I know a lot will probably say right before Ginni took over but I think our troubles have started long before then. It happened the moment the company stopped seeing older employees as invaluable contributors who built this company and started seeing them as a cost to get rid of. Once they started cutting people with most experience and knowledge, the fall was inevitable.
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Last time IBM was great was when the Services teams were not trying to destroy our install base and "help" replace with competitor solutions
2014 was the last good year. 2015 they blew it up with st—dreorg CAMSS and creative accounting to pretend to be selling "Cloud". I miss the simple SWG, STG, and SVCS, 3 pillars. No need to hype stuff up and confuse everyone with what product is for Cloud, Analytics, Mobile, Security, Social...now just "Cloud", Systems and Services.
3bwm I agree with you. When you get under most of the problems within any business, there are usually 1 or 2 underlying problems that cause most of the issues. Solve those underlying problems, and most day to day problems go away. The underlying problem IBM assumed with the purchase of PWC was they bought a bunch of “financial engineers” who had zero understanding of what the competitive advantage “innovation” brought to the IBM equation. NOTE Gerstner also made this fundamental error in judgement. As such innovation took a back seat to financial engineering/cashing out for the exec’s (what Gerstner understood best and practiced his whole career). The result was a disaster for IBM, as it lost its value proposition in its customers eyes to excessive executive compensation. The rest as they say is history
2002: before the PWC acquisition. Given the horrific borderline psychotic leadership who came from that acquisition and has climbed the ranks, it was arguably the worst acquisition IBM ever made.
Twofold
- Not taking the rights to the OS when the PC came out started the decline
- the financial engineering that became the only thing the sr execs cared about under palmisano.
Gerstner did all he could to overcome mistake number 1.
Ginny was handed a sh$t sandwich. The issue is she did not do anything about it until IBM no longer had maneuvering room financially and she hung onto the policy of financial engineering in lieu of really investing for 3-4 years.
Personally I think Arvind has very little room financially to do much. RH was about 2x what it was worth and basically is eating all the financial flexibility the company has right now.
Sadly, I think the real intrinsic value of the company is under 100 a share.
Want to know how Amazon eats IBM's lunch? They hired all the 40/50 something experienced IBM'ers to call on large customers and move them to AWS. IBM's problems were never about having a bad "seniority mix". The problem was lack of products customers wanted to buy because of lack of focus on having that by senior management.
"In C&CS there are a lot of changes made at Exec levels."
True but don't read anything into it. This has nothing to do with eliminating bad execs. It is just the constant churn of an organization trying to find relevance. With every new exec team comes new priorities, worse than the first, flailing about.
The last day was when they made Notes Budy go away..
IBM focused too heavily on reducing costs and not on services. Their prices were high but provided a bottom dollar service. This is what killed their reputation and the rest is history
and don't forget Broken Promise Thomas
But then there's BvK............
AK got rid of John Kelly from Research division, who was the father of Watson and single handedly has produced something for IBM that can be sold (well even Watson is having tough time selling).
A lot of VPs have been moved around to less important positions, in the hope that they would leave on their own. But they are still here.
In C&CS there are a lot of changes made at Exec levels.
AK has had over a year, why HASN'T he gotten rid of all the GR holdover execs? Most of them are working against him every day.
#2 is not happening. Waiting waiting waiting
Nope not happening and until it does IBM is SOS.
Every successful restructuring has 3 basic components
- Eliminate the current unsuccessful strategy for a new strategy
- Eliminate the management team who brought on the failure
- Exploit the new strategy to create value
Every single successful turn around incorporates some pieces/aspects of all 3
IBM under Gerstner eliminated an unsuccessful strategy for services. He eliminated 50% of management positions along with 33% of the employee population, and he exploited the new services strategy to create value in the enterprise engagements.
AK has bought a new strategy (Redhat)
He is in the process of spinning off the old strategy (GTS)
He needs to eliminate the management team that brought him to this disaster
He needs to exploit the new strategy (AI, Hybrid cloud, and modernization) into customer perceived value
Keep your eye on band 10 and above levels Currently they are at 14 bands If they go down to 7 you know he is serious about restructuring IBM If they remain at 14, he will fail
What does Cringely say:
https://www.amazon.com/Decline-Fall-IBM-American-Icon-ebook/dp/B00KRHWZ22
Moffat was Palmisano's "nepotee" who got caught.
We can thank Bob Moffatt for coining the term "resources" when he referred to employees. I was once in a meeting with him when he first used this term, he then went on to say "that is why ladies and gentlemen I will never be allowed to run HR in this company"
The decline is inversely correlated to the increase in GR.
I'd say that the beginning of the end was getting in bed with Microsoft jointly building OS/2.
First, working with Microsoft jointly is always a bad idea. They will take from you and eventually build their ow.
Second, making OS/2 be 16 bit initially was a colossal technical decision. Sure, the installed base of hardware was 16 bit, but the 32 bit future came fast, and they had a c-appy 16 bit OS to hawk.
The late 90’s is the approx correct answer. Gerstner came into IBM in 1993 and focused on saving IBM from itself. It worked in that he spent the first 3 -4 years restructuring IBM for efficiency around Mainframe and the delivery of services. He then pivoted IBM to e-commerce and focused the entire company there. IBM was the leader in e-commerce in the 1998-99 time frame. The company was hitting on all cylinders and then he got lazy and unfocused. That resulted in IBM morphing into a financial engineering company vs an innovation company. That’s when IBM started to downfall. They lost their focus, thus their innovation. When that happened, they were doomed. What happened after approx 1998? IBM pivoted to enriching their executives and the compensation plan for the management team changed dramatically. Innovation took a back seat to financial engineering. That plus two ineffective CEO’s who focused on financial engineering instead of what brought you to the party (innovation), and here we are
I'd agree that it was around 1987. I noticed that PSRs - Program Support Representatives - the guys who actually troubleshoot software problems -AT A CUTSOMER SITE - disappeared, That was followed by the disappearance of customer SEs - System Engineers - who worked with a site's systems programmers. Before going "poof", IBM relegated them to sales personnel for software, etc. at a customer site.
Prior to that, IBM had wiped out most mainframe competition. RCA, Burroughs, Sperry, CDC, Amdahl - all bit the mainframe dust. IBM had it made and then, through "astute" management, they blew it.
Today a customer is essentially "on their own" with support. IBM can "talk the talk" with support. But with tech talent leaving or being jettisoned, IBM can't "walk the walk" in that regard anymore.
I've been at numerous sites where SLAs (Service Level Agreements) weren't met by IBM with a client. The M.O. was either no tech talent or a revolving door of tech talent at IBM - saw it many times as a contractor in that revolving door.
The M.O. for missed SLAs - we (IBM) can play games with contract costs, along with "Gee we're really sorry about missed SLAs and will strive to do better", and "where're you gonna go now that you fired your own tech staff and gave support to us (IBM)."
I've actually seen a few major clients take their datacenters back from IBM and just go internal with alternate(duplicate) datacenters. All that is a WISE move instead of this "cloud out there somewhere" datacenter risky mirage nonsense.
Late 90s. MQ was released in 93 and WAS in 98, what major platforms since? Nothing. Just acquisitions and financial engineering.
April 1, 1987.
Pre-PS/2.
April 1987