How A Spin Master Built A Solid Financial Growth Strategy For Kyndryl
If you're looking for a CFO with deep spinoff experience, David Wyshner is a good resource. He's worked on spinoffs as CFO at companies including XPO and Wyndham Hotels and Resorts, and is the first CFO for IBM spinoff Kyndryl. I talked to him about his work with spinoffs, the strategic opportunities they present, and how he's built a solid growth strategy for Kyndryl.
This conversation has been edited for length, clarity and continuity. It was excerpted in the Forbes CFO newsletter.
What drew you to be the first CFO of Kyndryl?
Wyshner: I've been involved in a number of spinoffs over time. Kyndryl is actually No. 6 for me on that list. It sort of happened accidentally at first, but lately it's been intentional that I've been joining organizations that were going through or thinking about going through spins. That's what XPO, Wyndham and Kyndryl have in common.
It's really exciting to be involved in an organization that's going through a lot of change. It's a really formative stage, and the number of things that need to be done, that need to be decided, that need to be set up, that need to be started just makes it really exciting. Given the size, scale and complexity of Kyndryl, plus, the team that our CEO was assembling, made it a really exciting opportunity for me and I was thrilled to get the opportunity to do it.
Kyndryl CFO David Wyshner.
What are some of the things that are unique to a company going through a spin that you have experience in handling?
There are so many opportunities to decide who you want to be when you grow up, and to start the process of getting there. In the case of Kyndryl, there were two really important elements. The first was: Culturally, how do we want to operate? How do we want to act and feel?
The fact that Kyndryl's color is red, and that Kyndryl is spelled in a way that's a little bit funky and all lowercase. The fact that we're based here in New York City, not up in Westchester [County, New York] are all little signals that Kyndryl is different from IBM, its former parent company, that were all done intentionally. The culture we set up to be flat, fast, and focused, which aren't always things that our former parent was known for. It was a really important part of what we've set up and tried to organize leadership behaviors around.
The second element was establishing our strategy as an independent organization. Our rationale for becoming an independent company is one of the best I've ever seen. Previously, we were a captive managed services provider, and that strategically was just not a good place to be. But as an independent company, we became an end-to-end services provider across a range of interconnected technologies.
That independence to operate across a technology estate, rather than being constrained to a single parent company's technology, was a game changer. It increased our addressable market, changed what we could do for our customers. We weren't there just to provide help on IBM-related stuff. We were there to be a provider of services across their infrastructure and their tech estate, and we put in place a series of strategies to take advantage of the opportunity associated with that.
You talked about going from working solely in the IBM ecosystem to across all providers. How do you build and scale a strategy based on going from a small tank to the open ocean? How have you done it?
We're very focused early on building alliances with other leading technology providers, including the cloud hyperscalers: AWS, Microsoft Azure and Google Cloud, and a number of other technology firms as well. It was a natural thing for us to do because as an infrastructure services provider, large organizations are all using hybrid IT technologies. The constraint around us as a captive didn't make sense, and our customers wanted us to be able to do more for them. Alliance partners wanted access to our customers and our customers wanted to do it. We all wanted to be moving in this same direction because it's a win-win-win for all of us. We devoted time and effort and resources to being a good partner to the alliance partners that we signed up.
You talked about alliances, one of the three A's in your strategy. What are the other A's, and how does this strategy lay the groundwork for your plans?
About three years ago, we announced the three A's: alliances, advanced delivery and focus accounts. I've established strategies before. Sometimes they're three parts, and you look back and say: One of them was exactly right, one was okay, one I might do all over again.
The three A's were perfect for us. They were the things that strategically were important that would move the needle in terms of our results and competitive position. And the execution on them has been really strong. One was alliances, in building out our positioning across the tech estate.
Advanced delivery was about driving automation and efficiency in how we deliver infrastructure services to customers. We've freed up thousands of people and saved over three quarters of a billion dollars a year by automating elements of what we do: Delivering services in a more automated and sophisticated way, and taking our service quality, which was always really strong to begin with, and making it even better than it was. That's been a huge win for us. It's been a driver of both margin expansion and continuing to have very strong customer satisfaction scores.
The third element was our accounts initiative. When we became independent, we looked across our customer base and found that about 40% of our revenues were coming from accounts where we weren't making any money on a gross margin basis, which means we were losing money on a fully allocated pre-tax basis. Was it just because we were unlucky on 40%? No, it's actually because that's the way those deals had been priced and set up initially, often when our services relationship was part of a broader IBM relationship.
That insight was some of the best news ever because it made it a fixable problem. We needed to get those accounts back to market pricing and levels of margin, and that's what we've been executing against ever since, adding to date, about $900 million of annual profit for us. Of all the initiatives I've been involved with, it's one of the best in terms of impact that it's had and the execution we've delivered. We still have some runway there because we operate under long-term contracts, so not all of our contracts have come up for renewal yet. The idea that we're at $900 million and still have some opportunity to deliver more is incredibly exciting.
Two years ago in calendar 2023, our stock was up 87%. Last year, it was up another 67%. This year, we're up in the mid-teens. The three A's have been the core driver because we told people exactly what we were going to do. We've reported on it each quarter, and people were able to see the progress that we've made in a way that really has been great in terms of our do-to-say ratio: What we've done relative to exactly what we said we were going to do.
What are some of the biggest challenges that you faced with Kyndryl, the spinoff, and getting through the first few years as an independent company?
Three things come to mind. The culture that we had in mind was different from the culture we inherited as a spinoff. On the day that we spun off, by definition, our 90,000 Kyndryls were also 90,000 former IBMers. Driving cultural change in an organization of that size has been a good challenge for us to work on. We made a lot of progress, and we still have work to do there.
The second challenge was in terms of setting up our strategy, landing on it, and then executing against it. That's where it made a lot of progress on the three A's.
The three A's were primarily focused on fixing and turning around business that was break-even at the time of the spin. Now we're much more focused on growth, including revenue growth. That's the opportunity we're aggressively tackling now. We reported our first quarter in a while of positive constant currency revenue growth in March. We're targeting growth for this current fiscal year and fiscal '26 as well. That's the challenge that's front and center for us right now.
Where do you see the company going in the next three years?
I see us continuing to be a really important part of meeting our customers' IT needs. I like to think of a chief information officer as having two hats. One of them is [responsibility for] all the stuff that needs to run well, 24/7, efficiently, and with security and resiliency around it. The other hat that a CIO wears is helping to drive her organization's business outcomes. How do they drive growth?
That whole first part—of making sure everything runs, is modernized, optimized, and is secure, resilient and supporting all the things that need to be done to help drive business outcomes—that's where we can play a larger and larger role. We do that at scale. We invest in it, innovate in that space. Any one of our customers, they're running one infrastructure, not hundreds or thousands of them. Given the scale we have, we are good at innovating in that space, driving positive outcomes there. As a result, I think we can be even more helpful to our customers.
At the same time, that creates growth opportunities for us. It creates profit opportunities for us, and it makes us more important to the customers that we serve, in a way that can be very valuable to them as well. That's the opportunity that we're going to be going after. I'm really confident in our ability to seize that opportunity and play that role. We're a leader in our space right now. We've invested in AI, in particular around Kyndryl Bridge, to help drive additional benefits associated with our leadership. That's going to help us seize this opportunity over the next several years.
How important is it to work with other members of the C-suite, especially with a CEO who was the CFO of IBM before the spinoff?
It is so important for us as a team to be working together. For the finance team, the word that I tend to stress the most is collaboration, both within the finance team and with other parts of the organization.
I try to lead by example there, in terms of the relationships I have with senior colleagues, but it needs to be much more multifaceted than that. We don't want to operate solely as silos that are connected at the top. We need this collaboration to happen at multiple levels, and across levels and functions as well.
The aspiration is that I would like for people to report that interacting with finance is fun. I don't think we're ever going to get to that aspiration, but by having that as a goal and the aspiration, we can get to: At least they were collaborative. They had my back, they were looking out for me. They were responsive, they understood what I was trying to achieve. They asked questions, they were okay to work with.
If we can achieve those things, they'll be really helpful. Even if we don't get 100% of the way there, we can drive a lot of collaboration and live the type of culture that we want to have.
If you were to give some advice to other financial leaders, what would you say?
One of the roles of finance is to drive great, impactful decision making across the organization. Where finance could be helpful is by analyzing, collaborating and prioritizing, and those are the areas I focus on.
The quality of analysis that we can provide can support decision making. In fact, a lot of times, a good analysis makes what makes a decision really rather obvious. And so good objective analysis is really helpful.
In organizations of almost any size, particularly larger organizations, collaboration is so critical to making progress.
The third thing on my list is prioritizing. I think people and organizations can so easily get distracted by shiny objects, or devote more resources to things that are good or beneficial, but aren't as good or as beneficial as other things. And as a result, the idea of ruthless prioritization and making sure we're spending our resources—sometimes it's money, but it's often time, or organizational bandwidth for change—in a way that's really optimal. Analyze ruthlessly, collaborate ruthlessly—that's not an oxymoron—and prioritize ruthlessly.
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