4 Takeaways from Kyndryl’s Forced Migrations to the Public Cloud

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The deadline to move your Kyndryl workloads to the public cloud is here. These key insights will help you prepare for the months to come with Kyndryl’s forced migrations.  

When clients are evaluating IT Services Providers, the provider’s reputation, experience, and credibility are generally far more important than the cost of the services they provide.  When a customer can count on their selected partner to deliver and provide proper support, the value they are likely to receive from such a relationship will outweigh the costs.

Because of this, it is generally a provider’s goal to become a strategic and trusted partner that their clients turn to when support is needed. While all providers are in the business of making money, there is generally a balance of cost and value that is struck to secure their seat at the table.

Oddly, as many former IBM Infrastructure Services clients are finding out, the transition to Kyndryl has not provided the relationship customers were promised. Instead, Kyndryl clients are preparing for an accelerated move to the public cloud as Kyndryl retires its assets.

Here are the most important insights for Kyndryl customers to keep in mind now that the deadline to move to the public cloud is here.

1. Why Kyndryl Decided to Force Migrations to the Public Cloud

IBM created Kyndryl as a spin-off to IBM’s infrastructure services in 2021. Kyndryl, given its reliance on IBM’s infrastructure, likely faced increased costs and revenue pressure from looming technical refreshes or exit provisions with IBM.  Struggling to maintain its profits and loss statements, Kyndryl was left with two choices: gracefully transition clients to the public cloud or transition their economic issues to their clients by forcing that migration.

In early 2023, Kyndryl told clients they had until July 1st, 2023 to move their workloads to the public cloud or face punitive monthly increases until transitioned. These punitive increases were as high as three times clients’ current monthly fees.

It generally takes four to six months to migrate environments to the cloud after executing hyperscaler and migration services agreements, but it could take even longer for larger environments.  The July 1st deadline to migrate to the cloud was meant to limit a client’s ability to seek alternate support options and ensure client retention due to this lack of competition.

Kyndryl gave clients exactly six months to make this transition knowing at least that much time was needed to properly migrate workloads to the public cloud, with little to no time to negotiate with other IT Services Providers.  Additionally, Kyndryl is not waiving the punitive penalties for clients that signed onto Kyndryl’s Cloud Managed Services even though signing onto this agreement secures client retention and cloud migration management.

Kyndryl’s chosen path has sent a clear message to their existing customer base and to the market on how they prioritize their client relationships.

2. Kyndryl’s Ability to Support Cloud Customers

Around the time Kyndryl announced their forced march to the public cloud, they were also touting their cloud services and making contradicting statements around cloud migrations, including:

  • The 30,000+ certified hyperscaler professional relationships Kyndryl has gained in the past 18 months
  • Their new relationships with AWS, Azure, and GCP
  • Advised clients to take their time migrating to the cloud
  • When requested to provide proposals for their Cloud Managed Services, Kyndryl cannot or will not provide one for support with GCP

These statements raise an important series of questions around Kyndryl’s readiness to even support the clients they are forcing to the cloud, especially in the limited timeframe in which they are forcing them to move.

3. IBM is Attempting to Play the Role of “Savior”

IBM is attempting to provide a path to move off Kyndryl to their former clients.  The very services they divested two years ago are now being offered as options for cloud managed services within their IBM Cloud or with a hyperscaler of the client’s choosing.  Most organizations are evaluating the responses with caution as they try to piece together Kyndryl and IBM’s direction.

4. How Kyndryl’s Forced Migrations Affects Customers

While it remains to be seen what impact these forced migrations will have on their client retention and ability to onboard new customers once the punitive penalties take effect, one thing is for sure – Kyndryl’s existing clients have a new perspective on them as a partner. We can see this reflected in Kyndryl’s recent layoffs and stock decreases.

Kyndryl’s forced migrations are some of the more rigid processes we are seeing in the market. Other managed cloud providers have used a gradual and nuanced approach to migrating their clients to a utility cloud. But under Kyndryl, customers are being caught in a vulnerable position with limited options and time to migrate to the public cloud.

Most companies are not in a strong enough position to fight back because they either lack the right degree of sophistication to negotiate these deals or they lack the right amount of buying power or overall leverage.

Larger companies with a larger footprint and overall spend profile will have an easier time negotiating because their business makes up a larger percentage of Kyndryl’s overall revenue. With smaller companies that may not have enough spend to truly influence Kyndryl’s margins, Kyndryl would be in a better position to dictate the terms of their migration.

What to Keep in Mind for Kyndryl’s Forced Migrations

For organizations who rely heavily on their IT Services Partners, this situation highlights an important fact: while your relationship with your provider might be sound now, it’s always important to have an exit strategy.

Ensure you have the contractual protections to enforce your exit strategy when companies change direction and when your IT Services Providers prioritize revenues over value and relationships. Unfortunately, Kyndryl’s forced migrations are not an isolated incident, and you will be glad you had a back-up plan in place.

UpperEdge has advised clients in these situations and on downstream negotiations with their end-state hyperscaler. This puts UpperEdge in a unique position to deliver value for its clients and advise clients through a successful move to the public cloud with a comprehensive cloud strategy. Reach out today to learn how we can help.