On Thursday IBM announced that it would separate the Managed Infrastructure Services unit of its Global Technology Services division into a new company, which it said would move it from being an entity with “more than half its revenues in services to one with a majority in high-value cloud software and solutions,” with the new company to be “entirely focused on managing and modernizing client-owned infrastructures.”

This represents a fundamental shift in favor of the cloud and artificial intelligence, with CEO Arvind Krishna stating that it will “redefine the future of IBM,” and Executive Chairman Ginni Rometty saying that it will “position [the company] for the new era of [the] hybrid cloud.”

Specifically, it seeks to allow IBM to place its focus on a ‘$1 trillion hybrid cloud opportunity’ and “have greater ability to design, run and modernize the infrastructure of the world’s most important organizations.”

Such a transformation is assisted by IBM’s recent purchase of Red Hat, a distributor of open source software and tools and the naming of its’ CEO Jim Whitehurst as President of the company.

It is planning a pro rata spin off to IBM shareholders that will be tax free for U.S. Federal income tax purposes.

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