Six months after coming to power, IBM CEO Arvind Krishna made his most serious push to back his plan in remaking IBM into a hybrid cloud powerhouse.

The tech giant is ditching its lagging Managed Infrastructure Services and Global Technology Services business units into their own separate public company dubbed “NewCo.” Krishna spun the move as stating it will allow those units to somehow reverse their current paths of declining revenues once they are unencumbered by growing hybrid-cloud business.

“NewCo will have greater agility to design, run, and modernize the infrastructure of the world's most important organizations,” Krishna explained in a statement. “Both companies will be on an improved growth trajectory with greater ability to partner and capture new opportunities – creating value for clients and shareholders."

Those two business units have continually posted falling revenues, which IBM has attempted to pass off as being tied to the ongoing COVID-19 pandemic. IBM CFO Jim Kavanaugh said during the company’s most recent earnings call that the pandemic has hit those operations with “disruptions in transactional performance and volume reductions. Many clients continued to delay projects, defer purchases, and favor opex over capex spending in this environment.”

The new operation, which luckily is being promised a new name, will hit the streets as a significant player in the managed infrastructure services market. It will count more than 4,600 clients and a backlog of $60 billion in revenues. That backlog entails the remaining contract commitments and is more than twice the scale of its nearest competitor, according to IBM.

It will offer hosting and network services, infrastructure modernization, services management, and multi-cloud management and migration. On the plus side, somewhat removing the IBM ties should allow the new operations to be more fully embraced by what are now IBM’s hybrid cloud rivals, which could lead to new revenue opportunities.

“Infrastructure services has been a declining-margin business for years,” noted Forrester VP and Principal Analyst Ted Schadler, in a report on the move. “It's driven off a ‘we'll run your mess for less’ value proposition for CIOs seeking to get out of the infrastructure management business. Truth is, there are big opportunities here to use automation and cloud migration to streamline the costs and capital requirements for infrastructure. So NewCo can also pursue an interesting growth path.”

More importantly for IBM’s future, Krishna said that the move will allow it to now be “laser-focused” on the hybrid cloud market. IBM backed the move by stating that the hybrid cloud market represents a $1 trillion market opportunity.

"Client buying needs for application and infrastructure services are diverging, while adoption of our hybrid cloud platform is accelerating,” Krishna said. “Now is the right time to create two market-leading companies focused on what they do best. IBM will focus on its open hybrid cloud platform and AI capabilities.”

IBM has been gradually building out its hybrid cloud business model, which has included a lot of Red Hat integration.

However, despite some segment victories, it has continued to struggle.

A recent Gartner report on the cloud infrastructure and platform services market had IBM well behind market leaders Amazon Web Services (AWS), Microsoft Azure, and Google Cloud Platform (GCP). The report noted that despite the Red Hat infusion, IBM was still viewed as working through its integration plans and continues to be troubled by complex platforms tied to its legacy operations.

The move also follows IBM’s $34 billion purchase of Red Hat, which fast-tracked IBM’s positioning in the market. It does need to be noted that the deal was initiated and consummated under IBM’s previous leader and current executive chairman Ginni Rometty.

Since that deal closed last year, Red Hat has repeatedly been the shining star of IBM’s financial performance. Nearly all of IBM’s positive financial momentum has come from its Cloud & Cognitive Software business, which houses its Red Hat operations. And more specifically, all of that growth came from the Cloud & Data Platforms sub-business, which is where Red Hat’s operations more directly sit. That unit posted a 30% year-over-year increase in revenues.

Krishna took over as CEO in April, throwing down a challenge for the company to become a hybrid-cloud powerhouse on the back of its Red Hat operations. He had most recently served as SVP for cloud and cognitive software at IBM.

Shortly after Krishna’s arrival, which also came as the ongoing COVID-19 pandemic began to take off, IBM reportedly cut thousands of jobs in an attempt to slash operating expenses.

IBM is also using the spin-off to “simplify and optimize” its internal operations. This includes a “streamlining” of its “geographic model,” “transforming its go-to-market structure to better engage with and support clients,” and “consolidate its shared services.” There was no word yet as to whether these moves would include further job cuts.

IBM is structuring the deal as being a tax-free move for IBM shareholders, so you can forget this deal having any immediate impact on the ballooning U.S. debt. But, thankfully the financial advisors at J.P. Morgan Securities and Lazard, and legal advisors at Paul, Weiss, Rifkind, Wharton & Garrison should see their fair share of compensation. (It’s not easy keeping all those lawyers happy.)

Unwinding the operations will take some time, with the move scheduled to be completed by the end of next year.

The financial ramifications of the deal were further highlighted by IBM releasing preliminary third-quarter results. Those included an expected $17.6 billion in revenue for the quarter, which would be a 2% year-over-year and sequential drop.

Investors appeared in favor of the move as IBM’s stock was trading up more than 5% in early Thursday trading. However, the big test will be to see how much they want to invest in what appears to be IBM’s second-tier operations.