In this undated photo provided by International Business Machines Corp. (IBM) magnetic stripe technology is used in 1971, at a shoe store. IBM was formed on June 16, 1911, as the Computing Tabulating Recording Co. in a merger of four separate companies. The new business with a plant in Endicott, N.Y., made scales, time clocks, cheese slicers and _ significantly for its future _ machines that read data stored on punch cards.(AP Photo/IBM Corporation) |
ENDICOTT,
N.Y. (AP) — Google, Apple and Facebook get all the attention. But the
forgettable everyday tasks of technology — saving a file on your laptop,
swiping your ATM card to get 40 bucks, scanning a gallon of milk at the
checkout line — that’s all IBM.
International
Business Machines turns 100 on Thursday without much fanfare. But its
much younger competitors owe a lot to Big Blue.
After all, where would Groupon be without the supermarket bar code? Or Google without the mainframe computer?
“They
were kind of like a cornerstone of that whole enterprise that has
become the heart of the computer industry in the U.S.,” says Bob
Djurdjevic, a former IBM employee and president of Annex Research.
IBM
dates to June 16, 1911, when three companies that made scales,
punch-clocks for work and other machines merged to form the Computing
Tabulating Recording Co. The modern-day name followed in 1924.
With
a plant in Endicott, N.Y., the new business also made cheese slicers
and — significantly for its future — machines that read data stored on
punch cards. By the 1930s, IBM’s cards were keeping track of 26 million
Americans for the newly launched Social Security program.
These
old, sprawling machines might seem quaint in the iPod era, but they had
design elements similar to modern computers. They had places for data
storage, math processing areas and output, says David A. Mindell,
professor of the history of technology at the Massachusetts Institute of
Technology.
Punch cards carted from station to station represented what business today might call “data flow.”
“It was very sophisticated,” Mindell says.
The
force behind IBM’s early growth was Thomas J. Watson Sr., a demanding
boss with exacting standards for everything from office wear (white
shirts, ties) to creativity (his slogan: “Think”).
In this undated photo provided by International Business Machines Corp. (IBM) a punch card machine is being assembled. (AP Photo/IBM Corporation) |
Watson,
and later his son, Thomas Watson Jr., guided IBM into the computer age.
Its machines were used to calculate everything from banking
transactions to space shots. As the company swelled after World War II,
IBM threw its considerable resources at research to maintain its
dominance in the market for mainframes, the hulking computers that power
whole offices.
“When
we did semiconductors, we had thousands and thousands of people,” says
Donald Seraphim, who worked at IBM from 1957 until 1986 and was named a
fellow, the company’s highest honor for technical achievement. “They
just know how to put the force behind the entrepreneurial things.”
By
the late ’60s, IBM was consistently the only high-tech company in the
Fortune 500’s top 10. IBM famously spent $5 billion during the decade to
develop a family of computers designed so growing businesses could
easily upgrade.
It
introduced the magnetic hard drive in 1956 and the floppy disk in 1971.
In the 1960s, IBM developed the first bar code, paving the way for
automated supermarket checkouts. IBM introduced a high-speed processing
system that allowed ATM transactions. It created magnetic strip
technology for credit cards.
For
much of the 20th century, IBM was the model of a dominant,
paternalistic corporation. It was among the first to give workers paid
holidays and life insurance.
It ran country clubs for employees generations before Google offered subsidized massages and free meals.
“The
model really was you joined IBM and you built your career for life
there,” says David Finegold, dean of the School of Management and Labor
Relations at Rutgers University. Transfers to other cities were still
common enough that employees joked IBM really stood for “I’ve Been
Moved.”
The
origins of the company’s nickname, Big Blue, are something of a
mystery. It may simply derive from IBM’s global size and the color of
its logo.
In this undated photo provided by International Business Machines Corp. (IBM) the IBM PC makes its debut in 1981. (AP Photo/IBM Corporation) |
IBM’s
gold-plated reputation was based in part on ubiquity and reliability,
as well as a relentless sales force. But its fortunes began to change as
bureaucracy stifled innovation.
Information-technology
managers used to joke that nobody ever got fired for buying IBM. But by
the 1980s, Big Blue found itself adrift in a changing technology
environment.
IBM
had slipped with the rise of cheap microprocessors and rapid changes in
the industry. In an infamous blunder, IBM introduced its influential
personal computer in 1981, but it passed on buying the rights to the
software that ran it — made by a startup called Microsoft.
IBM
helped make the PC a mainstream product, but it quickly found itself
outmatched in a market it helped create. It relied on Intel for chips
and Microsoft for software, leaving it vulnerable when the PC industry
took off and rivals began using the same technology.
The
PC’s casing wasn’t as important as the technology inside it, and IBM
didn’t own the intellectual property inside its own machines. In
addition, the rise of smaller computers that performed some of the same
functions as mainframes threw IBM’s main moneymaking business into
disarray.
With its legacy and very survival at stake, the company was forced to embark on a wrenching restructuring.
One
of its major achievements turned out to be re-engineering itself during
the upheavals of the 1990s. Viewed as too bureaucratic to compete in
fast-changing times, IBM tapped an outsider as CEO in 1993 to help with a
turnaround.
Louis
Gerstner, a former executive with American Express and RJR Nabisco, had
little knowledge of technology or IBM culture. In his first meeting
with top IBM executives, he was the only one in the room with a blue
shirt.
But
he broke up old fiefdoms, slashed prices and eliminated jobs. IBM,
which had peaked at 406,000 employees in 1985, shed more than 150,000 in
the 1990s as the company lost nearly $16 billion over five years.
Gerstner
resisted pressure to break up the company and instead focused on
services, such as data storage and technical support. Services could be
sold as an add-on to companies that had already bought IBM computers.
Even barely profitable pieces of hardware were used to open the door to
more profitable deals.
The
shift allowed IBM to ride out two recessions: When times are tough,
businesses pay IBM to help them find ways to cut costs and handle
technology chores that would be more expensive to perform in-house.
The
change in strategy was risky for a company that helped create the PC
industry, yet IBM rose to become the world’s biggest technology services
provider.
With
around $100 billion in annual revenue today, IBM is ranked 18th in the
Fortune 500. It’s three times the size of Google and almost twice as big
as Apple. Its market capitalization of around $200 billion beats Google
and allowed IBM last month to briefly surpass its old nemesis,
Microsoft.
Though transformed, IBM remains a pioneer, the envy of the technology industry.
Hewlett-Packard
Co.’s new CEO, Leo Apotheker, says one of his primary goals is to
strengthen the company’s software and services businesses to compete
better with IBM.
Some
things haven’t changed. The company still spends heavily on research,
about $6 billion a year. It still comes up with flashy feats of
computing prowess, most recently when its Watson computer system handily
defeated the world’s best “Jeopardy!” players.
And, just as in 1911, it’s still in the business of finding data solutions.
While
IBM’s Watson attracted buzz by beating two human “Jeopardy!” champions,
the company wants to put it to real-world use as a medical diagnostic
tool that can understand plain language and analyze mountains of
information. That’s in line with IBM’s focus on other big data projects,
such as analyzing traffic patterns citywide to predict and stave off
traffic jams.
The
company that built its success making sense of millions of punch card
records sees future innovations in the analysis of the billions and
billions of bits of data being transmitted in the 21st century.
“The
scale of that enables you to do discovery, whether it’s in the case of
drugs, medicine, crime — you name it,” says Bernard Meyerson, IBM’s vice
president for innovation.
SOURCE: The Associated Press
