How Samuel Palmisano of I.B.M. Stayed a Step Ahead | Hacker News Reader

How Samuel Palmisano of I.B.M. Stayed a Step Ahead

nytimes.com

45 pointsez779 comments

People probably don't know this yet: IBM probably has stopped R&D for their software (DB2, WebSphere family, IBM JRE, LotusNotes, etc). They're just milking the license and support money. At IBM, the motto is: "It's not a bug, it's a feature" when you call their tech support. Sometime you get bitten by a bugfix that supposed to cure the problem for General Motors so the only excuse they can give for you is that "it's a feature (for GM)".

The latest WebSphere Community Edition is apparently just Tomcat + additional throw-in features. IBM HTTP Server is just Apache + IBM plugins (plugins for integration with WebSphere, WebSphere Portal, etc). I wouldn't be surprised if IBM rolls out new DB2 Community Edition based on PostgreSQL or something (they're not currently, but who knows...). They even have their own Hadoop thing going on too: http://www-01.ibm.com/software/ebusiness/jstart/hadoop/

With Open Source, they know that software has become a commodity. So why not invest with moderate expense in Open Source as opposed to keeping expensive Software R&D? They did what they had done to their PC division. By the way, they still have their R&D but probably operates at a different level of requirements.

"Combining research, specialized skills and sophisticated technology is the recipe behind I.B.M.’s Smarter Planet initiative, begun in 2008. It now has more than 2,000 projects worldwide, applying computer intelligence to create more efficient systems for utility grids, traffic management, food distribution, water conservation and health care."

This is probably one of the most crucial strategy at IBM. Once you're tightly integrated in the core function of a city, a town, a state, a country, it's almost impossible to replace you.

Microsoft is making in-road to the government too lately but judging from the progress, they're frying small fishes: Sharepoint for Intranet, a bunch of business processes, windows for desktops, MS Office for documents. Even with their cloud initiatives, Azure and Sharepoint for the Cloud, they're still stuck in that market: intranet.

IBM, on the other hand, is printing Driver's License and ID cards on behalf of the government (http://www.pss.gov.bc.ca/bcmp/id-card-production.html). They're charging per-printed-card by the way. So if you ever lost your card, government will charge you X and IBM will get a piece of that.

Check out IBM recent purchases: cloud, cloud, storage cloud, cloud, software for government (Curam: claim management system, social service, pension plan, etc).

I was reading a great investing book this weekend which mentioned that companies seldom stay leaders if they only dominate in one discipline.

The author cited technology companies and how sometimes a great engineering culture simply isn't enough to maintain leadership, you often need to combine it a strong position in another discipline such as sales/marketing.

I think this rings true for IBM. I would guess that around 20 years or so ago, they stopped being primarily a technology company and shifted to offering services that were sold be a great sales force to keep customers hooked.

> In 2004, I.B.M. sold its PC business to Lenovo of China. Mr. Palmisano says he deflected overtures from Dell and private equity firms, preferring the sale to a company in China for strategic reasons: the Chinese government wants its corporations to expand globally, and by aiding that national goal, I.B.M. enhanced its stature in the lucrative Chinese market, where the government still steers business.

This doesn't surprise me, but I'm still blown away by this concept. It's highly unlikely that Lenovo happened to offer the same amount as whoever else was the true highest bidder, so this was essentially a huge extortion payment from IBM to China. The deal involved roughly $1 billion of assests, so it's not unreasonable to think that IBM paid of order $100 million to get into the Chinese government's good graces.

Or you can think of it as a small investment to reap the huge reward later.

Extortion is someone putting a gun on your head to demand for the money. Investment is you CHOOSE to put money in for later reward.

Even ignoring that, it still makes sense to avoid selling to Dell, HP, or similar. Those companies compete directly with IBM in other areas, so why sell a major division of the company to them and make them stronger? Plus, Dell and HP already sell desktops and laptops which makes them less likely to fully adopt the ThinkPad brand like Lenovo has.

For that matter, IBM actually derives ongoing revenue from the sale of ThinkPads, due to owning part of Lenovo; I don't know the terms of the sale, but they might also get some ongoing licensing revenue on brands and designs. (Also, they still use IBM's tech support, right down to the phone number: 1-800-IBM-SERV.) That kind of ongoing revenue would make Dell or HP even less likely to want to push ThinkPad laptops over their own systems.

IBM leverages the hell out of open sources. They had that 1 billion dollars investment into Linux back then but they reaped massively from servers/mainframe, services, and projects riding on the free OS, while they saved on R&D/maintenance on AIX and others.

On close examination, you may find that their Research Division is mostly just a patent shop.

Likely their 'services' work is mostly just 'help desk'.

Likely much of what they are doing is what they did decades ago called 'facilities management' or 'service bureau'.

Likely for new products, they find a small company with a good customer list, buy the company, and have the IBM sales force include that company's products in the list of products available. That is, they don't really try to 'develop' such products on their own.

So, in many companies, the CIO can 'bring in IBM' and go play golf.

Likely a good CIO could give faster results, more innovative and valuable results, at lower cost. But not all CIOs are good.

Don't you think it's a bit silly that you didn't even bother to include anecdotal data, let alone something more? As it is, it's just worthless unsubstantiated allegations. You could be right, you could be wrong, but your post adds not a single thing to the discussion.

Yup. But in this case I know all too well just what the heck I'm talking about, unfortunately. Hint: I live in Dutchess County, NY and for years worked in Westchester Country, NY.

Besides, the NYT wrote just a puff piece. Now just why would the highly self-esteemed, formerly highly revered, long pseudo-objective NYT do that?

Besides, what details did the NYT piece provide?

Wise up and appreciate a gift when you get it!

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