The IBM story
Today – June 16, 2011- IBM turns 100 year old. It is difficult to imagine a “very old” company (In high-tech industry, company with more than 10 years is considered “old”) is still have the vitality of a young startups. Before I explain why I think IBM is still strong, let us look at its history.
The company was formed in June 16, 1911, when three companies that made scales, punch-clocks, and office machines merged to form the “Computing Tabulating Recording Company”. Later it change the name to International Business Machines (IBM). One of the products was a machines that read data stored on punch cards. In 1930s, IBM’s cards were used to keep track of 26 million Americans in the Social Security program. The machine has three major components: Input (To read cards), Processing and data storage, and Output (Printer). At that time, it is the most sophisticated machines in the industry.
During World War 2, when computing technologies were developed to be used in missile and space programs. IBM immediately jumped into the computer business. The key force in IBM was Thomas J. Watson Sr., a person with strong management style. He demanded everybody in his company to follow strict standards for everything from the clothes they wear (white shirts, blue suit and red ties) to creativity (his slogan: “Think”). It was Watson, and later his son, Thomas Watson Jr. that build IBM into the most powerful computer company in the world. In just ten years, its computers were used to calculate everything, from banking transactions to launching space satellites. IBM invested significant funding and resources into research to maintain its dominance in the market. Today, many components that we use in information technology were invented at IBM: Paper tape drive, magnetic drive, hard disk drive, magnetic card drive, floppy disk, database storage, key board, memory card, and several programming languages.
By 1960s, IBM was the largest high-tech company in the world. Its computers were sold to almost every countries and its workforce reached over half million people. Because IBM computers were used in many businesses and manufactures, including governments. It is a dream of most engineers and developers at that time to work for IBM.
In late 1970s, the technology industry changed significantly with new inventions such as transistor, semiconducting chips and microprocessors etc. These electronic components allowed hobbyists to build their own computers. Of course, nobody would even think these small homemade computers could compete with the large IBM mainframe, except two young students named Steve Wozniak and Steve Jobs. Together they formed a company called Apple to sell “Assemble kits” for people who like to build computers. This small business grew into big business and created a new revolution: “The electronic revolution” and later the electronic industry in a place called “Silicon Valley”. Steve Jobs declared that his small company will beat the big company (IBM) because in the fast changing market, “Smaller is faster”. His famous quote: “Big elephant cannot dance”.
When Apple computer began to threaten the market that IBM control, the “big company” immediately created another smaller computer called Personal Computer (PC) to “Squat” this “small competitor”. In a hurry to recapture the market, IBM made a big mistake by allow an “Unknown” company called Microsoft to build the software that control the operation system. At that time, few people would consider software as the key factor, except Bill Gates. Both IBM and Apple were hardware companies so as they compete the battle should happen in the hardware arena. However, as the price of hardware goes down, PC prices became more affordable, more people are buying it so the need for more software applications increases. To build software for the PC, every companies must have license from Microsoft to use its operating system. Suddenly this “Unknown” company grew bigger, more powerful and eventually “Squat” both bigger company: IBM and Apple. Somebody mentioned that Bill Gates using another quote: “When Kingfisher and Clam fight, it is the fisherman who win”.
As the PC get more powerful, more companies were using it instead of IBM mainframes. As sales of mainframe dropped, so was IBM values. Its stocks dropped from over five hundred dollars per share to merely less than one hundred. Many people considered IBM or “The big elephant” was too big, too bureaucratic to compete in fast-changing times but IBM hired an outsider as CEO in 1993 to help with a turnaround.
Louis Gerstner, the new CEO had little knowledge of technology but had a new vision for this company. First, he broke up many hardware groups that did not perform well and eliminated jobs. IBM, which had 406,000 employees shed more than 150,000 jobs as the company lost nearly $16 billion over five years. Instead of continue to build mainframe computers, he turned all efforts into providing services. He said: “The future of this industry is not in hardware, not in software but in services. In the next century, everything will be in services”. Under his leadership, IBM provided data storage and technical support to companies that had already bought IBM computers to keep all old customers happy. When economic crises happened, many companies could not afford to keep their own IT workers, many paid IBM to take over the works. IBM helped them find ways to cut costs and handle technology that they do not have the expertise. Over time, the new vision helped IBM to become the world’s biggest technology services provider. As Lou Gerstner was quoted after the company successful transformed itself: “Who said elephant cannot dance?”.
Today with about $100 billion in annual revenue. IBM is ranked 18th in the top 500 global companies. It is three times the size of Google, twice bigger than Apple. Its market value of over $200 billion is much better than both Google and its old enemy, Microsoft. As people began to recognize that “Service is replacing both software and hardware as the key factor to grow in this competitive market”, many companies began to jump into “Software as a Service” or “Cloud computing” including Google, Apple, Microsoft, Dell, HP, and Oracle but on the top is still the big blue elephant: IBM.
To conclude this story, I would like to share with you my own opinion on why do I think the “very old” IBM is still have the vitality of a young startups. (Since it may be bias because it does involve myself, my apology for some readers).
Today IBM do not stop at just providing services. Its division just create a new computer technology. This technology will again create a new revolution in the information technology. By collaborate with Carnegie Mellon, the new computer called “Watson” has defeated two top people in the game show called “Jeopardy” by answered many questions correctly. This is the smartest, fastest and most sophisticated computer ever built. In few years, it will replace many computers that we use today. There will be no keyboard, no mouse but only natural languages. This computer is using the most advanced “Artificial Intelligence” technology called “Machine learning” to learn how to interact with human. With Watson, users can ask the computer to do certain things in their own language (Today, it is still in English but the computer is learning several languages now). The computer will analyze your command and will answer accordingly. Since I am involving in this technology as a team member of the CMU research, I will have another blog article about Watson.
Sources
- Blogs of Prof. John Vu, Carnegie Mellon University
