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Bloomberg Audio Studios. Podcasts. Radio. News. We've got to go to what's happening with IBM. I'm pleased to welcome the CEO, Arvind Krishna, who is coming from the company's Think Conference, an annual event. And Arvind, I'm just excited to hear really from you the pace of change that's happening with agentic AI. I think you put out there that in three years' time, there's going to be one billion applications.
It is so noisy, it is cluttered. How are you managing to streamline it for your customers? Look, first, I think that number is a really interesting number. A billion new applications using AI, over a third of them using agentic AI. And the way that we are approaching it is, how do we make it easy for our customers, leverage their own data,
insert their own data into the models, and then leverage it to make the enterprise a lot more productive. That's what we're after building, and that's what we just announced with our Watson X orchestrate with agentic capabilities, including 150 new agents, some from us and some from our partners.
150 agents sounds an extraordinary number of it and you've got a big book of business already when it comes to generative ai six billion dollars and growing but how much are you seeing the ceos you serve pushing back on on overwhelm how are you managing to help them navigate what feels like in some ways a less than productive environment for the amount that they're investing in generative ai look
I think that what CEOs are concerned about is that now that we have gone, the era of experimentation, as I call it, is over. Now people are looking for business value on AI. As they're doing that, they have discovered that about 25% of the time, these projects are paying off very well for them.
So learn from that 25 and then figure out what are the inhibitors in the other 75 and take those out. And those are invariably. There's fragmentation in the environment. So how do you have a more integrated environment? You've got to make sure that there is value in the AI projects. Don't just do an experiment.
and leave it on the shelf. You've got to scale it and deploy it across the enterprise. So how do you integrate? How do you create the right hybrid environment? That's what we're helping them with. And then we believe that 25 will go all the way up to 50 or 75, at which point that's a great return for the CEOs.
That software that you're unveiling, those consulting offerings that you continue to provide, Arvind, at the moment, how much is that bearing fruit in this current environment? How willing are these CEOs to experiment and move on from experimentation when we've got a really uncertain economy on our hands? Look, I'm a...
more of an optimist on the uses of technology in the current environment than a pessimist. And why do I say that? So when you have supply chain issues, you have cost issues, you have productivity issues, technology becomes an answer to help you scale the business without having to add a lot of physical cost into the business.
So I find the appetite of the CEOs is quite high to spend on technology as long as they can see a return that is, I'll call it, short to medium term, meaning six months, 12 months, 18 months. I find people leaning in very heavily.
And I think that's why you see enterprise tech spending has remained robust despite all of these issues that could be talked about. What about government at the moment? Scott Besson getting grilled on a hill at the moment around Doge. And that has had implications for your own business. I think it's about 15 contracts, we understand, have been cancelled. Are more to come? Are you seeing an end to that cancellation process?
I actually choose not to get worried about DOE. I think that the areas where we have very robust contracts, when we're helping the VA process claims, we help the GSA on expense management, we help the DOD on payroll, those remain very robust, and I don't believe that those will come under any significant attack.
Areas which do come under attack are much more what I call discretionary or much more time and material or labor augmentation based. Those may come under attack. It actually does not worry me. I believe that even if those come under attack, there is more than enough offset from the areas that are more critical. Interesting. So basically any cancellations will be outweighed by business that you potentially can win within the government as well?
I believe that from having talked to very senior members of the administration, there is a huge appetite to use technology to modernize government and to help make government itself more efficient. You can't achieve efficiency just based on cost cutting. You actually also will have to invest in technology. And I believe, and not just my belief, from having spoken to them, they have an appetite to do that.
I'll tell you where there's appetite, air traffic control. And Trump himself talking about maybe Raytheon, IBM coming in to help solve some of the real anxieties we've got, just a loss of radar over happening in Newark. Is that progressing, Arvind? Are you able to share on how any sort of contract might shape up?
Look, I don't want to talk about any specific contract or any specific agency, but I think what he just pointed out is a great example where technology will be part of the answer. Better integration, better computing capabilities, better communication capabilities, all of those will play a role because right now we are living on not exactly, but essentially, let's call it a slightly evolved system that was built in the 1970s.
Arvind, what's crucial about air traffic control is accuracy. And I know that's almost where everyone's eyes are when it comes to agentic AI, when it comes to generative AI, is the risk of the underlying data being inaccurate and how that compounds. How are you managing to tackle that sort of area of anxiety and reality?
I always break the problem down. The core of air traffic control has to be built on very precise data, completely accurate data. You're not going to go use agentic AI to estimate where a plane is. That's going to be based on much more physics and hard engineering. Now, could agentic AI come in trying to optimize routes and worrying about how do you increase the total flow and capacity at an airport? Perhaps.
but I'm using the word perhaps because there's a lot of careful work to be done there. But could agentic AI be used to process claims faster at Social Security or at the VA? Absolutely. And then you make citizens happier, you deliver them services faster at a lower cost. That's where I would go first with agentic AI.
And in the private sector, they're looking for accuracy and that's something you're offering at the moment. How much is you just seeing the adoption and the use and productive use of Agenda KI being limited by that underlying data right now or is that something that we're streamlining already? I always advise our clients start with the use cases where you can live with some risk, where you do not need it to be 100% accurate.
So if you think about customer service, you think about end client experience, I think about our internal IT help list. Those are all areas where when you were dealing with people, you actually had a 10 or 15% error rate. So now that you deal with the genetic AI, you can actually have a lower error rate than that, but maybe not perfect, but you can still live with it.
think is all about innovation? I'm looking at the car behind you. I'm thinking about the way in which you're also pushing the agenda, not only when it comes to hybrid, when it comes to on-prem, when you think about the innovations you're making on mainframes, but quantum. Are you getting a lot of questions on quantum right now? Scott Besson wants the US to lead in AI, but also in quantum computing. How is that making a difference in your business right now?
So we are very, very pleased with the innovation we brought out here. We talked about the agentic AI. You just mentioned the mainframe. We can do 450 billion AI inferences per day on the latest mainframe we just announced this quarter, the Z17. Think about using that in financial systems to help reduce fraud. So that's an incredible area of innovation. On quantum, part of the reason we announced the huge investment last year
and into quantum, and we just brought out the quantum system too this year, is because we are very excited with where that will go. That's an area in which we believe the US must and can lead on quantum computing, both for national security, but also for competitive advantage and for growing a business. And is that competitive advantage continue to grow here in the United States? You've just unveiled a huge amount of investment into the US.
Yes. So we put $150 billion here into the US because we believe that if I look at AI, I look at hybrid cloud, and I look at quantum coming, the growth opportunities are here. So we want to invest to take advantage of these opportunities. IBM Chairman, President, CEO, Arvind Krishna, live from Think.
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