Tell a "ghost story": IBM is behind again

Picture recording @ Visual China

Wen | Xinyan, author | Ye Jing, editor | Sang Mingqiang

To understand computers, you can't avoid IBM.

If the computer is divided by electronic devices, the first three generations are based on IBM's computer as the "generational" product mark, if you want to choose a company to represent the development of the entire modern computer industry, IBM is undoubtedly the most appropriate one. From the beginning of the Holleries watchmaker at the end of the nineteenth century, to the 1960s, IBM's market value reached 1/4 of the US GDP.

As the only enterprise that spans the four eras of mainframe, PC, mobile Internet and cloud computing, and is about to enter the era of intelligence, IBM's business from hardware, software, consulting to services, from cloud computing, big data analysis, to security enterprise-level solutions, more than 100 years, many peaks, and many times into the quagmire.

Although the blue giant is still standing, in the current era of change, the cloud market has been frustrated, split listing, revenue difficulties, aging mechanisms and other issues, so that IBM can not avoid being sung down, market value performance is the most direct embodiment, now IBM's market value, even less than 1/20 of Apple. Want to unload the baggage, but can not keep up with the pace of the upstarts, turn around again, maybe we are experiencing the end of the Blue Giant.

Big Blue with computers

The birth of IBM is an old story.

In 1914, investor Flint brought in an unemployed manager, Thomas Watson, for the CTR, which was on the verge of bankruptcy. Taking office, the elder Watson motivated employees with the slogan "THINK", and with the business spread across the globe, in 1924, the company changed its name to IBM (International Business Machines Corporation).

During World War II, IBM made a fortune in the arms business, and ibm made IBM's first entry into the computer field. In 1944, IBM's first electromagnetic computer, marki," was introduced, but it was huge and slow to operate, and was soon replaced by tube-assembled ENIAC and UNIVAC, the latter of which were also used for censuses, making IBM face the crisis of losing its traditional watchmaking business, even though IBM immediately launched the SSEC, but this "huge technological dinosaur" with a total length of more than 36 meters could not store programs.

In the early 1950s, Watson Jr. was commissioned to cooperate with the Semi-Automatic Ground Air Defense Engineering Program (SAGE) and hired von Neumann as a consultant to develop a defense electronic computer, the IBM 701, which cost nearly $12 million. This was later known as Watson Jr.'s first big gamble, and IBM completely abandoned its watchmaking business and went into entirely new areas: tube logic circuits, core memory and tape processors.

While other companies were still competing in the mainframe field, in 1954, ibm medium-sized business computer IBM 650 sold thousands of units, breaking the old Watson's assertion that "the world only needs 5 computers", and then launched the IBM 709 was the best performing computer for scientific computing at the time, and the last tube computer produced by IBM.

After a short period of time, ibm's development after the giant machine Waterloo stagnated, Watson Jr. seized the opportunity of integrated circuits, and spent 5 billion yuan to bet on IBM 360 in 1964, spending 2.5 times the cost of the "Manhattan Project", which in Watson Jr.'s view, was also the "biggest and most risky decision" he made in his life.

IBM360 marked the third generation of integrated circuit computers on the historical stage, ushered in the era of computer compatibility, laid the foundation for the current database, PC, Internet and e-commerce, and since then, both Apollo XI and the original bank ATM system have relied on IBM360.

At the end of 1966, IBM's annual profit reached $1 billion, jumping to the ranks of the top 10 companies in the United States and dominating the world computer market. As it grew, the sheer number of antitrust lawsuits and the company's internal corrupt bureaucracy have hurt IBM' morale. Under the internal and external difficulties, coupled with the rise of small machines, IBM in the mainframe field turned weak and lost to DEC in the market.

In the early seventies, authority was handed over to Frank Cali, and the 5100 in 1975 was ibm's first portable computer, and the high price was ignored; the following year, Jobs planted Apple's first self-made computer, riding the tide of the personal computer revolution, while The Blue Giant still stood and watched.

Until 1980, in order for IBM to also own "Apple Computer", "Chess" as a code name, Cali ordered the formation of a group to independently develop microcomputers. In order to develop a microcomputer that can be rapidly popularized within a year, IBM used other enterprise achievements, such as the use of Intel 8088 chip as the hub of the computer, commissioned Microsoft to sign up to develop various software for DOS configuration, and named the new machine "personal computer", that is, the PC.

In 1981, IMPC, which changed the bulky appearance and high price of the previous computer, and the speed of computing was not inferior, sold 100,000 units in the first year of listing, occupying three-quarters of the PC market at that time. As PCs gradually infiltrated offices, schools, stores, and homes, IBM took a risky step: open source.

All technical information on IMMPC except BIOS was made public, so that users recognized PCs, and electronic computer manufacturers around the world began to compete to copy IMPC compatible machines, such as Compaq Portable, which after a few years, these compatible machines encroached on most of the original IBM market.

In addition, IBM also suffered a backstab from Microsoft's business. The latter developed Windows based on DOS systems gradually became the mainstream operating system of PCs, taking this opportunity to form a Wintel alliance with Intel, using large programs and Intel computers equipped with large memory bundles, occupying more than 90% of the PC market. At this time, IBM and Apple and Motorola formed a PowerPC chip alliance, but under the attack of the Pentium chip series with Windows 95, PowerPC was gradually defeated.

From 1990 to 1993, IBM lost $16.8 billion in consecutive losses, and the stock plummeted from $43 in 1987 to about $10. IBM's heavy bet on OS/2 also failed, the mainframe has a large inventory backlog, the IMPC that should have been the dominant one is halfway broken, IBM has become an outdated person who is following the tide, and has lost its voice in the PC market.

Internet, customer first and smart earth

In 1993, when the once most brilliant large companies were classified by the market as terminally ill and no one took over, the "food king" Luis Gerstner took command across industries.

In order to survive the crisis, IBM laid off 45,000 employees within half a year, stopped mainframe production lines and production models, and mobilized funds to build a new PC production plant. The following year, after IBM initially turned a loss into a profit, Gerstner proposed a "network-centric computing" plan, positioning the development position on the Internet, and proposing that the combination of the Internet and the business world will bring about a revolution: e-commerce.

In the 1990s, informatization was the general trend of IT development.

Lotus Software controlled more than 34 percent of the enterprise network market with Notes before being acquired by IBM for $3.5 billion. Ibm took this opportunity to break into the Internet field, software rewriting work, and mainly attack high-end large servers and low-end PC desktop terminals, notebook computers two aspects of hardware equipment, while taking the workstation as the entry point, of which RS/6000 workstation computer, also known as "deep blue", by defeating the chess king Kaspalov has become a legend in the computer industry.

In 1995, centenarian revenue broke through 70 billion yuan for the first time, equivalent to 7 times that of Microsoft at that time, and even the sales of PCs and computers in the past recession rose by 1/4. Relevant data show that the revenue of IBM's networking division reached $6 billion, which is the sum of the annual revenue of Cisco, 3Com, and Bay, but in the following years, as the performance of the three companies has skyrocketed, IBM's network business has not been well managed, which means that Big Blue needs to divest the low-profit, low-prospect network business as soon as possible.

Another success for IBM is his customer-focused "Bear Hugs" program: traveling the world to talk to key customers, understand needs and improve relationships.

It is precisely because of this that IBM, which has computer components such as semiconductors and mainframes, personal computers, and disk drives, can not be split, and can allow IBM, which has always sold high to buy, choose to dispose of the backlog of mainframe inventory at a low price; at the same time, providing consulting services and solutions for enterprises has contributed a "hardware + software + service" transformation direction for IBM.

During Gerstner's tenure, IBM lost $8.1 billion in 1993 to $7.7 billion in 2001, and stock prices rose from $12.58 to $120.96, with services revenue becoming one of ibm's main sources of revenue growth.

If Gerstner allowed elephants to cheer up and dance, Peng Mingsheng wanted ibm to revive.

In the 21st century, the Internet bubble burst, IBM's advantage in mainframes and microcomputers declined, and revenue began to decline. After acquiring PwC Consulting of PwC in 2002, on the basis of Gerstner, Peng Mingsheng advocated the development of IT outsourcing services as a new business.

Microsoft and Apple swept the PC space one after another, allowing IBM's PC division to lose $1 billion from 2001 to 2004. IBM then decided to sell its PC business to Lenovo, which avoided a head-on confrontation with the former enemy Intel Microsoft, and was also an official farewell to the PC era, but due to the increase in the penetration rate of IBPC in many enterprises, IBM gradually became the leader of IT services.

In 2008, the world is forming a boom in building a smart city with the Internet of Things as the core, which fits the concept of "smart earth" that Peng Mingsheng believes that computers will penetrate into all walks of life, and IBM also accumulated some advantages in supercomputing, sensor networking, software servitization, cloud computing, data integration and mining. "SmartErland" not only brought IBM 25% of its operating income, but also pushed the Internet of Things a step further.

The fall of the cloud market

When Peng Mingsheng took office, Amazon launched the AWS platform, and four years later, it opened a cloud service business model. IBM did not seize the opportunity, in Peng Mingsheng's view, "IBM a transaction is enough to be bigger than Amazon's cloud business." ”

Obviously, light enemy means that the wind will be missed.

In 2012, after taking office, Luo Ruilan redefined IBM's plan: investing in cloud computing and optimizing the company's product portfolio. How to enter the cloud, she gives two ways: to provide cloud services, to promote Watson.

IBM is accelerating the business development of public and private cloud solutions by acquiring a large number of technology companies, while advancing smart city solutions, smart commerce and other applications. IBM has established capabilities in hybrid cloud, security, quantum computing, industry expertise, data, AI, etc., but in the field of cloud computing, in the face of Amazon's sniping, in contrast to IBM's faltering in cloud computing, AWS's development is more neat.

On the other hand, Luo Ruilan pointed out at ibmanceThink 2018 that by creating an artificial intelligence-based data analysis tool Watson, the technology industry will usher in the third exponential change, that is, the integration of data and artificial intelligence, which can bring more opportunities to those who are currently changing the industry.

At the time, Watson had high hopes for improved medical research and diagnosis. Contrary to expectations, Watson gradually became more of a marketing gimmick, not only failing to deliver on its promises, but also failing to make huge investments that led to a continuous decline in IBM's revenue from 2012 to 2017, and its stock price plummeted by 42%. When talking about the transformation from traditional business to a new generation of technology, some securities analysts even said bluntly, "During Luo Ruilan's administration, poor financial performance is the best embodiment of this." ”

Today, IBM's scepter has been handed over to the Indian-American technocrats, who led the acquisition of RedHat's Arvind Krishna.

Krishna believes that IBM needs to inject artificial intelligence into software and hardware systems through hybrid cloud. In order to advance IBM's hybrid cloud strategy, divest from the traditional business, and focus its main focus on the more lucrative cloud computing field, IBM began to spin off in 2020.

In fact, IBM's former most important global technical services business, technical consulting division, global business services division, etc. are declining. Compared with Amazon's cloud to meet the hosting needs of e-commerce merchants, Microsoft is "software + services", Alibaba Cloud Computing realizes the "online" of IT services through the combination of mobility and cloud computing, and IBM's main business is hardware, which does not have an advantage in the understanding of cloud computing.

Like the previous acquisition of SoftLayer, it cannot provide the private cloud technology services required by large companies to go to the cloud, and it was not until 2019 that IBM Cloud obtained virtual private cloud service technology, which is about 10 years later than AWS. On the other hand, over the past decade, IBM has been repeatedly asked to develop special one-off projects for key customers, a practice that is thought to delay critical infrastructure services by months or even years.

Krishna's first act was to end the two-track strategy of infrastructure design, requiring the team to focus on a single architecture for the future. But after years of procrastination and mismanagement, the IBM Cloud is a far cry from its peers.

Just like earlier Buffett was optimistic about cloud computing to buy IBM shares in a big way, but eventually lost and sold after six years, in a sense, Amazon Microsoft's cloud is too powerful, Buffett's betting trend is right, but the bet is the wrong object. Some people say that this will be the end of another IT era, but people who are optimistic about IBM are also looking forward to the fact that as long as the sleeping lion does not die, sooner or later it will wake up.