IBM: The Rise and Fall and Reinvention of a Global Icon (History of Computing)

the authors backgrouind
As a 30 years retired IBM’er I agree with the authors review and telling of the IBM story . I was there for 1966-1996 with 20 in Management in many different location and functions. I very enjoyable read would recommend for any IBM’er.

Good but not much else
This is fine as a narrative of IBM’s history.There are two major shortcomings.First, there is no industry or strategic analysis. You can piece this together yourself but you don’t get any interesting or useful synthesis here.And second, the author seems to be completely financially illiterate, using nonsensical measures and making bizarre statements about IBM’s margins and revenues.

Great Gift
Great read

Good read but a narrow perspective.
As a 20 year IBM veteran who lived through the 80s and 90s I really enjoyed reading this book. Kudos to the author for the writing style and for including many of the classic IBM cultural cues. It made reading the book of familiar feeling and comfortable read.Having said that they were two things that one should understand the book misses.First is lack of any emphasis or information about technology itself. The book is long on business strategy and especially sales and marketing strategy. It spends almost nothing emphasizing some of IBM‘s fantastic technology advancements which really formed the foundation for its products success. Without the products, the sales and marketing and business strategy would not have succeeded. From the 1401 to the 360 to the AS/400 and many many others along the way, great products formed the foundation for why many companies bought IBM. Yet none of this is discussed in the book really in any detail.Second is a bit of over emphasis on blaming “bureaucracy“ and the 90’s Technology advancement for IBM‘s decline. I would argue it was 100% due to leadership. Poor leadership helped to give away the PC business. Poor leadership made the decision that in to get into application software. Poor leadership made them late to the Internet market, missed the networking market, cloud computing, and over focus on the mainframe for years after it was a dinosaur.A summary of IBM would be that great leadership created a great culture and great strategy in the first 50 years of IBM‘s existence and led to a success. Unfortunately leadership post 1980 and the subsequent strategies that were implemented is what led to IBM‘s decline.With better leadership and resulting strategy IBM could have been the Cisco and Oracle, Microsoft and Apple, and even Amazon cloud of today. The book would’ve been better if it would’ve drawn this aspect stronger.

This book does not replace many excellent books about IBM written before Cortada’s new book. Below you will Cortada’s findings – original quotes – with my comments marked “MC” and books referenced in brackets which you should read if you want to better understand IBM’s history.Many very important milestones in IBM’s history – products, systems, people, stories – are missing in this book to get a lively picture of IBM’s exciting and dramatic history! Therefore, it cannot comply with the aspiration “This book is the first authoritative business and technical history of IBM to appear in fifteen years”.I am convinced that no single book can make this happen. James Cortada did not comply with the rules in his excellent book “History Hunting – A Guide for Fellow Adventures” published in 2012!Preface:Pg. IX: Large corporations and governments began to use IBM’s products before 1900.MC: these were products invented and produced by Herman Hollerith – not by IBM! He founded his company Tabulating Machine Company (TMC) in 1896 merged into the new Computing-Tabulating-Recording Company (C.T.R.) incorporated on June 16th, 1911.Pg. XIV: How is it that a company (IBM) viewed as so stable and reliable for decades had so many ups and downs over the course of its 130-year history?MC: in the year of 1989 IBM celebrated globally its 75th anniversary considering Thomas Watson Sr. as the founder of IBM. Emerson W. Pugh (born May 1, 1929), an American research engineer and scientist – his career at IBM US spanned several decades – is also an outstanding IBM historian who confirmed this in his excellent book “Building IBM”, published in 1996. Only Sam Palmisano, in his last year as IBM Chairman and CEO invented surprisingly the year 1911 as the year of IBM’s foundation to celebrate its 100th anniversary and glorify himself. IBM has very deep roots: merger of three companies out of previously 14 companies merged into two plus TMC merged into C.T.R. Without John Patterson, NCR, Charles Flint, George Fairchild (first designated C.T.R. Chairman and CEO), Herman Hollerith, and last but not least Thomas Watson Sr. who started as CTR General Manager in May 1914 and finally renamed CTR (different from the CTR in 1911) into IBM in February 1924. Then IBM’s 100th anniversary would be in 2024!I From Birth to Identity: IBM in its early years, 1880s-1945:Pg. 23: … Flint bought Hollerith’s company …MC: Flint did not buy TMC; he was the advisor, orchestrator, organizer of the merger of three companies into C.T.R. He never bought TMC! (“Memories of an Active Life” by Charles Flint, autobiography, 1923; “Herman Hollerith” by Geoffrey D. Austin, 1982).Pg. 24: C-T-R demonstrated Flint’s genius for pulling off scams – yes, scams is the correct term …MC: Flint was never accused of or sued for scams in this context! (“Memories of an Active Life”).Pg. 31: Watson joined the company (NCR) in 1895 at age 21, already an experienced salesman …MC: in the beginning of his NCR sales activities Watson Sr. was a failure; with the help of John Range he was taught selling to become a very successful NCR salesman and then NCR sales manager (“The Lengthening Shadow” by Belden & Belden, 1962; “The Watson Dynasty” by Richard Tedlow, 2003; “The Maverick and his machine” by Kevin Maney, 2003).Pg. 33: … Watson (Sr.) denied having done anything wrong, … Was he guilty? Probably, …MC: from a legal standpoint he was not guilty! (“Building IBM”; “The Maverick and his machine”).Pg. 35: Watson did not establish IBM; rather he molded it out of the conglomeration of three firms.MC: given Watson Sr.’s IBM performance, this is ridiculous to say the least.Pg. 47: Watson spoke in slogans …MC: better read “Men, Minutes, Money” with speeches by Watson Sr. published in 1934.Pg. 52: but only the assigned “rep” was paid commission …MC: “rep” is a derogative term never used by Watson Sr.Pg. 57: Watson behaved like a Chandlerian manager.MC: the honorable historian Alfred D. Chandler never covered Watson Sr. in his books!Pg.67: IBM rode the wave, with revenue rising from $10.2 million in 1922 to $20.3 million in 1931.MC: these figures deviate from the author’s Table 2.1 on page 57 and Table 3.1 on page 66.Pg. 68: … better known as the IBM Service Bureau Division … This business can be viewed as quintessential IT outsourcing, today known as cloud computing.MC: as a pioneer in the outsourcing business and informed about cloud computing, this is ridiculous.Pg. 91ff Chapter 4 IBM and the Great DepressionMC: the role of the IBM 80 column Punched Card and the IBM 405 Alphabetical Accounting Machine introduced in 1934 saving the companies in the 18930s, sold 1934-1949 are missing!!!Pg. 113: … 1930s … we probably understand events better than Watson did.MC: if “we” is the author himself, I do not think so! He is not quoting any reference.Pg. 121: Chapter 5 IBM in World War II, 1939-1945MC: IBM contributions to win World War II are missing.Pg.138: During the war, IBM Corporate had little or no control over operations in many of its European and Asian countries. Pg. 140: Watson did not collaborate with the Germans. Pg.141: In other words, the Germans used traditional date collection methods, nor data processing machines, techniques similar, as one historian put it, to those American doctors used with their colored tags to alphabetize records. Pg. 142: … no credible evidence has surfaced that Watson or his senior managers in New York or Geneva authorized use of their equipment to facilitate extermination of Jews.MC: this confirms that Edwin Black, author of “IBM and the Holocaust” published in 2001 – accusing IBM under Watson Sr. – was wrong.II IBM the Computer Behemoth, 1945-1985:Pg. 167: There was an old IBM salesman’s saying passed down over generations that applied here: “Ninety percent of a sales is about showing up.”MC: as an experienced sales man and sales manager I know that this saying is misrepresenting “salesmanship”. For further details see “IBM Icons of progress”.Pg. 168: … IBM’s first contract as a supplier for the MIT system (SAGE in IBM terms) came in October 1952, to build the hardware while Remington Rand would write the necessary software.MC: RAND wrote the software, not Remington Rand which was IBM’s competitor ranked nr. 2 against IBM.Pg. 192: That style of management (Watson Jr.: Williamsburg conference 1956) … remained for the next 60 years.MC: Lou Gerstner Jr. implemented a new matrix management style in 1993/1994 to run IBM.Pg. 203: Chapter 8 System 360: One of the greatest products in history? … In hindsight, it seemed a sloppy and ill-advised endeavor, chaotic in execution, yet brilliantly successful.MC: IBM 360 was a Revolution, not Evolution! “The computer that IBM made, that made IBM!”(“IBM’s 360 and Early 370 Systems” by Emerson Pugh, Lyle Johnson, John Palmer; 1991),Pg. 219: In the first month following the S/360 announcement, customers worldwide ordered over 100,000 systems! Pg. 225: By the end of 1966, customers had taken delivery … of 5,261 systems in the United States, … Pg. 365: IBM built S/360s (1964 through the early 1970s) … 35,000 of them.MC: the author is not firm with figures.Pg. 249: Today’s employment practices represent some of the most dramatic divergencies fromnearly all of IBM’s history.MC: YES, especially under Rometty’s leadership (events firing people called “Resource Actions”).Pg. 265: The S/38 proved massively popular, wiping out the majority of its competitors during the 1980s and leaving others crippled survivors (such as DEC). … IBM’s AS/400 replaced the S/38 beginning in 1988.MC: The S/38 was the most innovative IBM system after IBM S/360, however IBM itself “declared the System /38 ‘non-strategic’ … The so called “DEC killer” was not S/38 but IBM’s AS/400 replacing the IBM Systems S/36 and S/38. (“The Silverlake Project” by Bauer, Collar and Tang, Foreword by Tom Peters, 1992; “Fortress Rochester – The Inside Story of the IBM iSeries” by Frank Soltis,2001.)Pg. 285: … notably the work of CEO Frank Cary, who I rescue from obscurity and argue was one of the most powerful and best CEOs in IBM history. … Pg. 310: During his tenure as CEO and chairman, he had decentralized product development and midwifed IBM’s PC, introduced in August 1981, and had grown the company.MC: yes, BUT the way he and his executives midwifed the IBM PC was the beginning of the Fall of IBM and the Rise of Microsoft!Pg. 325: Chapter 12 Two Decades of Antitrust Suits 1960s-1980s … Pg. 345: … on January 8, 1982, Tom Barr (led IBM’s defense) felt vindicated, exclaiming that “Sixteen Federal judges have decided in our favor.” He added, “These claims are without merit. IBM has been completely vindicated.”MC: the cases began in 1969 and ended in 1982 (“Folded, Spindled, and Mutilated – Economic Analysis and US. vs. IBM” published by Fisher, McGowan and Greenwood, 1983).Pg. 379: Over time, it became clear that the disappointing story of IBM’s PC mirrored the declining performance of the entire company.MC: Yes; for details I recommend: “Computer Wars” by Ferguson and Morris, “Big Blues – The Unmaking of IBM” by Paul Carroll, 1993; “ThinkPad A Different Shade of Blue” by Deborah Dell and Gerry Purdy, 2000; “Idea Man” by Paul Allen – A Memoir by the Cofounder of Microsoft, 2011).Pg. 398: Known to few outside of IBM and Microsoft, in mid-1986 Gates had offered to sell IBM a portion of his company. He needed cash to fund development of new operating systems.MC: this became known to the public in 1993: “Big Blues – The Unmaking of IBM” Pg. 118/119/131.Pg. 402: … midrange AS/400 … It took a long time to design and build them.MC: “The AS/400 was launched globally – in 27 different languages and with 2,500 applications software programs. And it all had to be done – for survival’s sake – in two years instead of the normal four!” (Foreword by Tom Peters in “The Silverlake Project” quoted above).III A Time of Crisis, 1985-1994:Pg. 425: Just as Louis V. Gerstner Jr. and a small group of executives were able to formulate a rescue of IBM in the 1990s, a handful of earlier senior managers, perhaps as few as two dozen, had led IBM into the abyss in the 1980s. Pg. 437: So, instead of the $100 billion forecast for 1990, IBM brought in $69 billion, still a good performance but far from what Opel had planned on in 1980 and 1981. Pg. 457: Decisions made by Cary affected Opel’s realities; Opel’s realities affected Akers’s circumstances. Akers’s decisions shaped what IBM looked like on the day he retired.MC: therefore Cary was not one of the best CEOs; I recommend reading books above as well as: “Blue Magic” by Chposky and Leonsis, 1988; “Broken Promises” by Quinn Mills and Bruce Friesen published 1996; “IBM REDUX” by Doug Garr, 1999; “Saving Big Blue” by Robert Slater, 1999; and “Who Says Elephants Can’t Dance?” by Louis Gerstner, Jr., 2002).Pg. 460: The Role of IBM’s Board of Directors … In 1988, IBM’s board consisted of 18 members, 6 of whom were active or retired IBMers, 6 CEOs from other companies (… in the health industry and two from media), 2 outside lawyers, and 4 from higher education. None came out of the computer industry external to IBM, and all were on the older side (50s-60s). Pg. 464: That it failed to fix IBM’s problems or help Akers suggests that collectively the board proved unwilling, complicit, or simply incompetent to carry out its fiduciary and ethical responsibilities until forced to by circumstances. Pg. 467: Then as now, a fundamental structural problem existed with senior leadership. Akers had been the CEO and the chairman of the board, but also an operational manager within IBM’s management structure. … At IBM, all these positions were consolidated into one … Another lesson from IBM’s experience is that reorganizations do not fix bad strategies. IBM has had a penchant for reorganizing to fix problems. … Reorganizations should be conducted to implement strategy. They are no substitute for a good strategy. Pg. 485: …Gerstner’s decision to reverse Aker’s strategy of breaking up the company. Gerstner later wrote that it was, “I believe, the most important decision I ever made – not just at IBM, but in my entire business career. …” Pg. 499: The turnaround, as remarkable as it appeared, reflected a broad recovery that had started before Gerstner came to IBM but that he and his executives accelerated. He added new elements …MC: Gerstner’s turnaround AND returning of IBM to a leadership position – described in his excellent book – is a unique role model for saving a global corporation near bankruptcy. Chapters 17 and 18 are no substitute for Gerstner’s book about the successes realized by Gerstner, his executive teams and the whole IBM company as well as the books written by Doug Garr and Robert Slater).IV IBM in the New Century:Pg. 539: Once full employment was gone and benefit reductions had begun … a near firestorm marked the time of Palmisano’s successor, Rometty, whose chairmanship was viewed as one of laying off workers to achieve her operational targets by cutting expenses. Pg. 546: The next period, under Rometty, was fraught with financial shortfalls and concerns, more churn in IBM’s employee population, a faltering strategy that ushered in a more widely supported one, what Rometty called a “reboot,” and the birth of a new approach for sustaining IBM’s business. Those who thought IBM could continue to ride a wave of success based on the actions taken by Gerstner and Palmisano were mistaken. Pg. 544: Table 18.1 IBM’s business performance, select years, 1998-2011 shows Revenue, Net Income, Earnings per share, Cash flow from operations, Return on stockholder’s equity, number of employees, stock price.MC: the development of “Good Will” in the balance sheets – reflecting the purchase price of (almost countless) acquisitions of companies subtracting the difference between the fair market value of the assets and liabilities – is missing. 2011: Good Will/Total Assets: 26.213M$/116.433M$ – 2019: 58.222M$/152.186M$ – see Red Hat acquisition in 2018.Pg. 551: From Roadmap 2015 to Roadkill 2015 Pg. 554: … until IBM abandoned Roadmap 2015 in October 2014, EPS of $20 had become the target before all others. Rometty was the longest-serving champion of Roadmap 2015. Pg. 556: She proved more of a technocrat than an inspirational leader, more in the mold of Palmisano and Akers but more blunt.MC: the architect and mastermind of BOTH fateful, shareholder value focused Roadmaps (2010 and 2015) was James Kavanaugh, now CFO since 2018, replacing Martin Schroeter – Kavanaugh is not mentioned in this book published in 2019!Pg. 571: While IBM arrived late to cloud computing (see page 68!) it slowly extended its presence among large enterprises in 2015 and 2016 with combinations of cloud services.MC: in the year of 2018 IBM announced the acquisition of Red Hat to improve its position in the area of cloud computing – a deal valued at 34B$ with Red Hat’s market capitalization at 20.5B$. This is not mentioned in this book published in 2019.Pg. 576: In January 2014, Rometty established the IBM Cognitive Business Group, committing the company to selling Watson-based services, with a staff of 2,000 and revenue targets. … Rometty bragged that it would generate $10 billion in annual revenue within a decade. She possibly had her own technology “big bet.” … Pg. 577: Although IBM was not sharing information about how much revenue it generated from each imperative, estimates by industry watchers speculated that revenue attributed to Watson technology hovered at $500 million in 2016. … Even though IBM’s financial performance remained anaemic in 2016 and 2017, Rometty had to be feeling better about her overall strategy, thanks to Watson, as she said, “Digital business is converging with a new kind of digital intelligence – what you will recognize as Watson. We call this Cognitive Business.” You can forgive her hubris when she said, “We can literally build cognition into everything digital.” … Now she had to execute with a company still troubled. Pg. 584: Critics saw IBM shifting too slowly to cloud computing and pricing its analytics services too high, while Microsoft pushed ahead technologically on mobile services, although IBM and Apple partnered to pursue that opportunity. Pg. 590: Rometty was never a quota-carrying salesperson … she never came up in the sales culture.MC: It seems Rometty did not read “Smart Machines – IBM’s Watson and the Era of Cognitive Computing” by John E. Kelly III and Steve Hamm – both IBM – published in 2013. Kelly III wrote in the Preface: “The changes that are coming over the next two decades will transform the way we live and work just as the computing revolution has transformed the human landscape over the past half century. At IBM we call this the era of cognitive computing… “Together, we can drive the exploration and invention that will shape society, the economy, and business for the next fifty years”.MC: running the business requires understanding of what you want to sell and your customers to whom you want to sell! Otherwise forecasts are futile. The decade mentioned by Rometty ends in 2023, IBM seems to be far away from the 10B$ annual revenue with Watson technology. The real big bet that could make or break IBM is the Red Hat Deal. Now, on October 8th, 2019, the new IBM CEO Arvind Krishna is announcing to split IBM into two companies: separating Global Technology Services with ca. 19 B$ revenue and ca. 90.000 employees into a separate company going public. What would the Watsons and Gerstner think about this? I recommend reading this book very carefully, however, not as a substitute for excellent books written before. Pg. 595: Between 1986 and 2007, the amount of information-data-one could store in a computer increased by 23 percent each year. The amount of information transmitted through telecommunications grew by 28 percent each year. The raw computing power of computers grew by 58 percent each year.MC: obviously, the market has exploded; 1USD in 1984 is equivalent in purchasing power to about $2.51 in 2020. In 1984, IBM’s revenue was 46B$, adjusted to 2020 it would be the equivalent of 115B$; the market grew by a factor of ca. 10 – IBM wanted to be a 100B$ company by the end of the 1980s. By year end 2019 the IBM revenue was only 77B$.With a new IBM CEO – Arvind Krishna – and a new IBM President – Jim Whitehurst – since April 2020 I recommend reading “The OPEN Organization” by Jim Whitehurst, CEO RED HAT, published in 2015, and “Hit Refresh – The Quest to Rediscover Microsoft’s Soul and Imagine a Better Future for Everyone” by Satya Nadella, Microsoft’s CEO, published in 2017, while Rometty was running IBM her way!