Robert X. Cringely - The Decline and Fall of IBM: End of an American Icon?

THE DECLINE AND FALL OF IBM

End of an

American Icon?

by

Robert X. Cringely

Copyright 2014 by Robert X. Cringely

All rights reserved.

Certain portions of this book appeared originally on www.pbs.org and are the property of the Public Broadcasting Service (PBS). Used with Permission. All Rights Reserved.

Published by NeRDTV, LLC

Formatted by Any Subject Books, London

Epub edition: ISBN 978-0-9904444-1-1

Mobi (Kindle) edition: ISBN 978-0-9904444-0-4

Paperback edition: ISBN 978-0-9904444-2-8

In memory of Lois Cringely

1924-2014

An 8-year-old boy tries to sell IBM on a dazzling idea, sparking a life-long interest for him in the company.

Signs of Trouble at IBM: No one except IBMers are paying attention.

Good Old IBM: The heady days of The Brand.

Lou Gerstner Saves IBM -- for Awhile: First outsider to become CEO, Gerstner is given carte blanche to fix the company. Does he do the job?

Next CEO: Sam Palmisano, the 2015 roadmap, and the long con.

Why Big Companies Cant Change: They dont know the right questions to ask.

LEAN and Mean: IBM takes on Toyotas manufacturing model, swings and misses.

The 2015 Roadmap to $20 earnings per share: IBMers call it the Death March 2015

A Tale of Two Division Sales: IBM sells its PC division to Lenovo in 2004, and ten years later negotiates a deal to sell its server business to the same company. Big mistake?

Financial Engineering: How are all those share buybacks with borrowed money working out for ya, IBM?

An IT Labor Economics Lesson from Memphis for IBM: The company carelessly loses two big customers.

The Ginni Paradox or How to Fix IBM: CEO Ginni Rometty bets the farm that Palmisano was right to focus on shareholder earnings. Was he? And -- some thoughts on fixing IBM.

What if Ginni doesnt listen?

When I was growing up in Ohio, ours was the only house in the neighborhood with a laboratory. In it, the previous owner, Leonard Skeggs, had invented the automated blood analyzer, which pretty much created the present biomedical industry. Unwilling to let such a facility go to waste, I threw myself into research. It was 1961 and I was 8 years old.

I was always drawn to user interface design and quickly settled, as Gene Roddenberry did in Star Trek half a decade later, on the idea of controlling computers with voice. My father was a natural scrounger, and using all the cool crap he dragged home from who knows where, I decided to base my voice control work on the amplitude modulation optical sound track technology from 16mm film (we had a projector). If I could paint optical tracks to represent commands then all Id need was some way of characterizing and analyzing those tracks to tell the computer what to do. But the one thing I didnt have down in the lab in 1961 was a computer.

Thats what took me to IBM.

I wrote a letter to IBM CEO T.J. Watson, Jr., pecking it out on an old Underwood manual typewriter. My proposal was simple: a 50/50 partnership between IBM and me to develop and exploit advanced user interface technologies. In a few days I received a letter from IBM. I dont know if it was from Watson, himself, because neither my parents nor I thought to keep the letter. The response invited me to a local IBM research facility to discuss my plan.

I wore a suit, of course, on that fateful day. My dad drove me in his 1959 Chrysler New Yorker that was foggy with blue cigarette smoke. He dropped me at the curb and told me hed be back in a couple of hours. Inside the IBM building I met with six engineers, all dressed in dark suits with the skinny ties of that era, the tops of their socks showing when they sat down. They took me very seriously. T.J. Watson had called the meeting, himself.

Nobody said, Wait a minute, youre 8.

I made my pitch, which they absorbed in silence. Then they introduced me to their interface of choice, the punched card.

Uh-oh.

Thirty years later, long after he retired, I got to know Homer Sarasohn, IBMs chief engineer at the time of my meeting. When I told him the story of my experience with IBM, he almost fell off his chair laughing. My ideas were good, Homer said, they were just forty years too early. In other words, they were still 10 years in the future when Homer and I were talking a decade ago.

The message that came through clearly from those IBMers back in 1961 was that they were a little embarrassed by their own lack of progress. Terminals werent even common at that point, but they were coming. If I could have offered IBM a more practical magic bullet, I think they might have grabbed it.

So when I write about IBM and you wonder where I am coming from, its at least in part from that boyhood experience. A huge company took me seriously for a morning, and quite possibly changed my life in the process.

Alas, that IBM no longer exists. So I had to write this book in an attempt to get it back.

The story of this book began in the summer of 2007 when I was shooting a TV documentary called The Transformation Age Surviving a Technology Revolution, at the Mayo Clinic in Rochester, Minnesota. Rochester has two main employers, Mayo and IBM, and a reporter cant spend several days in town without hearing a lot about both. What I heard about IBM was very disturbing. Huge layoffs were coming as IBM tried to transfer much of its U.S. services business directly to lower-cost countries like India and Argentina. It felt to me like a step down in customer service, and from what I heard the IBMers werent being treated well either. And yet there was nothing about it even in the local press.

Ive been a professional journalist for more than forty years and my medium of choice these days is the Internet where I am a blogger. Bloggers like me are the 21st century version of newspaper beat reporters. Only bloggers have the patience (or obsessive compulsive disorder) to follow one company every day. The traditional business press doesnt tend to follow companies closely enough to really understand the way they work, nor do they stay long enough to see emerging trends. Today business news is all about executive personalities, mergers and acquisitions, and of course quarterly earnings. The only time a traditional reporter bothers to lookreally lookinside a company is if they have a book contract, and that is rare. But Ive been banging away at this story for seven years.

Starting in 2007, during that trip to Minnesota, I saw troubling things at IBM. I saw the company changing, and not for the better. I saw the people of IBM (they are actually called resources) beginning to lose faith in their company and starting to panic. I wrote story after story, and IBM workers called or wrote me, both to confirm my fears and to give me even more material.

I was naive. My hope was that when it became clear to the public what was happening at IBM that things would change. Apparently I was the only member of the press covering the story in any depthsometimes the only one at all. I was sure the national press, or at least the trade press, would jump on this story as I wrote it. Politicians would notice. The grumbling of more than a million IBM retirees would bring the story more into public discourse. Shamed, IBM would reverse course and change behavior. None of that happened. This lack of deeper interest in IBM boggled my mind, and still does.