Happy birthday, Big Blue

The Boardroom

by Jason Stamper| 08 July 2011

IBM celebrated its centennial recently. To mark the occasion Jason Stamper spoke to the company's UK and Ireland chief executive, as well as its corporate citizenship and affairs manager, to try to get to grips with Big Blue as it lives and breathes today

Thomas John Watson Snr, chairman of IBM in the 1940s, allegedly once said: "I think there is a world market for about five computers". While there is scant evidence that Watson ever said any such thing, the sentiment highlights an interesting truism about IBM, as it celebrates its 100th anniversary recently.

It has gone from a company selling tabulating machines to a handful of firms in 1911 to one attempting to integrate, manage and optimise billions of digital 'things' for organisations around the globe, while its outlook has moved on from building smarter adding machines to helping to build what it calls a Smarter Planet.

IBM is not doing too badly for a 100-year old firm. It may not get a letter from the Queen, but the popularity of its products and services make it the 18th largest firm in the US and the seventh most profitable according to Fortune.

It's also been named the number one company for leaders (Fortune), number two best global brand (Interbrand) and one of the most innovative firms (Fast Company). Not surprising given that it consistently wins more patents than any other technology firm.

Speaking to CBR, IBM's CEO of the UK and Ireland, Stephen Leonard, says that the firm's centenary is "one that we're quite proud of. There are few organisations in the world that get to be 100 years in existence, and there are certainly none in our industry."

But he says that rather than giving itself a slap on the back or resting on its laurels, the company is using the milestone to "demonstrate the impact that IBM has had on the world and the impact that we believe that we can continue to have, and to continue to contribute to things that really matter to businesses and organisations in today's environment".

Of course, over these past 100 years IBM has had its fair share of ups and downs. As The Economist noted recently: "It almost came unstuck early on because its bosses were hesitant to abandon punch cards. And it had a near-death experience in 1993 before Lou Gerstner realised that the best way to package technology for use by businesses was to focus on services."

IBM still has its fair share of challenges and challengers today - not least a fairly recent competitor to its broad technology and services portfolio, in the shape of Oracle, even more bullish than usual after its acquisition of Sun Microsystems finally gave it a strong hardware story to add to its software argument.

Shortly after that acquisition, Oracle boss Larry Ellison made it clear which firm 'Oracle Microsystems' was going after: he highlighted a benchmark that found a Sun-Oracle server configuration to be faster and more energy efficient that a rival IBM set-up. Ellison said he was so confident that this comparison would hold up that he launched a new program in which Oracle would pay customers $10m if a Sun-Oracle configuration wasn't at least twice as fast as a comparable IBM solution.

Ellison also gave a parting shot to IBM's eco-friendly 'Smarter Planet' campaign, saying: "I don't know what building a smarter world means. We're going to focus on building smarter computers."

That's as may be. But among the things that IBM does really rather well is its so-called 'Big Iron': its trusty mainframe. While rival server architectures have come and gone, the mainframe - always backwards-compatible with previous applications - is still the server of choice for many organisations' most critical workloads. With the 'z' in zEnterprise standing for 'zero downtime', the systems are built with spare components capable of hot failovers to ensure continuous operations.

The mainframe and IBM's image will always be inextricably linked: the mainframe is Big Iron, IBM is Big Blue. The mantra that "nobody gets fired for buying IBM" is surely down to the fact the mainframe never lets the IT department down.

As Richard Holway, the influential analyst on TechMarketView, puts it: "Although IBM has been around for 100 years, for me the IT industry started in 1964 with the launch of the IBM S/360 [mainframe] - the first computer designed for business. There is no other company in the whole IT sector that has dominated the sector ever since. It has done this by reinventing itself several times. For example, the IBM PC in 1981 and IBM's change in business model from 'Big Iron' to 'Big Software and Services' over the last 15 years."

'IBMers'
Today IBM employs around 425,000 people in 25 countries around the world. Many of those staff will do a variety of roles at the firm no matter how long they stay - 'IBMers' joke that IBM stands for 'I've Been Moved' or even 'I Break Marriages'. So how would IBM's Leonard describe IBM's staff?

"It's a completely different company to the company it was 100 years ago, but one thing that is the same is the essence of the organisation - what we stand for," he says. "Thomas Watson Snr felt that what would really distinguish his company was the people that worked for it: the intellect, the thought process and what they brought to the table, not the products that we sold."

Indeed Watson encouraged employee sports teams, family outings and a company band, while IBM was among the first corporations to provide group life insurance, survivor benefits and paid vacations.

Today, IBM and its staff do prolific volunteering work and other charitable activities. But why? Mark Wakefield, corporate citizenship and affairs manager at IBM UK, says, "We have a very talented and skilled workforce... amongst the brightest and the best in the country. We understand that for IBM to progress we have to share some of that talent and resource and intellect, and enable other organizations and individuals to progress as well."

But what of IBM today? Carter Lusher, chief analyst at Ovum, believes it is facing a number of challenges as it looks to the next 100 years: "We think that one of the biggest dangers for IBM is complacency, but it has a plethora of other challenges including disruption by technology and competition, consumerisation of IT, government regulation pushed in part by non-governmental organisations (NGOs), and obsession with financial results that cause it to fail other stakeholders.

"While we celebrate IBM's centenary, it is critical to think about how this vendor will adapt in the future," says Lusher. "Three CEO cycles, countless changes in the tech fad du jour, climate change, politicians and NGOs wanting IBM to do things that make no business sense, are all challenges and opportunities it will face over the next 20 years. It needs to focus on the 'international' and 'business' parts of its name. It thrives when it focuses on the business needs and opportunities of its customers."

IBM, as always, faces stiff competition. Oracle and its new hardware business, HP and its new CEO, and even Apple and its new tablet threaten to undermine IBM's relevance in the modern enterprise. Yet as IBM's Leonard says when asked how he sleeps at night managing over 20,000 staff in the UK: "I do, because I have a fantastic team, and we're all part of the same team ethos. I stand on the shoulders of giants."

It might not be perfect, and it may not have the best product in every category, but few would underestimate IBM and its 'IBMers'. As TechMarketView's Holway neatly sums up: "As an analyst, I find it difficult to give any cast-iron forecasts on the future of any of the leading players - except one. I have absolutely no doubt that IBM has both the resources - both financial and managerial - to rise and adapt to any of the new opportunities that the IT market throws at it. Happy birthday IBM."

Hear more on IBM's Smarter Planet strategy and why it still resonates today in the podcast interview with Stephen Leonard on www.cbronline.tv.

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