The Unmaking of IBM

By | December 25, 2005

I’ve just finished reading Big Blues: The Unmaking of IBM, by Paul Carroll. Published in 1993, it’s a bit out of date now, but it provides an interesting look into the mid-80’s to early-90’s IBM. This was a time when it went from being the largest US company, to posting a loss greater than the value of the second largest.

The points made in the book as to the cause of IBM’s troubles were made extremely clearly, and over and over. It’s hard to tell if that’s because they’re the issues that author identified and wanted to make sure the reader knew that’s what they were, or if it was that those problems were so institutional that they came up all the time. Based on the anecdotes and descriptions, I think I’m erring toward the latter.

There are a couple of major points that, according to the author, were largely the cause of the company’s downfall:

  • Massive beaurocracy causing even little things to happen slowly,
  • An extreme unwillingness to allow change, or even see that different markets behave in different ways

These never became such problems when the company had an 80-90% market share with it’s mainframe systems. But when cheap personal computers were being developed by much smaller, more agile companies, the competition in a new field meant that these problems became devastating, as IBM couldn’t change to make itself fit the new market, and couldn’t see that it had to. The main difference between these two types of customers is that in the mainframe market, IBM could pretty much dictate what the consumer would get. In the desktop market, costs mattered a lot more than a name brand.

There were some truely impressive examples of the beaurocracy, and the struggles to fight it. It was found that often the only times that a department did well was when it was separated from the rest of the company. Two main examples of this were the PC department (remember the terms ‘IBM XT/AT/PC’?), and the Lexington typewriters department (later Lexmark printers). However, at least in the case of the first one, once it managed to succeed, it was reabsorbed back into the fold, killing it. There were also many stories of good plans that were made to travel the length and breadth of the company, but all it took was one person feeling like it was stepping on their turf, or had the potential to cut into their product sales, and it was effectively stalled.

The company intertia is something that seems to be self evident, a large company can’t usually turn on a dime. However, if the book is remotely accurate, time and time again the culture got in the way. Things like refusing to sell computers at low prices to make it competitive, simply because it’s unthinkable that mainframe hardware profit margins can’t be made on consumer-level hardware also. Another major blind spot was that it wasn’t until many years of being pounded by competitors that the management started to realise that the IBM stamp wouldn’t be guarenteed to sell hardware to consumers the same was it would to corporate clients.

Another interesting part of the book deals with the relationship between IBM and Microsoft, particularly the mismanagement dealing with the production of OS/2.

The only problem I had with the book, or rather writing style, was that it is prone to having a new chapter restart the timeline back in the 80’s, which makes it hard to keep a mental timeline of all the events. However, I suspect that the alternative of having it go purely sequential would be even worse, as there was a lot going on all the time, and following mostly logical paths as it does is probably the best way.

It’s unfortunate that the book was written so long ago, I’d quite like to see something in similar detail about the change since then, from a hardware company into a services company that is actually starting to become significant again. There are a few points in the book where it is dealing with things that are being developed in early ’93, and uses names that I’ve never heard of, so I expect that they’ve vanished the same way so many other IBM projects just a short time earlier did.

Recommended reading for anyone with a bit of an interest in computer industry history.

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