The Decline of IBM

This video is meant to be a documentary to be enjoyed in one or more sittings. The question answered is: Why did International Business Machines decline?

Timestamps:
The Backdrop 1983-1993 (Was it really a mistake to go with Microsoft and Intel?) : 2:24
Lou Gerstner Years: 1993 - 2001 (IBM is a top player in everything tech!): 5:38
Sam Palmisano Years: 2002 to 2011 (Continuing the Gerstner Vision and missing the cloud!): 18:52
Ginni Rometty Years: 2012 to 2020 (Continuing the Gerstner vision and cutting costs!): 26:13
The Future and Arvind Krishna: 2020 to present (A bright future?): 32:34

What we can say is that despite the company still ranking as one of the largest companies in the world, it used to be the largest, touching many aspects of a consumer’s life. Today, IBM is a Business to Business (B2B) company that has been surpassed by many tech rivals including, Google, Apple, Amazon, Facebook. How did that happen?

Many people think IBM declined because of decisions in the 1980s where it licensed software from Microsoft and used Intel’s chips. This logic is flawed; coopetition is a good thing and technological innovation happens quicker when many people and companies work together. In addition, the Personal Computer (PC) was coming whether IBM was ready for it or not—therefore these partnerships allowed IBM to get its PC to market earlier than it would have otherwise. Of course, you could then push the mistake further back and say IBM invested too heavily in mainframes and not enough in PC’s, in the 1970’s, forcing it to partner with Microsoft and Intel. This lack of investment in the 1970’s was a mistake, but companies are allowed to make some mistakes.

Furthermore, IBM had ample opportunities to still win in these and many other markets. So, despite IBM falling behind in the PC market, at the start of the 1990’s, it was so much larger than many other tech companies, in terms of size, R&D spending and dominance, that it should have become the king again. It didn’t.

This is why our video focuses on IBM’s CEO’s and product decisions under Louis Gerstner, Sam Palmisano and Ginni Rometty. These CEO’s turned IBM from a tech giant into more of a services-oriented business. What these CEO’s, also, forgot is that the secret sauce of IBM’s services was that it was viewed much more favorably than other services company as it was renowned for its technology. Therefore, underinvesting in tech eventually also hurt is services business.

Despite all this negativity, optimistically, we are excited with who IBM chose as its CEO in 2020, Arvind Krishna may turn around IBM. We hope you enjoyed our video!

The Music in the video is the following:
1) Which Way Is Up? 1:59 Silent Partner Dance & Electronic | Dramatic
2) Gently, Onwards 3:27 ELPHNT Cinematic | Calm
3) Apprehensive at Best 0:03 / 1:42 Biz Baz Studio Cinematic | Dark
4) If I Had a Chicken 0:02 / 2:30 Kevin MacLeod Cinematic | Happy
5) White Hats 0:03 / 1:46 Wayne Jones Cinematic | Dark
6) Follow The Shadows 0:02 / 2:46 The 126ers Pop | Sad

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Disclaimer: We are not financial advisers, and nothing on this channel is meant to be financial advice. The ideas expressed on this channel are purely opinions and should not be regarded as objective information. Nothing on this channel is a recommendation to buy or sell securities. Do not assume that facts and numbers in any video are accurate. Always do your own due diligence.

[TheMarketisOpen]

This video is meant to be a documentary, enjoyed in one or more sittings, and we hope you enjoy. We go through IBM’s decline from the 1980’s until today. Despite all the negativity in the video, we are actually optimistic of IBM’s future prospects because of who it chose as its next CEO. Let us know who you think led to IBM’s decline and can Arvind Krishna turn the business around?
Time stamps:
The Backdrop 1983-1993 (Was it really a mistake to go with Microsoft and Intel?) : 2:24
Lou Gerstner Years: 1993 - 2001 (IBM is a top player in everything tech!): 5:38
Sam Palmisano Years: 2002 to 2011 (Continuing the Gerstner Vision and missing the cloud!): 18:52
Ginni Rometty Years: 2012 to 2020 (Continuing the Gerstner vision and cutting costs!): 26:13
The Future and Arvind Krishna: 2020 to present (A bright future?): 32:34

[chrisguevara]

When a company switches its strategy from innovation to cost cutting, you know they have no ideas left in them. A horrible sign of things to come.

[SavageScientist]

I just started at IBM this year and this is the introduction they never mentioned in the orientation . Thanks

[Joe-xqzu]

This is why financial types shouldn't be allowed to run technology focused companies. They almost never seem to understand the actual product and focus almost entirely on cutting 'expenses' (by cutting R&D and outsourcing everything) and maximising profit margins over maintaining pace of innovation that the company was founded on

[emrahny]

As a former R/D, it was sad to see the company changing after Sam's leadership. We invented a lot of stuff, common today way early but it got killed before reaching to the market. Giving the helm to sales/marketing was the worst thing one could do.

[rhymereason]

IBM made the same mistake HP and Boeing made... they turned the companies over to the bean counters...

[garry]

Their big mistake was only trying to make money. Making money is a side effect of making good products.

[richardwhite]

As a former IBM employee, I learned that the middle management was totally responsible for its downfall. It is overburdened with bureaucratic delays for everything it does, and it must add corporate overhead to every contract...a sure path to extinction to support this unneeded expense.

[PerryLMarrs]

I was a young man working as an executive secretary in the Education Department at IBM Las Colinas in Texas in 1981 when they released the PC. Your documentary is excellent, but I would add that IBM squandered valuable resources, such as employee time. My last day there, for instance, two secretaries spent all day trying to determine if an internal memo could be labelled as both "Personal" and "Confidential." Executives would not sign the documents we typed for them unless we placed them very carefully in hand-made albums from Germany. Nothing was ever simple.

[theeconideal]

Rometty hired her brother-in-law as a major executive running the cloud business in 2014. He had no experience in cloud. IBM has come under fire for corporate governance over the years, yet this nepotism got through and was never questioned. IBM struggled to put its cloud business into a higher ranking, and failed.

[KingCong]

I worked in Services for many years. Made lots of great friends and connections, but rarely found any good managers. Worked my ass off but never got any recognition. The culture was toxic and I regret not leaving earlier.

[greghelton]

As an ex techie it amazed me when people with no knowledge of the technology behind the products become CEOs. Scully, Whitman, and Gerstner come to mind. But I’ve seen many others and almost always didn’t turn out well.

[abbyw]

"The Men in the Gray Flannel Suits" is what IBM employees were known as. It was a given if you got a job at IBM you had a job for life. Then in the 1980's IBM had their first layoffs in history. That changed the security of every working person in the US. Today 2/3 of IBM employees are in India.

[banto]

Very good video, but trying to pin it all on the CEOs that ran IBM into the ground is missing the bigger story. IBM culture (anyone who ever worked there or worked with IBM on a project knows what I am referring to) has been totally rotten up and down the entire management chain for a very long time. Most people who worked (not managed people) at IBM were very good people and very smart. Great ideas were created and developed in IBM's world-class research division and never became a reality due to the fact that the company was run (at all levels) by lawyers and MBA's who wouldn't know a great idea if it hit them on the head. People who know what IBM actually is internally know that the acronym actually stands for Idiots Become Managers.

[gilbesm]

Moral of the story....Never hire someone whose background is in snack cakes run your tech company

[minka]

I was with ibm gbs at some of the times that were mentioned here. The point of no return was the aquisition of pwc, which changed the mindset of ibm from „excellence“ and customer focus to „cost cutting“ and shareholder focus. Thus many investments were cut, not only in research, but also in product development and market visibility...
then cane the worst, what happened in many companies, people were not seen as a competitive advantage with their skills and experience, but as a cost factor that needs to be cut to favour the shareholders. In a services based company, where people are the „products“ and the „production“ this is deadly on mid term.
The brain drain was too big, the loss in reputation from potential customers too high,
there is no one left to recover ibm.
Not on the front, where it counts,
you can be the greatest general, if you have no soldiers to fight....

[mrwallstreet]

It's interesting how many former IBM employees are in the comments LOL

[thephilosopherofculture]

I have know senior execs at IBM EU. You would not believe how self-gratifying, self-sufficient (smug) that culture was. It would be completely impossible to do anything that was not routine, anything new. Corporate infighting and corporate evaluation systems made it impossible to be different. They had to put development outside of the company, completely, in order to get anywhere at all. These were called 'research fellows" who could do as they pleased and got funding. But that did not work either. So, IBM had to turn itself into a services company, irrespective of the technologies it would use and this has put IBM up against much smarter and nimbler and far far far less smug companies against which they of course lost pitch after pitch. Perhaps this is the way all companies go. Companies grow big, smug and then fail and shrink.

[guillaumegiroux]

And her salary never stopped going up, but hey, you need to attract talent

[Andrewk]

This is the most thorough and education IBM video on the internet! Wow keep it up!