When Blekko was acquired by IBM in 2015 we had an "Integration Executive" assigned to us who was responsible for all the 'detail work' of the integration (if you can imagine a project manager for an integration that would describe their job). He had joined IBM in the '80s. I found his perspective on the Gerstner years pretty fascinating.
I had interned at IBM in the late 70's (as a high school kid of all things) and decided it was more of a real estate company than a computer company :-). Up until Gerstner, IBM had a policy of acquiring and holding real estate as a hedge. Often reported on the books under "cash equivalents" because real estate had the property that it could usually be liquidated when required into cash. When we were acquired in 2015 that had changed, nearly all of the places I had worked in the 70's were no longer owned (or operated) by IBM.
Our exec said that those property holdings were the only thing that kept IBM alive between 1990 and 2000. They had to ruthlessly re-tool the entire business and that required a lot of up front cash without a product revenue stream to fund it. That was Gerstner's legacy for him, he used that asset to re-invent the company around consulting services, business automation, enterprise data processing, and business insights driven by processing billions of metrics.
And it turned out that a lot of companies needed to understand their business better, and automate it, to adapt to this new fangled thing called the Internet.
We both agreed that they would be unlikely to do that again as they had used up their 'secret weapon' already.
Residential real estate construction has lagged population growth for decades as the average age of the first-time homebuyer has gone up and real wages have stagnated. The largest generational cohort in the United States (the post-WWII one with the nickname that everybody is tired of hearing) is getting out of homeownership as they retire southward or head to assisted living. Many of their family homes are in areas in which young people can't or don't want to live. There's going to be a great value reckoning as this asset transfer takes place - I have trouble believing that "line go up" will apply as it has post-COVID with so many sellers and so few ill-equipped buyers.
On the other side of the coin commercial real estate is often treated as financial leverage and a store of value instead of a going concern. From what I understand commercial landlords very frequently use their existing properties to collateralize new loans in a daisy chain-type fashion. Recall all of the grumbling about the end of downtowns and what would happen to CRE paper if people didn't return to the office a few years back? We came pretty close to the precipice and avoided it by artificially propping up the utility of these buildings. What happens during COVID II: The Quickening?
Combine all of this with a broader economy that's been vigorously puffed down to the filter with two drags of AI smoke left in it and things don't look particularly rosy for RE as an appreciating asset class. Scarcity doesn't automatically imply value perceived or otherwise.
Not financial advice, not an economist, just my $.02.
I worked for a large Silicon Valley company that took the exact opposite approach. They didnt think they had expertise to strategically manage real estate. So the company leased their facilities (and moved twice while I was there). They were also in a business where the original products were still generating lots of cash that was invested in adjacent product lines (and mostly successfully).
I talked to a CEO of one of these companies who claimed his accountants were pushing him to do the leasing only since a company was only supposed to be in one sector. A tech company that has a lot of real estate on the books wasn't going to have the same ups relative to book value, etc. Of course not having the same downs seems worth it if you aren't a day trader.
That's classic (bad) business school advice. Core competency. When I went every company was supposed to try and be like GE. Amazon in particular ignored many of the things I was taught. Take a college professors business advice with a grain of salt.
In his memoir, Gerstner described the turnaround as difficult and often wrenching for an IBM culture that had become insular and balkanized. After he arrived, over 100,000 employees were laid off from a company that had maintained a lifetime employment practice from its inception. Long allowed by their managers to believe that employment security had little reference to performance, thousands of IBM employees had grown lax, while the top-performing employees complained bitterly in attitude surveys. In the goal to create one common brand message for all IBM products and services around the world, under Gerstner's leadership the company consolidated its many advertising agencies down to just Ogilvy & Mather. Layoffs and other tough management measures continued in the first two years of his tenure, but the company was saved, and business success has continued to grow steadily since then.
Zero intention to speak badly of the deceased… Just an anecdote - I started at IBM in the early 2000s right out of college. At the time his immediate legacy was the divestiture of a big chunk of IBMs real estate. As a new IBMer that meant hot-desking if I went to the office and a very liberal work from home policy 20 years before its time. I love work from home but experienced first hand how hard it can be on young people. In my first professional job I maybe saw my bosses (yes plural because of org changes and the IBM matrix) twice a year.
I did a couple of internships at IBM (1995 in Boca Raton and 2000 in Hawthorn). It was hard on young people even if you were in the office. You'd see your manager occasionally, but...it just felt like a place lacking in energy and was way too big corp to be very interesting. IBM is a big reason I delayed starting my career via grad school, a post doc in Switzerland, and then working for Microsoft in China of all places. I just didn't want the mundane techie experience, and was sort of so traumatized by IBM that I searched for different paths.
I am pretty self-sufficient and had colleagues who had been in the same role for 20+yrs that I could depend on. But they were also not local. Was weird but workable. Lots of sametime.
I wish thinkpad had been viable as a retained business. I've run pre and post leonovo, I liked pre better mostly, but you have to resist thinking anachronistically since the x1 carbons are excellent.
I think absorbing redhat was interesting.
I think IBM is possibly the only Dinosaur which could have swallowed Oracle for a better outcome for everyone but that might have meant sun died hard.
Winchester Disks and RISC architectures. Plasma displays.
I never had nuch interest in their mainframes but they scaled and many people depended on them for massive delivery. I had a lot of time for people from IBM research. They are very good. ETH Zurich and IBM go back a long way. IBM and the IETF go back a long way.
Seemed like a pivotal time in IBM's history. IBM in 1993 was looking face to face with irrelevance during his tenure after mainframes being evergreen declared relics, and losing the bus wars in the PC industry. IBM in 2002 was still an interesting R&D and products company. Unfortunately the talent bleed off has been continuous from that time and neither the R&D nor the products are as astonishing versus the competition as they used to be. At least no follow on CEO has been daft enough to undercut the mainframe business so far, but they did miss the timing and limp execution on plenty of things.. POWER8 was almost perfectly positioned to be the AI interconnect and glue of choice.
Gerstner changed the culture, but there was perhaps no greater and more startling visible change than:
"IBM withdrew from the retail desktop PC market entirely, which had become unprofitable due to price pressures in the early 2000s. Three years after Gerstner's 2002 retirement, IBM sold the PC division to Lenovo." [1]
If Lou Gerstner had put any energy into growing RJR Nabisco's tobacco business, I could see your point. But during that 1989-1993 timespan, RJR Nabisco's leaders at the time (Gerstner plus private equity guys) were focused on wringing cash out of the shrinking tobacco division. Most of their growth strategies involved the Nabisco half, which actually accounted for about 60% of revenue.
There's still nothing heroic about that chapter of Gerstner's career. But if you're seeing public good in having tobacco companies fade from sight, there are bits of Gerstner's stewardship at RJR Nabisco that unwittingly worked out okay.
I was in my 2nd year on college when I remember Gerstner was named to run IBM. At the time, IBM was the big tech monster that was stagnet and needed a fresh way to move forward. He came in and radically changed how it worked. I remember services became a big part of its core business. He really made a big difference on how the company functioned.
What I admire is that one man changed IBM from the 50s and 60s stoggy IBM to a more modern functional company that was able to move forward. I supect that without him IBM would have died long time ago.
It paved the way for a lot more than that. At a time open source in general, and Linux in particular, did not have much corporate buy-in, IBM signaled "we back this" and "we're investing in this" in substantial ways that corporate IT executives could hear and act upon. That was a pre-cloud, pre-hyperscaler era when "enterprise IT" was the generally understood "high end" of the market, and IBM ruled that arena. IBM backing Linux and open source paved the way for a large swath of the industry—customers, software vendors, channel/distribution partners, yadda yadda—to do likewise.
OS/2 never had a chance. I was working at Radio Shack at the time that IBM was trying to sell Aptivas with OS/2. No one wanted it.
It was just weird to people. Microsoft did a big consumer push for Windows 95 and there were lines to buy it and Bill Gates promoted it on the Jay Leno show.
There were plenty of people who wanted OS/2. They simply weren't the type of people who would go to Radio Shack.
By plenty, I should be clear: it probably wasn't enough for OS/2 survive. IBM made some bad decisions early on. Microsoft was also a thorn in everyone's side and it looked like. While their product was good enough, their business practices were savage. Possibly something they learned from IBM's legacy.
I was in my late teens/early twenties at the time. What I learned about how major corporations at the time is likely what led to my llife long interest in open source.
Douglas Copeland wrote a fictional book called Microserfs. He did a lot of comparison between the culture of IBM and Microsoft. Not a bad book , I recall. as
It was never really suited to retail sales channels like Radio Shack. It was more of a corporate thing although it obviously failed there as well.
I only came across it at one site, a big UK bank (Midland Bank). They were using a heavily modified version, it didn’t look anything like the original product.
I arrived at IBM just a little before Gerstner got there. He was an absolutely amazing individual in terms of how he spoke incredibly bluntly to everyone. At IBM, it was all about legacy internal political structures, where you would have enormous presentations held by various executives trying to explain why their business was going to be best and why you needed to invest in it. The ritual of presenting at IBM’s headquarters in Armonk was a symbol of the culture.
While I don't remember every single speech word for word, I remember one of his earliest all-hands meetings. He said, "If I have one more exec come to me with a bunch of slides that can't simply describe what's happening in their business with the key strategic attributes, I'm going to start firing people." He continued, "If you're running a massive section of the business, I should be able to come to you and we should just be able to have a good, solid conversation about the levers. You need to demonstrate to me that you know exactly what's going on, and you can't have your staffer answer my questions."
He also stated that he was completely appalled because, at every other company he had been at, they woke up every day paranoid about the competition. He told everyone we had completely lost our way. if you weren't waking up every single day thinking about the scorecard, you probably weren't right for the new environment.
If you were internal and under any scrutiny at all during these years, you would understand that Lou, without Jerry York, was only half of the story. Jerry was an amazing financial mind who could sniff through spreadsheets and smell bullshit. People would come out of executive reviews hanging on for dear life. Some of these executives, after they had been exposed to York and actually performed well, would leave IBM and succeed elsewhere. However, to be clear, he was an A-hole.
They achieved an enormous amount of cultural change, which was excellent. The problem was that while they had a great cultural leader and a great financial leader, IBM which was built to the brim with some of the most incredibly technical people you had ever seen, was completely lacking a clear technical lead. Inasmuch as these two guys created an amazing turnaround story, they never stopped for a moment to ask how to find the technical leadership to truly transform the place. While they did a great job, you cannot support a stool with only two legs. If IBM had found that third leg, we would still be counting it among the Mag 8 of today.
Today, a technical leader at IBM should be able to advise Ford leadership on how firmware in trucks, fleetwide, should be refreshed in minutes without all hands behind backs and waiting hours for each truck to be done.
The benches inside of IBM were phenomenally deep. They did not need to go to the outside world.However the research arm was divided into a bunch of buckets in each division had a tendency to be their own siloed operations. The various heads of research were really really good and there was some work to try to pull some of the stuff together but never a single driving overreaching strategy that I saw as an insider.
Rommety was at the helm my entire tenure at IBM. Without wanting to actively bash a former employer, I will say that reading this made me sad, and nostalgic for an IBM I never worked for.
I spent 9 months at IBM in 1999. At that time, Lou’s legacy had already been solidified. He saved IBM. While not everyone agreed with his decisions, there was a culture of both honesty to customers and innovation that permeated the company. In contrast, look what happened to HP without such great leadership. Once a shining light in Silicon Valley, it turned into a shell of its former self.
Gerstner's overhaul at ibm was one of the best reads i made in business sharing with a few Drucker articles and tqm the japanese way by Ishikawa. Since 1980 I think I've only met two managers (one chemE and one manager at a credit card company) that came close to "Management". I miss those guys.
He was Right on outsourcing, wrong on everything else.
Gerstner joined IBM in 1993 with the company in a very bad situation and immediately killed the "Baby Blues" breakup plan - no more independent product units for PCs, various servers, storage, semiconductors. Instead: one monolith optimized for selling professional services to enterprises. Outsourcing became the flagship.
This saved IBM then. It also set a ceiling on what IBM as a technology company could ever be again.
The services pivot worked commercially. Outsourcing grew into a maybe 20 billion/year business, ironically eventually spun off as Kyndryl in 2021. But the cultural shift - from building systems/cutting edge-tech to managing other people's systems - hollowed out IBM's product DNA.
Consider that IBM's last major hardware win was the RS/6000, circa 1990. That's 35 years without a new product category victory. Meanwhile, IBM had countless pieces to own which is cumbersome -- and sad -- to list, and the list would be long. VMs invented in the 1970, running on every mainframe as an example: VMware ate the corporate market while the cloud hyperscalers built actual technology services based on it. You could probably get business consulting on it from IBM in the same time.
IBM Research remained well-funded throughout - still producing papers, still winning awards. But research was not focused to support a technology business any more, it even got pulled into service client engagements (!), subordinated to billable hours rather than productization. The research labs that gave us the bar code, DRAM, RISC, relational databases, and the scanning tunneling microscope became a presales asset.
The counterexample of large technology company in later trouble is Siemens: a conglomerate that actively manages distinct businesses as distinct businesses. Healthineers spun out and thrived. Energy spun out when it needed different go-to-market models. Industrial automation runs independently. No insistence on "one face to the enterprise customer", yet they can probably provided it if needed (don't know). They did their portfolio reshaping without strategic rigidity and the Gerstner betting on a single non-really-tech managed IT services anchored in shallowish business more than anything else horse and not the technology herd of horses.
Gerstner's legacy is complicated. He unquestionably prevented IBM's collapse financially then. But the rescue vehicle became a prison. A company with IBM's research depth, enterprise relationships, and installed base should have built the cloud, should have owned enterprise AI, should have been where AWS, VMware, TSMC even, and more low-hanging Salesforce are now.
Gerstner himself probably wouldn't be recognized as an IBMer by most who worked there before him. Brought in by a probably desperate board to save a company he then remade in a different image entirely. He saved IBM by making it something else he knew to be valuable from his prior work as a business leader. Whether that something else was the best available option, or merely an option he was familiar with: purchasing abstract solutions from a single source, is the open question his tenure leaves behind. This post argues it was the wrong one, dead wrong that is. In hindsight it was just good for the business strategic outsourcing (which is managed IT for large enterprises) side of things, wrong for much else.
Siemens as a company with similar issues of a collapsing core business ca. 2000, even much more so than the mainframe ever did, is the anti-thesis in terms of approach taken. It actively manage distinct businesses as distinct businesses, reshaping portfolios without insisting on a single face or a single model; an approach that turns out to work better looking at it now in comparison than trying to play seller of a single face to enterprise customer as a monolith. Most of the business are both technologically strong and financially in a good shape.
IBM under Gerstner set course on being a monolith optimized for selling and delivering professional services, stripped of the technology capabilities the company was built on. IBM evidently was saved then. Was it the only/best route to take? Probably not, as the low ceiling on what IBM as a technology company could be afterward turned out to be too low to stand or produce not a single major hardware win thereafter for over 35 years.
More bluntly: he transformed a legend into a fallen angel. IBM today is a shadow of what it was, what it stood for, and what it could have been. Gerstner himself fits the pattern of a business turnaround guy - an outside business consultant who saved IBM by remaking it in his own image. He never became an IBMer. But he did make IBM something else.
The issue is old IBM while it had amazing hardware and software, its cost basis was so high that they were wildly uncompetitive in the market. It doesnt matter how good your tech is, if it costs 200% more than everyone else's, you wont find much of a buyer.
When Blekko was acquired by IBM in 2015 we had an "Integration Executive" assigned to us who was responsible for all the 'detail work' of the integration (if you can imagine a project manager for an integration that would describe their job). He had joined IBM in the '80s. I found his perspective on the Gerstner years pretty fascinating.
I had interned at IBM in the late 70's (as a high school kid of all things) and decided it was more of a real estate company than a computer company :-). Up until Gerstner, IBM had a policy of acquiring and holding real estate as a hedge. Often reported on the books under "cash equivalents" because real estate had the property that it could usually be liquidated when required into cash. When we were acquired in 2015 that had changed, nearly all of the places I had worked in the 70's were no longer owned (or operated) by IBM.
Our exec said that those property holdings were the only thing that kept IBM alive between 1990 and 2000. They had to ruthlessly re-tool the entire business and that required a lot of up front cash without a product revenue stream to fund it. That was Gerstner's legacy for him, he used that asset to re-invent the company around consulting services, business automation, enterprise data processing, and business insights driven by processing billions of metrics.
And it turned out that a lot of companies needed to understand their business better, and automate it, to adapt to this new fangled thing called the Internet.
We both agreed that they would be unlikely to do that again as they had used up their 'secret weapon' already.
It’s interesting that Apple is buying real estate like there is no tomorrow.
> It’s interesting that Apple is buying real estate like there is no tomorrow.
Well, as the saying goes, they ain't making more of it.
Residential real estate construction has lagged population growth for decades as the average age of the first-time homebuyer has gone up and real wages have stagnated. The largest generational cohort in the United States (the post-WWII one with the nickname that everybody is tired of hearing) is getting out of homeownership as they retire southward or head to assisted living. Many of their family homes are in areas in which young people can't or don't want to live. There's going to be a great value reckoning as this asset transfer takes place - I have trouble believing that "line go up" will apply as it has post-COVID with so many sellers and so few ill-equipped buyers.
On the other side of the coin commercial real estate is often treated as financial leverage and a store of value instead of a going concern. From what I understand commercial landlords very frequently use their existing properties to collateralize new loans in a daisy chain-type fashion. Recall all of the grumbling about the end of downtowns and what would happen to CRE paper if people didn't return to the office a few years back? We came pretty close to the precipice and avoided it by artificially propping up the utility of these buildings. What happens during COVID II: The Quickening?
Combine all of this with a broader economy that's been vigorously puffed down to the filter with two drags of AI smoke left in it and things don't look particularly rosy for RE as an appreciating asset class. Scarcity doesn't automatically imply value perceived or otherwise.
Not financial advice, not an economist, just my $.02.
I worked for a large Silicon Valley company that took the exact opposite approach. They didnt think they had expertise to strategically manage real estate. So the company leased their facilities (and moved twice while I was there). They were also in a business where the original products were still generating lots of cash that was invested in adjacent product lines (and mostly successfully).
I talked to a CEO of one of these companies who claimed his accountants were pushing him to do the leasing only since a company was only supposed to be in one sector. A tech company that has a lot of real estate on the books wasn't going to have the same ups relative to book value, etc. Of course not having the same downs seems worth it if you aren't a day trader.
That's classic (bad) business school advice. Core competency. When I went every company was supposed to try and be like GE. Amazon in particular ignored many of the things I was taught. Take a college professors business advice with a grain of salt.
In his memoir, Gerstner described the turnaround as difficult and often wrenching for an IBM culture that had become insular and balkanized. After he arrived, over 100,000 employees were laid off from a company that had maintained a lifetime employment practice from its inception. Long allowed by their managers to believe that employment security had little reference to performance, thousands of IBM employees had grown lax, while the top-performing employees complained bitterly in attitude surveys. In the goal to create one common brand message for all IBM products and services around the world, under Gerstner's leadership the company consolidated its many advertising agencies down to just Ogilvy & Mather. Layoffs and other tough management measures continued in the first two years of his tenure, but the company was saved, and business success has continued to grow steadily since then.
https://en.wikipedia.org/wiki/Lou_Gerstner
https://web.archive.org/web/20251228211136/https://gerstner....
https://openlibrary.org/works/OL274413W/Who_says_elephants_c...
https://archive.org/details/WhoSaysElephantsCantDance
Zero intention to speak badly of the deceased… Just an anecdote - I started at IBM in the early 2000s right out of college. At the time his immediate legacy was the divestiture of a big chunk of IBMs real estate. As a new IBMer that meant hot-desking if I went to the office and a very liberal work from home policy 20 years before its time. I love work from home but experienced first hand how hard it can be on young people. In my first professional job I maybe saw my bosses (yes plural because of org changes and the IBM matrix) twice a year.
I did a couple of internships at IBM (1995 in Boca Raton and 2000 in Hawthorn). It was hard on young people even if you were in the office. You'd see your manager occasionally, but...it just felt like a place lacking in energy and was way too big corp to be very interesting. IBM is a big reason I delayed starting my career via grad school, a post doc in Switzerland, and then working for Microsoft in China of all places. I just didn't want the mundane techie experience, and was sort of so traumatized by IBM that I searched for different paths.
> In my first professional job I maybe saw my bosses (yes plural because of org changes and the IBM matrix) twice a year.
Did this work at all? How did you feel throughout it? What about your colleagues?
I am pretty self-sufficient and had colleagues who had been in the same role for 20+yrs that I could depend on. But they were also not local. Was weird but workable. Lots of sametime.
I wish thinkpad had been viable as a retained business. I've run pre and post leonovo, I liked pre better mostly, but you have to resist thinking anachronistically since the x1 carbons are excellent.
I think absorbing redhat was interesting.
I think IBM is possibly the only Dinosaur which could have swallowed Oracle for a better outcome for everyone but that might have meant sun died hard.
Winchester Disks and RISC architectures. Plasma displays.
I never had nuch interest in their mainframes but they scaled and many people depended on them for massive delivery. I had a lot of time for people from IBM research. They are very good. ETH Zurich and IBM go back a long way. IBM and the IETF go back a long way.
I still miss DEC.
Seemed like a pivotal time in IBM's history. IBM in 1993 was looking face to face with irrelevance during his tenure after mainframes being evergreen declared relics, and losing the bus wars in the PC industry. IBM in 2002 was still an interesting R&D and products company. Unfortunately the talent bleed off has been continuous from that time and neither the R&D nor the products are as astonishing versus the competition as they used to be. At least no follow on CEO has been daft enough to undercut the mainframe business so far, but they did miss the timing and limp execution on plenty of things.. POWER8 was almost perfectly positioned to be the AI interconnect and glue of choice.
> a pivotal time in IBM's history.
Gerstner changed the culture, but there was perhaps no greater and more startling visible change than:
"IBM withdrew from the retail desktop PC market entirely, which had become unprofitable due to price pressures in the early 2000s. Three years after Gerstner's 2002 retirement, IBM sold the PC division to Lenovo." [1]
[1] _ https://en.wikipedia.org/wiki/Lou_Gerstner
At Kaleida Labs (a joint venture of Apple and IBM), I gave Lou Gerstner a ScriptX demo involving an animated disembodied spinning bouncing eyeball.
He commented "That's a bit too right-brained for me."
I replied "Oh no, I should have used the other eyeball!"
Sorry, he may have saved IBM but I cannot respect anyone who was CEO of a tobacco company.
If Lou Gerstner had put any energy into growing RJR Nabisco's tobacco business, I could see your point. But during that 1989-1993 timespan, RJR Nabisco's leaders at the time (Gerstner plus private equity guys) were focused on wringing cash out of the shrinking tobacco division. Most of their growth strategies involved the Nabisco half, which actually accounted for about 60% of revenue.
There's still nothing heroic about that chapter of Gerstner's career. But if you're seeing public good in having tobacco companies fade from sight, there are bits of Gerstner's stewardship at RJR Nabisco that unwittingly worked out okay.
I was in my 2nd year on college when I remember Gerstner was named to run IBM. At the time, IBM was the big tech monster that was stagnet and needed a fresh way to move forward. He came in and radically changed how it worked. I remember services became a big part of its core business. He really made a big difference on how the company functioned.
What I admire is that one man changed IBM from the 50s and 60s stoggy IBM to a more modern functional company that was able to move forward. I supect that without him IBM would have died long time ago.
And IIRC, he had IBM invest in Linux around 1999. That paved the way for eventual acquisition of Red Hat (for good or bad) :)
It paved the way for a lot more than that. At a time open source in general, and Linux in particular, did not have much corporate buy-in, IBM signaled "we back this" and "we're investing in this" in substantial ways that corporate IT executives could hear and act upon. That was a pre-cloud, pre-hyperscaler era when "enterprise IT" was the generally understood "high end" of the market, and IBM ruled that arena. IBM backing Linux and open source paved the way for a large swath of the industry—customers, software vendors, channel/distribution partners, yadda yadda—to do likewise.
agree - and the big industry consortium building `gcc` was already proving itself
I got complicated feelings about that. He did help pave the way for Linux, but he also killed OS/2.
OS/2 never had a chance. I was working at Radio Shack at the time that IBM was trying to sell Aptivas with OS/2. No one wanted it.
It was just weird to people. Microsoft did a big consumer push for Windows 95 and there were lines to buy it and Bill Gates promoted it on the Jay Leno show.
Windows 95 almost killed Apple.
There were plenty of people who wanted OS/2. They simply weren't the type of people who would go to Radio Shack.
By plenty, I should be clear: it probably wasn't enough for OS/2 survive. IBM made some bad decisions early on. Microsoft was also a thorn in everyone's side and it looked like. While their product was good enough, their business practices were savage. Possibly something they learned from IBM's legacy.
I was in my late teens/early twenties at the time. What I learned about how major corporations at the time is likely what led to my llife long interest in open source.
Microsoft spent a billion 1995 dollars marketing Win 95. Plus they had existing DOS and Windows 3.x users.
Arguably OS/2 was "better" (depending on your definition) but MS were all-in on Windows, and for IBM OS/2 was a side-line. It never stood a chance.
Douglas Copeland wrote a fictional book called Microserfs. He did a lot of comparison between the culture of IBM and Microsoft. Not a bad book , I recall. as
It was never really suited to retail sales channels like Radio Shack. It was more of a corporate thing although it obviously failed there as well.
I only came across it at one site, a big UK bank (Midland Bank). They were using a heavily modified version, it didn’t look anything like the original product.
OS/2 had some of the ugliest icons I've ever seen (and that elephant!) - looking cute always wins.
Yeah, I remember switching from OS/2 to Linux when OS/2 was more or less abandoned.
I arrived at IBM just a little before Gerstner got there. He was an absolutely amazing individual in terms of how he spoke incredibly bluntly to everyone. At IBM, it was all about legacy internal political structures, where you would have enormous presentations held by various executives trying to explain why their business was going to be best and why you needed to invest in it. The ritual of presenting at IBM’s headquarters in Armonk was a symbol of the culture.
While I don't remember every single speech word for word, I remember one of his earliest all-hands meetings. He said, "If I have one more exec come to me with a bunch of slides that can't simply describe what's happening in their business with the key strategic attributes, I'm going to start firing people." He continued, "If you're running a massive section of the business, I should be able to come to you and we should just be able to have a good, solid conversation about the levers. You need to demonstrate to me that you know exactly what's going on, and you can't have your staffer answer my questions."
He also stated that he was completely appalled because, at every other company he had been at, they woke up every day paranoid about the competition. He told everyone we had completely lost our way. if you weren't waking up every single day thinking about the scorecard, you probably weren't right for the new environment.
If you were internal and under any scrutiny at all during these years, you would understand that Lou, without Jerry York, was only half of the story. Jerry was an amazing financial mind who could sniff through spreadsheets and smell bullshit. People would come out of executive reviews hanging on for dear life. Some of these executives, after they had been exposed to York and actually performed well, would leave IBM and succeed elsewhere. However, to be clear, he was an A-hole.
They achieved an enormous amount of cultural change, which was excellent. The problem was that while they had a great cultural leader and a great financial leader, IBM which was built to the brim with some of the most incredibly technical people you had ever seen, was completely lacking a clear technical lead. Inasmuch as these two guys created an amazing turnaround story, they never stopped for a moment to ask how to find the technical leadership to truly transform the place. While they did a great job, you cannot support a stool with only two legs. If IBM had found that third leg, we would still be counting it among the Mag 8 of today.
Today, a technical leader at IBM should be able to advise Ford leadership on how firmware in trucks, fleetwide, should be refreshed in minutes without all hands behind backs and waiting hours for each truck to be done.
Great point. I’m trying to imagine, with the full benefit of hindsight, who that might have been in that era.
Jim Clark is the best I can come up with.
The benches inside of IBM were phenomenally deep. They did not need to go to the outside world.However the research arm was divided into a bunch of buckets in each division had a tendency to be their own siloed operations. The various heads of research were really really good and there was some work to try to pull some of the stuff together but never a single driving overreaching strategy that I saw as an insider.
Rommety was at the helm my entire tenure at IBM. Without wanting to actively bash a former employer, I will say that reading this made me sad, and nostalgic for an IBM I never worked for.
I spent 9 months at IBM in 1999. At that time, Lou’s legacy had already been solidified. He saved IBM. While not everyone agreed with his decisions, there was a culture of both honesty to customers and innovation that permeated the company. In contrast, look what happened to HP without such great leadership. Once a shining light in Silicon Valley, it turned into a shell of its former self.
Maybe not a great contrast there. HP and IBM entered the "shell of their former selves" stage of development at roughly the same time.
It can be argued that the real HP became Agilent and Keysight.
What's the corporate culture like at those companies?
Gerstner's overhaul at ibm was one of the best reads i made in business sharing with a few Drucker articles and tqm the japanese way by Ishikawa. Since 1980 I think I've only met two managers (one chemE and one manager at a credit card company) that came close to "Management". I miss those guys.
He was Right on outsourcing, wrong on everything else.
Gerstner joined IBM in 1993 with the company in a very bad situation and immediately killed the "Baby Blues" breakup plan - no more independent product units for PCs, various servers, storage, semiconductors. Instead: one monolith optimized for selling professional services to enterprises. Outsourcing became the flagship.
This saved IBM then. It also set a ceiling on what IBM as a technology company could ever be again. The services pivot worked commercially. Outsourcing grew into a maybe 20 billion/year business, ironically eventually spun off as Kyndryl in 2021. But the cultural shift - from building systems/cutting edge-tech to managing other people's systems - hollowed out IBM's product DNA.
Consider that IBM's last major hardware win was the RS/6000, circa 1990. That's 35 years without a new product category victory. Meanwhile, IBM had countless pieces to own which is cumbersome -- and sad -- to list, and the list would be long. VMs invented in the 1970, running on every mainframe as an example: VMware ate the corporate market while the cloud hyperscalers built actual technology services based on it. You could probably get business consulting on it from IBM in the same time.
IBM Research remained well-funded throughout - still producing papers, still winning awards. But research was not focused to support a technology business any more, it even got pulled into service client engagements (!), subordinated to billable hours rather than productization. The research labs that gave us the bar code, DRAM, RISC, relational databases, and the scanning tunneling microscope became a presales asset.
The counterexample of large technology company in later trouble is Siemens: a conglomerate that actively manages distinct businesses as distinct businesses. Healthineers spun out and thrived. Energy spun out when it needed different go-to-market models. Industrial automation runs independently. No insistence on "one face to the enterprise customer", yet they can probably provided it if needed (don't know). They did their portfolio reshaping without strategic rigidity and the Gerstner betting on a single non-really-tech managed IT services anchored in shallowish business more than anything else horse and not the technology herd of horses.
Gerstner's legacy is complicated. He unquestionably prevented IBM's collapse financially then. But the rescue vehicle became a prison. A company with IBM's research depth, enterprise relationships, and installed base should have built the cloud, should have owned enterprise AI, should have been where AWS, VMware, TSMC even, and more low-hanging Salesforce are now.
Gerstner himself probably wouldn't be recognized as an IBMer by most who worked there before him. Brought in by a probably desperate board to save a company he then remade in a different image entirely. He saved IBM by making it something else he knew to be valuable from his prior work as a business leader. Whether that something else was the best available option, or merely an option he was familiar with: purchasing abstract solutions from a single source, is the open question his tenure leaves behind. This post argues it was the wrong one, dead wrong that is. In hindsight it was just good for the business strategic outsourcing (which is managed IT for large enterprises) side of things, wrong for much else.
Siemens as a company with similar issues of a collapsing core business ca. 2000, even much more so than the mainframe ever did, is the anti-thesis in terms of approach taken. It actively manage distinct businesses as distinct businesses, reshaping portfolios without insisting on a single face or a single model; an approach that turns out to work better looking at it now in comparison than trying to play seller of a single face to enterprise customer as a monolith. Most of the business are both technologically strong and financially in a good shape.
IBM under Gerstner set course on being a monolith optimized for selling and delivering professional services, stripped of the technology capabilities the company was built on. IBM evidently was saved then. Was it the only/best route to take? Probably not, as the low ceiling on what IBM as a technology company could be afterward turned out to be too low to stand or produce not a single major hardware win thereafter for over 35 years.
More bluntly: he transformed a legend into a fallen angel. IBM today is a shadow of what it was, what it stood for, and what it could have been. Gerstner himself fits the pattern of a business turnaround guy - an outside business consultant who saved IBM by remaking it in his own image. He never became an IBMer. But he did make IBM something else.
The issue is old IBM while it had amazing hardware and software, its cost basis was so high that they were wildly uncompetitive in the market. It doesnt matter how good your tech is, if it costs 200% more than everyone else's, you wont find much of a buyer.
Does the BladeCenter not count as a new hardware win?
Sure, RLX were first to market by 6 months or so, but it was IBM that made the blade concept a success.
"Where's the buy button?"