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IBM Bags Deal From USDA to Accelerate Digital Modernization

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International Business Machines Corporation (IBM - Free Report) recently announced that it was awarded a deal by the U.S. Department of Agriculture (“USDA”) to offer software development services and accelerate the latter’s digital modernization of operations.

The deal was awarded as part of a blanket purchase agreement (BPA) to five vendors, which includes IBM. The combined valued contract is worth $620 million and set to be completed over the next five years.

IBM and USDA have a long-standing history spanning over nine decades. The tech giant has been helping USDA for various projects like the Food Safety and Inspection Service, Forest Service and Agriculture Marketing Service.

 

IBM noted that it will assist Farm Production and Conservation (FPAC) to upgrade its legacy applications. The application modernization will enhance the conservation programs’ effectiveness by helping farmers and ranchers to improve water supplies and water quality, limit soil erosion as well as enhance wildlife habitats and reduce damage caused by natural disasters, added the tech giant.

Application Modernization Market Growth Augurs Well

Application Modernization refers to revamping the existing legacy infrastructure to scalable, cloud environment by using latest technologies. Enterprises need to modernize and upgrade their systems to cater to evolving business and consumer needs as well as keep up with the technological advancements and retain a competitive edge.

Per a report available on ResearchAndMarkets, the worldwide application modernization services’ market is expected to witness a CAGR of 19.2% between 2020 and 2027 and reach $32.9 billion.

Currently, the rapid migration of workloads to cloud environment, accelerated by the COVID-19 crisis, as well as increasing need to modernize existing infrastructure to continue business operations are the main driving factors of the application modernization services market, per a report from MarketsAndMarkets.

Also, advantages of infusing innovative technologies like AI, machine learning (ML) and Big Data with applications to enhance business outcomes is another catalyst.

These prospects bode well for the company. IBM Cloud’s portfolio of products and services assists organisations to upgrade their legacy systems into the cloud environment.

IBM is focused on growing its cloud business, which it considers a $1-trillion dollar revenue prospect.

Persistent Headwinds

Nonetheless, sluggish IT spending due to COVID-19 crisis-induced macroeconomic weakness, is likely to affect demand for IBM’s offerings at least in the near term.

Further, increasing debt amid extensive restructuring activities and intense competition in the cloud space are other concerns for this Zacks Rank #4 (Sell) company.

Key Picks

Some other better-ranked stocks in the broader sector are Qorvo (QRVO - Free Report) , Cirrus Logic (CRUS - Free Report) and Avnet (AVT - Free Report) . All the stocks flaunt a Zacks Rank #1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here

Long-term earnings growth rate for Qorvo, Cirrus Logic and Avnet is currently pegged at 15.8%, 7.1%, and 19%, respectively.

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