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Vendors Survival: Will IBM Survive until 2027?

The entrance to IBM's Headquarter in Armonk
Source: Hebrew Wikipedia

IBM's earnings declined every quarter in the last 20 quarters. This trend is surely a warning sign which raise the question: Will IBM survive until 2027?
Warren Buffett's Berkshire Hathaway was one of IBM's larger shareholders. Buffet sold the shares after losing in his IBM investment. He said he hopes that he will not lose in his Apple's shares investment.  

The early days
According to Wikipedia, "The company was originated in 1911 as the Computing-Tabulating-Recording Company and was renamed "International Business machine" in 1924". 

The first Mainframes
On April 7, 1964 IBM announced its first computer system family: the IBM System/360. 
IBM System/360 was the first IBM Mainframe.

Thomas Watson Jr. was the company's president. 
He was warned that he will not be able to compete with the market leader NCR. Few years latter IBM replaced NCR as the market leader.

Personal notes on the 1970s
I started my career as a COBOL Programmer on IBM System/360 computer. IBM was then the market leader. IBM's Business model, as well as other vendors model, was simple: Buy an expensive computer and the vendor will supply the Software free of charge. It was one stop shop for all computers Hardware and Software.

IBM's Operating Systems were functionally limited. I worked as a Systems Programmer for a large Service Bureau serving a lot of Public Sector Organizations.
We had to extend and change IBM's Operating System in order to address issues such as Security, Tape Management and Spooling. 

IBM was a Theory Z organization like DEC and similar to large Japanese companies: employees are never fired. They may change their jobs but will rewarded for working always for the same company. 

The age of Arrogance
The 80ths and the beginning of the 90ths were IBM's arrogance age.
For example, the organization I worked for and IBM bid together in an RFP in the beginning of the 90ths.

The RFP was defined for Open Systems i.e UNIX, RDBMS, Hardware Platform independence etc. 
While writing our bid IBM's employees brought a strange White Paper. It was about SAA.  Was SAA successful architecture or a failure? the answer is irrelevant in the RFP's context. SAA connected various IBM platforms such as Mainframe, AS400 and IBM Unix. 

Instead of this paper I wrote a small paper about CICS like products on UNIX. They could be deployed on IBM's UNIX as well as on other UNIX platforms including HP-UX and SUN Solaris.

Would IBM cooperate with a small company?
In the arrogance age the answer would probably be "no".
A small company offered cooperation with IBM on the emerging PC platform. The small company, named Microsoft, offered cooperation based on its Windows Operating System.
IBM preferred its OS/2 PC Operating System.  

The Software Age
The PCs revolution included another game change concept: Software revenues were more significant than Hardware revenues.

IBM, HP and DEC had to adapt and change their Business Model. IBM adapted. HP adapted and DEC failed. 
Microsoft become the market leader. IBM was still one of the leading vendors. However, it was no more a vendor who is capable of provide all Hardware and Software functionality. 

IBM had to acquire other companies and to focus on specific markets, such as Middleware, in addition to its Proprietary Platforms, such as Mainframes and AS400 computers.

IBM Global Services
Additional way for competing was by offering Professional Services in addition to Software and Hardware products. IGS (IBM Global Services) was  a leader in the Professional Services market.

The SOA Age
After 2005 SOA emerged as a Mainstream Software approach. The four leading SOA Ecosystems were IBM, Oracle, Microsoft and SAP.

Cloud, Social Networks and Smart phones 
 New concepts and new market leaders. Google, Apple, Facebook and Amazon became the IT market leaders. Microsoft is also a leader in the Cloud Computing market thanks to its "Cloud First" approach.

would IBM Survive until 2027?
A company that survived since 1911 will probably continue to survive in the following ten years. IBM is a large global company who has many customers and many products.  It is a leader in markets such as IBPMS, other Integration and Middleware markets, BI and Big Data. 

Its proprietary markets such as the IBM System i (the AS/400) will not disappear in the following ten years.
As far as the Mainframe is concerned, IBM's work is excellent.
The Mainframe is alive and kicking more than 60 years. Its capabilities are extended supporting modern software such as Java and Linux. Its Security and Availability are still higher than other platform's Security and Availability and its Workload Management is unique. 
Many Large Enterprises are still using Mainframes for Core Systems. 
Recently, IBM announced new Mainframe generation z14.  
However, the Mainframe is a Niche platform and organizations are gradually migrating to Mainstream platform such as Linux and Windows. 

The Problem
Survival is important but the vendor position is also important. IBM's position is not as good as it was few years ago. 

The problem is that IBM does not lead any significant new technologies market.
It seems that IBM could be a leader in the Public Cloud Computing Infrastructure As a Service (IaaS) and Platform as a Service (Paas) markets. 
However, Amazon's AWS is the market leader (more than 40%) followed by Microsoft's Azure and Google. IBM is following Google, however its market share is small. 
Salesforce is a leader only in the PaaS market.

The computing market is dynamic and evolving. The times are constantly changing. Innovative company position could be improved. 
An interesting article published in February, 2017 depict a possibility of IBM regaining its old time position as the chip market leader instead of Intel.
The scenario is based on acquisition of other Power Consortium members (Power is IBM's chip).
The acquisition targets are Networking Infiniband and Networking Hardware vendor Mellanox, The graphical processors leader Nvidia and FPGA maker Xilinx. 

For more details read the article: The Case for IBM Buying Nvidia, Xilinx and Mellanox.


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More Stories By Avi Rosenthal

Ari has over 30 years of experience in IT across a wide variety of technology platforms, including application development, technology selection, application and infrastructure strategies, system design, middleware and transaction management technologies and security.

Positions held include CTO for one of the largest software houses in Israel as well as the CTO position for one of the largest ministries of the Israeli government.

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