The Downfall of IBM

[dedanna1029]

And so, five years later, I turn to IBM again. The direct impetus for this column is IBM’s internal plan to grow earnings-per- share (EPS) to $20 by 2015. The primary method for accomplishing this feat, according to the plan, will be by reducing US employee head count by 78 percent in that time frame.

http://www.betanews.com/2012/04/27/the-downfall-of-ibm/

OMG. That SO sucks...

[viking60]

I have seen this before:

Companies get confused. When they start getting bigger they want to replicate their initial success. And a lot of them think well somehow there is some magic in the process of how that success was created so they start to try to institutionalize process across the company. And before very long people get very confused that the process is the content. And that’s ultimately the downfall of IBM. IBM has the best process people in the world. They just forgot about the content.

It is the amateurish error of many big Industrial groups.
This is a very common mistake to:

When I wrote about IBM five years ago the cost reduction program was called LEAN and it was supposed to mold from Big Blue a hyper-efficient business machine. Yet today IBM has more layers of management than it had in 2007. These extra layers come at a cost both in dollars and in accountability. Those extra layers insulate IBM’s top management from responsibility for their decisions. At the highest levels in Armonk they think things are going beautifully because they are out of touch with the reality of their own company.

[R_Head]

When I wrote about IBM five years ago the cost reduction program was called LEAN and it was supposed to mold from Big Blue a hyper-efficient business machine. Yet today IBM has more layers of management than it had in 2007. These extra layers come at a cost both in dollars and in accountability. Those extra layers insulate IBM’s top management from responsibility for their decisions. At the highest levels in Armonk they think things are going beautifully because they are out of touch with the reality of their own company.

That is so true... I live that every day at work.
Can be applied to the Government too.

Donald Rumsfeld said...
"Reduce the number of lawyers. They are like beavers -- they get in the middle of the stream and dam it up."
That applies to Managers too.

[dedanna1029]

Yeah. The IBM situation is very sad in many ways. Employers with no regard whatsoever for their employees, impacting the current unemployment situation here in the states, all kinds of ways that I'm sure we can't even see.

I had an idea that technology would finally be hit from the economy, but this goes well beyond that excuse.

[viking60]

Well a lot of the criticism may be disappointment, it is hard to tell from the outside. In my experience IBM has always been a guarantee for excellent quality - and stiff prices.
S36 AS400 3270 are all very well working systems that I have had the joy of working with. They have never been good at jumping on opportunities, but they have made sure that what they had was top quality.
They also touted that open source was a good business model - no reason to doubt that.
IBM could not defend the price/quality relationship anymore so they are probably forced to cut costs by the customers.

IBM will probably need a partner (they still can buy them) and RedHat just seems perfect.....
I am pretty sure that Microsoft would fear that. Their desperate attempts to enter the server and supercomputer market would probably be buried once and for all....

[dedanna1029]

The problem being, that when you reduce your work force by 78% (quite a large number, and it is the plan), a product can not be as good as it once was; you don't have the manpower nor those left with the specific intelligence enough to, nor do you have the caring any longer in management or executive realm enough to. It becomes a matter of creating, then putting out a product (who cares how good it is, it's fine), a matter of routine. So the product itself becomes nothing special, and in some instances not very good at all; demand for the product goes down, and you become unable to produce one that is good, that will drive demand up. The paragraphs here sum it up:

If you were a product person at IBM or Xerox, so you make a better copy or a better computer, so what? When you have a monopoly market share the company is not any more successful (it's already hit its highs that it wants, everything else is just gravy; you can't get any more successful than that. D.). So the people that can make the company more successful are sales and marketing people and they end up running the companies and the product people get driven out of decision making forums. And the companies forget what it means to make great products.

Sort of the product sensibility and the product genius that brought them to that monopolistic position gets rotted out by people running these companies who have no conception of a good product versus a bad product. They have no conception of the craftsmanship that’s required to take a good idea and turn it into a good product and they really have no feeling in their hearts usually about wanting to help the customers.

The business will fail and go under before they can again produce a product that is in demand. My economics instructor seems to think that they will just slump for a while and then they will all of a sudden produce a product that will create demand to get them back on track. What he doesn't realize, is this is a 20-year (at least) plan of complete and utter self-destruction, and all they want to do is get the monetary value out of it before they go under completely.

It's the prime example of corporate greed, but they are taking it way too far, and well beyond what most execs do, not to mention the least shit they could give about their employees.

[viking60]

IBM has made some of the worlds best supercomputers, and they have kept away from the gadget market. As wrong as this may be, it is not fair or makes sense, to compare them to iGadet makers.

It is like McDonalds criticizing French restaurants or Coca Cola critisizing Italian Wine (Coca Cola makes more money, but a Chianti sure is way much better).

IBM has no popular trend to help them and they are tosSerious for arranging sleepover lines in front of their stores. IBM has business customers that are not willing to pay the high prize for their quality. I for one think their license and support contracts are a robbery!
So maintaining something that nobody will pay for may be a noble social gesture, but it is not Business. Given The B in IBM we will have to accept that they adapt to what the customers will pay for.
For the Business market I am sure they will be able to come up with something that can land you on the moon for lunch and bring you back for supper --- while Apple works on voice recognition and iTunes.
IBM is in the market for groundbreaking new products from a tech point of view - not a marketing point of view (and screw design). Their products really need to stand out and solve stuff no one else can.
To achieve this IBM has often used Linux in the past - and I bet the next big success will implement Linux too. They are just slower than Apple and MS - which is fine by the businesses because they are slow too, No one wants to take a risk, and research takes time.
IBM might bounce back

[R_Head]

Coca Cola critisizing Italian Wine (Coca Cola makes more money, but a Chianti sure is way much better).

Perhaps a Coke criticizing a Rioja Tinto wine.
Italian wines taste like Ethylene Glycol

[viking60]

Remember the Romans did give us the Wine originally

And IBM has bounced back- kind off

[R_Head]

I know and others perfected

Except from the folks in California