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IBM Downturn

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  IBM Downturn Anne & Lynn Wheeler <lynn@garlic.com> - 2021-11-06 12:46 -1000
    Re: IBM Downturn Anne & Lynn Wheeler <lynn@garlic.com> - 2021-11-08 13:51 -1000

#219667 — IBM Downturn

The seeds for IBM downturn were sown as Future System was failing
... during the FS period in the 1st half of the 70s (complete different
and completely replace 370), 370 work was being shutdown ... the lack of
new IBM 370 products in the period is credited with giving clone 370
markers their market foothold. I continued to do 360/370 work all
through the period and even periodically ridicule FS (which wasn't
exactly a career enhancing activity). from Ferguson & Morris, "Computer
Wars: The Post-IBM World", Time Books, 1993 .... reference to the
"Future System" project 1st half of the 70s:

and perhaps most damaging, the old culture under Watson Snr and Jr of
free and vigorous debate was replaced with *SYNCOPHANCY* and *MAKE NO
WAVES* under Opel and Akers. It's claimed that thereafter, IBM lived in
the shadow of defeat ... But because of the heavy investment of face by
the top management, F/S took years to kill, although its wrong
headedness was obvious from the very outset. "For the first time, during
F/S, outspoken criticism became politically dangerous," recalls a former
top executive.

... other FS detail
http://www.jfsowa.com/computer/memo125.htm

note above also mentions Amdahl had left IBM before FS and shortly after
ACS was shutdown ...  executives were afraid that it might advance
state-of-the-art too fast and IBM would loose control of the market
... following mentions some ACS features that don't show up until more
than 20yrs later in ES/9000
https://people.cs.clemson.edu/~mark/acs_end.html

so some seeds of the downfall may have have been sown with killing of
ACS.

In late 70s and early 80s, I was blamed for online computer conferencing
on the internal network (larger than arpanet/internet from just about
the beginning until sometime mid/late 80s). Jim Gray left IBM research
in fall of 1980 (palming some number of things on me) for Tandem and we
would periodically visit him. Internal online computer conferencing
really took off after I distributed Gray trip report spring of 1981
... some claims that 25,000 IBMers were reading. Folklore is that when
corporate executive committee were told about it, 5of6 wanted to fire
me. From IBMJargon:

Tandem Memos - n. Something constructive but hard to control; a fresh of
breath air (sic). That's another Tandem Memos. A phrase to worry middle
management. It refers to the computer-based conference (widely
distributed in 1981) in which many technical personnel expressed
dissatisfaction with the tools available to them at that time, and also
constructively criticized the way products were [are] developed. The
memos are required reading for anyone with a serious interest in quality
products. If you have not seen the memos, try reading the November 1981
Datamation summary.

from "Tandem Memos" Executive summary (along with about 300 pages printed
from the memos, along with the executive summary and summary of the
summeary, packaged in TANDEM 3-ring binders and sent to corporate
executive committee) :

PREFACE

This summary is an attempt to extract from the "Tandem memos" those
points which seem worthy of management attention, emphasizing those
points for which a clear plan of action can be recommended.  Since this
summary is less than 5% as long as the original documents, some points
worthy of mention are inevitably left out

I have done my best to represent the discussion as accurately as
possible.  Occasionally, I have added comments which are not actually
present in the "Tandem memos", but are consonant with them and, in most
cases, were made in other contexts by the participants

The decisions of what material and topics to include in this summary are
strictly my own.  I apologize if something of significance has been
omitted.  The intention was to include those comments which seemed to be
most widely held, most globally relevant, and most amenable to action by
management

SUMMARY OF THE SUMMARY

To give the reader an overview of what follows, I include here the most
important points.  It is impossible to do justice to the entire
discussion in such a short summary of a summary

* The perception of many technical people in IBM is that the company is
rapidly heading for disaster.  Furthermore, people fear that this
movement will not be appreciated until it begins more directly to affect
revenue, at which point recovery may be impossible

* Many technical people are extremely frustrated with their management
and with the way things are going in IBM.  To an increasing extent,
people are reacting to this by leaving IBM Most of the contributors to
the present discussion would prefer to stay with IBM and see the
problems rectified.  However, there is increasing skepticism that
correction is possible or likely, given the apparent lack of commitment
by management to take action

* There is a widespread perception that IBM management has failed to
understand how to manage technical people and high-technology
development in an extremely competitive environment.

... snip ...

aka, which comes to pass a decade later (1981-1992) ... reorging into
"13 baby blues" in preparation for breaking up the company (gone behind
paywall, mostly free at wayback machine)
http://web.archive.org/web/20101120231857/http://www.time.com/time/magazine/article/0,9171,977353,00.html
may also work
http://content.time.com/time/subscriber/article/0,33009,977353-1,00.html

we had left but get a call from bowels of Armonk (IBM corporate hdqtrs)
asking if we could help with the breakup of the company. Lots of
business units were using MOUs to leverage supplier contracts in other
units, which would be in different corporations after the breakup. All
these MOUs would have to be cataloged and turned into their own
contracts (before we get started, a new CEO is brought in and reverses
the breakup). We also get email from former coworkers complaining that
top executives weren't paying attention to running the business but
totally focused on moving expenses from the following year to the
current year. We ask our contact in Armonk. He says top executives won't
get a bonus for the current year, but the way the bonus plan is written
if they can move enough expenses from the following year, nudging it
even slightly into the black, they will get a bonus more than twice as
large as any previous bonus (aka, getting rewarded for having taken the
company into the red)

A little after "Tandem Memos", I was introduced to John Boyd and would
sponsor his briefings at IBM. Note in 89/90, the Commandant of the
Marine Corps leverages Boyd for a Corps make-over ... at a time when IBM
was desperately in need of a make-over (two organizations had about same
# of people)

Note, in the late 80s a senior disk engineer had got a talk scheduled at
annual, world-wide, internal communication group conference supposedly
on 3174 performance ... but opened the talk with statement that the
communication group was going to be responsible for demise of the disk
division. The issue was that the communication group had strategic
ownership of everything that crossed the datacenter wall and were
fiercely fighting off client/server and distributed computing. The disk
division was seeing drop in disk sales with customers moving to
platforms more distributed computing friendly. The disk division came up
with a number of solutions, but they were constantly being vetoed by the
communication group with their strategic stranglehold on datacenters.
The communication group datacenter stranglehold not only affected disk
sales but much of the rest of IBM computing business.

An European IBM executive view of the crises (The rise and fall of IBM)
https://www.ecole.org/en/session/49-the-rise-and-fall-of-ibm

--
virtualization experience starting Jan1968, online at home since Mar1970

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#219696

IBM: Dead Dinosaurs Can't Dance
https://seekingalpha.com/article/4466347-ibm-dead-dinosaurs-cant-dance?mail_subject=ibm-ibm-dead-dinosaurs-can-t-dance

Stockman in "The Great Deformation: The Corruption of Capitalism in
America (i.e. IBM financial engineering company)
https://www.amazon.com/Great-Deformation-Corruption-Capitalism-America-ebook/dp/B00B3M3UK6/ 
pg464/loc9995-10000: IBM was not the born-again growth machine trumpeted
by the mob of Wall Street momo traders. It was actually a stock buyback
contraption on steroids. During the five years ending in fiscal 2011,
the company spent a staggering $67 billion repurchasing its own shares,
a figure that was equal to 100 percent of its net income.
pg465/loc10014-17: Total shareholder distributions, including dividends,
amounted to $82 billion, or 122 percent, of net income over this
five-year period. Likewise, during the last five years IBM spent less on
capital investment than its depreciation and amortization charges, and
also shrank its constant dollar spending for research and development by
nearly 2 percent annually.

(2013) New IBM Buyback Plan Is For Over 10 Percent Of Its Stock
http://247wallst.com/technology-3/2013/10/29/new-ibm-buyback-plan-is-for-over-10-percent-of-its-stock/
(2014) IBM Asian Revenues Crash, Adjusted Earnings Beat On Tax Rate
Fudge; Debt Rises 20% To Fund Stock Buybacks
http://www.zerohedge.com/news/2014-01-21/ibm-asian-revenues-crash-adjusted-earnings-beat-tax-rate-fudge-debt-rises-20-fund-st
The company has represented that its dividends and share repurchases
have come to a total of over $159 billion since 2000.

(2016) After Forking Out $110 Billion on Stock Buybacks, IBM Shifts Its
Spending Focus
https://www.fool.com/investing/general/2016/04/25/after-forking-out-110-billion-on-stock-buybacks-ib.aspx
(2018) ... still doing buybacks ... but will (now?, finally?, a little?)
shift focus needing it for redhat purchase.
https://www.bloomberg.com/news/articles/2018-10-30/ibm-to-buy-back-up-to-4-billion-of-its-own-shares
(2019) IBM Tumbles After Reporting Worst Revenue In 17 Years As Cloud
Hits Air Pocket
https://www.zerohedge.com/news/2019-04-16/ibm-tumbles-after-reporting-worst-revenue-17-years-cloud-hits-air-pocket

-- 
virtualization experience starting Jan1968, online at home since Mar1970

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