A History of IBM, Essay Example

The company known as International Business Machines Corp(IBM) has a rich history going back to the 1800’s. Today IBM is an innovative integrated technology company that is also called the Big Blue that reflects the color of the IBM branded logo. The company has a long history making mainframes to personal computers(PC) while still making their market in the computer and technology world. The IBM incorporation started in New York in 1911 as the Computing- Tabulating- Recording Company (C-T-R) (International Business Machines Corporation(IBM),2015). The historical origins can be traced to the first dial record invented by Dr. Alexander Day in 1888 which became the foundation for C-T-R. The IBM history has other significant contributions starting in 1884 when the first patient was applied for in 1884 by Herman Hollerith. The beginning of the IBM originally started 1896 with Tabulating Machine Company founded by Herman Hollerith (Johnson,2000). The Tabulating Machine Company created punched card data processing equipment. This laid the foundation for the Tabulating Machine Company that was meeting the demands of the 1890 Census (Stebenne,2005).

In 19^th century IBM had good fortunes because the U.S government was in need of calculating the growing population. The U.S government department responsible for the U.S. Census bureau realize that the accounting methods were no longer effective. In addition, the U.S Census Bureau was trying to calculate the new wave of immigrants to the U.S during the Industrial Revolution. (IBM,2015). As a result, the U.S. government started a contest to see what person or company could find a more proficient way of tabulating census data. The winner of this contest was Herman Hollerith who developed a Punch Card Tabulating machine to calculate the running total of data. This prompted Herman Hollerith to form and open Tabulating Machine Company in 1896. There are other pieces of history that was responsible for the formation of IBM such as Charles F. Flint in 1911, who was the catalyst in merging the Hollerith’s Tabulating Machine company, Computing Scale Company of American and International Time Recording Company(IBM,2015). The two companies were merge with Computing Tabulating Record Company (C-T-R). The merged companies were based out of New York City with 1300 employee with plants in Endicott, New York, Washington D.C., Toronto and Ontario Canada(IBM,2015).

IBM 1800 to 1900

IBM was recognized as a leader with their monumental accomplishments in the 1930s. These innovative technology moves were the beginning of the technology age growth and IBM was leading the way. In the late 1800 and early 1900s IBM was dominating the market for punched card accounting machines(IBM,2015). IBM has no equal in the early years developing new punched card technology to integrate with business data-processing.

IBM 1920

In the years following World War I, C-T-R’s engineering and research staff developed new and improved mechanisms to meet the broadening needs of its customers. In 1920, the company introduced the lock autograph recorder, the first complete school time control system, and in 1921, the company acquired the business of the Ticketograph Company of Chicago, and certain patents and other property of the Peirce Accounting Machine Company. The new IBM company continue to thrive developing and producing punch cards at high speed, and punched card capacity was doubled (South-Western,2012).

IBM Great Depression Bold Moves

The Great Depression hit the conglomerate companies hard such as GE, and IBM, which prompted many businesses to go bankrupt. The business machine market had plummeted to the point that thousands of workers were being laid off. IBM made an historical bold move during an economic downturn Thomas Watson look at the percent of business accounting that was not automated(Hempel,2011). Watson believed that new growth was imminent therefore IBM would make two decisions during the depression. The two decisions were IBM would not layoff and continue their production capacity in anticipation of the future demand and the would increase and the second was IBM investments in innovation of new business account products. These two decisions caused IBM profits to double in 1928 and IBM vaulted all the way to second in total market shares in 1939(IBM,2012)

IBM has always been an innovative company however; they are masters at development products to meet the current market needs or preparing for a paradigm shift in customer needs. The market change in 1929 with business slower down purchasing the IBM products however, IBM created a launch a new product called the alphabetical accounting machine and it was introduced at a lower price in early 1930(IBM,2015).

The demand for the new alphabetical accounting machine allowing IBM to dominate the market and develop new strategies that distance IBM from their competitors. In 1931, introduced a less expensive and smaller model during the Great Depression era which allowed IBM to keep all their existing IBM customers. The timing was perfect and historical because the existing clients was now price conscious because of the Depression and IBM catered to that need. In addition, IBM new pricing changes allowed the small companies that could not afford the larger IBM machines could now afford the new inexpensive IBM machines. Watson continued to expand capacity, increasing it by one-third from 1929 to 1932. IBM continue their historical growth in the market with the addition of the Social Security Act of 1935 that contracted IBM to maintain personal records for over 26 million people. It was the largest contract award for IBM and the biggest commitment by the U.S government during the Great Depression(IBM,2015).

IBM 1950-1960

By 1950, the IBM punch card has taken over the industry including contracts with the government which their brand became ‘do not fold, spindle or mutilate. IBM continued to change the market up to the 1950s because the punched cards became the gold standard for punch card accounting machines. The computer age was introduced again by IBM in 1953 by producing their own computers. This was the first commercially successful general use computer(IBM,2015).

The 1960s was a critical point for IBM who used the punched card technology to replace the data storage by magnetic tape while driving the market towards using more functional computer technology. IBM has been made some competitive changes over the next 10 years even though they made a strategic mistake by continuing to build mainframes when the market shifted to PCs. IBM created a new business model of critical acquisitions that starting building a new market place for IBM. IBM began searching for new innovative products and reengineering of internal operations and seeking strong leadership changes. In addition, IBM made the strategic decision to utilize business partners like never before to assist with getting a larger share of the market.

IBM 1980-1993

One of the smartest business decisions by IBM was in 1980 when they partnered with Microsoft Bill Gates to build an operating system for IBM’s new computer for home customers. In 1981, IBM release the first IBM PC that sparked a new computer generation. In 1981, IBM appointed John R. Opel CEO who was fortunate enough to be hired during the new computing age. The IBM products was already moving forward with the invention of the IBM Personal Computer branded specifically for home, school and business use. This was a critical move for IBM who previously refused to change from mainframes to their own brand of PC’ or home computers. IBM has always been innovative with their products nevertheless the IBM PC was not the most technical machine in the market. Consequently, IBM PC has some combined features that the market did follow such as a smaller PC with expandable space and option colors. IBM understood they need a processing chip to compete with the competitors so they purchased a chip from Intel and the operation system they purchased from Microsoft. IBM had learned its lesson to utilize partners to enter the new PC era. IBM learned that its acceptable to do business with the competition because it keeps IBM relevant in the computer market.

The IBM history would not be complete without discussing the positive impact of John F. Akers who was a visionary that was hired as CEO in 1985 (Loomis & Mendes,1993). Akers focused on streamlining resources and changing the culture of IBM. The market took notice as well because Akers investment and commitment to research brought IBM four Nobel Prize winners in mathematics, memory storage, telecommunication and physics (Loomis & Mendes,1993). One the main technologies that is used today as a common application is the token ring which IBM introduced to the market in 1985 under Akers tenure which permits the personal computer users to exchange massive amounts of critical information. IBM historically had laid the foundation for improving their market position in computers and other innovative applications. IBM was still behind the technology in the 1980’s and 1990s because they were trying to be innovative as the new technology paradigms shifts kept coming such as the PC revolution and the client/server revolution. The market was no longer looking for large computers and they wanted the need technology now not tomorrow. As a result, in 1993 IBM profits dropped while the revolution continue with the new technology shift was the desktop applications.

IBM 2000-2015

In 2000, was the year business economist indicated IBM would no longer be a powerhouse because of the Y2K, dotcoms collapses and another paradigm shift to the new e-commerce (Hempel,2011). The sceptics appeared to be correct until IBM transition to new IBM’s leadership named Samuel J. Palmisano. Palmisano was hired as the President and then became the CEO in 2000. It was clear that without Palmisano change in direction to e-commerce would have been a possible collapse by IBM(Hempel,2011). In 2001, IBM moves into the server market by delivering a new product that were different from all competitors and the built the world’s most elegant server that was a web based claims processing system. In 2005, IBM introduces the IBM spent millions of dollars developing a platform that collaborated with thousands of IBM engineers around the world using the new hub technology of the future.

In 2015, one again IBM is leading the computer industry looking at Cognitive computing which is a growing industry and projected to quadruple in growth by 2018. In order, to stay ahead of the competition IBM has purchased Watson computer systems. The company is now called IBM Watson which is a new technology company that specializes in cognitive computer systems that understands natural languages((Lev-ram,2014).

History Leadership Changes

IBM has done a phenomenal job at reinventing the brand name from an entity known for being a provider of computer hardware that changed to a broad based supplier of technology services. The IBM leadership began to transform to a leader of technology services which can be contributed to three CEO’s, John Aker, Louis V. Gersner Jr., and Sam J. Palmisano. John Akers was instrumental in transforming and changing how IBM ran their operations. Akers made a strategic decision to shift the business towards building and establishing independent business units allowing IBM to be more competitive. John Akers did have some problems with the company’s poor performance conversely, he must be credited for changing the way IBM operated. It was noted that John Akers was the key reason IBM refused to change from mainframes to PCs yet, he created new opportunities that changed the IBM landscape.

Akers has to be credited in the history of IBM as one of the technology builders of the new and improved modern IBM. Akers brought his years of experience from Yale University and his military experience as a pilot in the U.S. Navy. Akers had strong background in sales because he started his career as a sales agent in Vermont. Akers credited Frank Cary for his success because he learned how a business should be run while working with Cary. The Akers era help IBM emerge as one the most successful blossoming computer companies of the time. During this period in 1964, IBM released the System/360 computer line and System/370 that revolutionized the computer industry. Akers was successful as a sales agent and an executive that led the way as the top performer and earned 16 promotions in 23 years. The peers of Akers indicated he was a solid leader that had the charisma to get every person to give the very best. There is no doubt that IBM benefited greatly from his tenure which he retired from IBM in 1993.

One the CEO that made some significant changes to IBM was Louis Vincent Gerstner, an American businessman who the IBM CEO from 1993 to 2002(Cusumano,2015). He was credited for improve the IBM financial portfolio that was at the brink of destruction. The CEO from outside the ranks of IBM brought respectability and experience to IBM as previous chairman from RJR Nabisco and 11 years as a top executive for American Express.

In 1993, the innovative and successful CEO Louis V. Gerstner, Jr. had a vision that kept IBM from being closed down and afloat. Gerstner was way ahead of his time by embracing the e-commerce and Internet capabilities which contributed to growing the IBM business(Cusumano,2015). In 1990, IBM was able to bounce back with e-commerce that eventually doubled the IBM business. nevertheless, the primary problem was the IBM culture that had become stagnant and lax about the IBM work ethics and innovative products of the future. In addition, historically IBM provided their employees with excellent benefits and advancement opportunities. The CEO realize the culture and the way the function internally, this change was one the largest company turnaround in history. Gerstner was not the most popular CEO because he was making some difficult decisions by laying off over 100,000 people from IBM to change the culture. The CEO brought experience from his tenure with RJR Nabisco as CEO and held a senior position with American Express. Gerstner tenure was successful because IBM capital rose from $29 billion to $168 billion(Cusumano,2015). The CEO brought a new style and culture to IBM that was customer oriented and promoted innovated and strategic thinking. This management style was learned by Gerstner from his experience working with the consulting agency McKinsey & Co. The IBM core was to stabilize and restructure the IBM’s product line and removing the old way of thinking by shrinking the IBM workforce. The consensus by top executives and board of directors was to split IBM into small separate independent companies which Gerstner disagreed. It was Gerstner decision to keep IBM as a unique brand prove to be the right move and Gerstner move the company in the direction of Internet and network computing paradigm shift. The CEO can be credited for a 20 percent a year growth allowing IBM to move confidently into the future as one the technology giants once again.

The third leader that made a significant impact at IBM is CEO, Sam J. Palmisano, who had the real-world understanding and future of IBM by venturing into the into the E-Commerce, Internet and consulting services. The CEO changes diversified IBM’s business portfolio while spending billions of dollars to pursue this technology which was considered risky (Hempel,2011). At that time in history, the consensus believe the IBM was about to fold because of the CEO bad decisions. Consequently, this risky move was responsible for transforming and pushing IBM to become a technology leader again in the market. It was noted that CEO Palmisano asked all the hard questions such as why are we doing business a certain way and made the necessary culture changes. There are some that will argue that during his decade long tenure revenues when done however, no one can dispute his risky decision to venture into e-commerce and the Internet was the best decision for IBM to remain a leader in computer technology.

Works Cited

Campbell-Kelly, M., Yost, J. R., Ensmenger, N., & Aspray, W. (2013). Computer: A History of the Information Machine. New York: Westview Press.

Cohen, M. “International Business Machines Corporation.” International Business Machines Corporation Marketline Company Profile 1-44. (2015). Entrepreneurial Studies Source. Web 8 Dec. 2015.

Cusumano M. In Defense of IBM: Communications of The ACM [serial online]. October 2015;58(10):27-28. Available from: Business Source Complete, Ipswich, MA. Web 8 Dec. 2015.

Hempel, J. “IBM’s Super Second Act.” Fortune 163, no. 4: 114-124. (2011). Business Source Complete, EBSCOhost Web 8 Dec. 2015

IBM. (2015). Chronological History of IBM. IBM Corporate Archives. Retrieved from http://www-03.ibm.com/ibm/history/history/decade_1920.html

International Business Machines Corporation(IBM). (2015). International Business Machines Corporation MarketLine Company Profile, 1-44.

Johnson, A. (2000). A career that counts; Herman Hollerith: Punching holes in the process.  Mathematics Teaching in the Middle SchoolVol,5 (2000): pgs. 584-589. Academic Search Complete. Web 7 Dec. 2015

Lev-ram, Michal. 2014. “getting past the big blues. (cover story).” Fortune 170, no. 5: 92-100. (2014) Business Source Complete, EBSCOhost Web 7 Dec. 2015.

Loomis J. & Mendes, J. “King john wears an uneasy crown.” Fortune 127, no. 1: 44-48. (1993)/Business Source Complete, EBSCOhost Web 8 Dec 2015

South-Western. Case 5: The Rise of IBM. n.p.: South-Western, 2012. Gale Virtual Reference Library, EBSCOhost Web 8 Dec. 2015

Stebenne, David L. “IBM’s “New Deal”: Employment Policies of the International Business Machines Corporation, 1933–1956.” Journal of The Historical Society 5.1 (2005): 47-77. Academic Search Complete. Web. 8 Dec. 2015.