin, David, Laurie, thank you as always for being here.
Thank you, Tien-tsin.
It means a lot.
Thanks for the opportunity.
Thank you.
Thanks, everybody.