When was the last time you thought about IBM?
Probably a long time ago, and that’s understandable.
As far as companies go, IBM could easily win the award for most boring business.
Cause what do they actually do?
Well, they make business machines.
And that’s it.
Boring, right?
But what if I told you that IBM can be interesting.
They are, for example, older than sliced bread, Band-Aid, and the State of Arizona.
You know those funny self-playing pianos they always show in old Western saloons?
It’s those pianos, specifically their paper rolls, that gave birth to IBM.
This was during the 1890s, a time when everything was done using pen and paper.
As you can imagine, administrative tasks for the government were painfully slow.
None suffered more from this than the US Census Bureau.
They had to count the population every ten years, but doing everything by hand was so
slow that the 1880 census took more than seven years to complete.
The whole thing was a nightmare, but where most saw disaster, one man saw opportunity.
That man was Herman Hollerith.
He worked at the Census Bureau, and he was so fed up with how slow it was that he spent
the next ten years developing a machine to speed it up.
He ended up inventing the tabulator, the first ever electromechanical counting machine.
This is where our saloon pianos come in.
Hollerith needed a way to store information, and paper rolls were his first solution.
They ended up being too fragile though, so instead he settled for punch cards.
Those might look ancient, but punch cards actually remained the standard for data storage
until well into the 1970s.
Hollerith’s tabulator was the beginning of modern information technology, and he knew
it, so in 1896 he established his own company.
Census bureaus around the world rejoiced, and Hollerith ended up becoming a very wealthy
man.
By the time he sold his business in 1911, it was worth more than 2.3 million dollars.
That might seem cheap, but remember that this was during a time when the average worker
barely earned two dollars a day.
So, who bought Hollerith’s company?
This guy, Charles Flint.
In 1911 he merged it with three other companies that made clocks and scales.
This was the birth of IBM.
Well, it wasn’t called IBM until 1924, but you get the idea.
Hollerith’s tabulators were at the heart of IBM’s business,
but as technology improved they would greatly expand their product range.
During World War 2, they even started to build rifles and equipment for the US military.
After the war was over and everyone went back to business,
IBM were well on their way to developing the first real computers:
you know, the ones that weighed 4 tons and could fill a room.
During the 60s they collaborated with NASA for the Apollo missions.
You know, the ones that put Neil Armstrong and friends on the Moon.
The PC revolution of the 80s, however, was their biggest challenge.
By that point personal computers had already been around for 5 years.
The most popular one was the Apple II, courtesy of Steve Jobs and Steve Wozniak.
The market for personal computers wasn’t too big yet, but it was growing fast,
and many pioneering companies had already settled in.
IBM was late to the party, but they didn’t give up, and on August 12th 1981, after a
single short year of development, IBM revealed their Trump card:
The IBM Personal Computer, or PC for short.
Nobody saw it coming.
IBM spent a fortune on their marketing campaign and unlike previous projects they actually
supported third-party developers.
This was a huge step in a time when everyone was guarding their trade secrets.
The IBM PC was such a success that in less than two years they would be selling one PC
every minute.
At this point, you’re probably wondering what happened.
After all, nobody’s uses an IBM computer in their home anymore.
So where did it all go wrong?
Well part of the answer lies in IBM’s decision to borrow components from other companies.
They didn’t actually develop its own operating system or microprocessor, but instead borrowed
them from Microsoft and Intel.
That’s why they were so eager to give free access to third-party developers.
By doing so, IBM unwittingly surrendered the keys to the PC industry.
What they really accomplished was to make MS-DOS and Intel processors the industry standard.
When other brands started copying this model, IBM had a hard time catching up.
The flood of cheap “clones” essentially drove IBM out of the market.
They had a pretty rough time in the years before the internet, but they actually recovered
surprisingly well, despite losing the PC war of the 80s.
Their core products, after all, had always been their mainframes:
the big, heavy computers that could power large businesses.
Small personal computers could never replace mainframes, so IBM was back in black after
only a couple of bad years.
The Dot-com crash in the year 2000 actually helped IBM, since many of their tech competitors
went bankrupt.
The internet turned out to be a great opportunity for them.
Now they could sell not only their mainframes, but entire packs of software and services.
What they became was, essentially, the do-it-all IT guy of the businesses world.
I actually lied that no one has an IBM computer anymore.
Lots of people do because IBM sold their PC division to Lenovo in 2005.
Their defeat during the 80s taught them just how important it is to stay on top of technological
progress.
They’ve actually had a huge role in the development of modern technology.
Take AI for example: In 1997 their Deep Blue program managed to
defeat world chess champion Garry Kasparov.
More recently, their Watson AI won a million dollars playing Jeopardy! in 2011.
IBM’s most recent struggle has been with cloud computing.
It’s a very hot topic in enterprise technology right now, but the idea behind it is actually
very simple.
Imagine a giant network of computing resources: think big servers, powerful processors, and
lots and lots of storage space.
You, or your business can use this network, and you can rent its vast resources for whatever
you need.
You don’t need to watch over it, you don’t need to maintain it, you won’t even know
its there.
That’s the beauty of it: a single network can provide service to thousands
of companies, which only have to pay a small fee for using it.
That might sound fine and dandy, but cloud computing is actually a huge threat to IBM.
Unlike the 80s, this time they’re not up against small tech startups.
Now they’re facing the big guys: Amazon, Microsoft, and Google.
And to be honest things are not looking to bright for IBM.
Cloud computing has the potential to replace their main source of income
Mainframes and business solutions have always been IBM’s bread and butter.
They do have a presence in the cloud market, but all their competitors have other cash
cows to rely on.
Compared to them, IBM doesn’t have much to fall back to.
In a world where you can rent all of your IT needs for cheap, nobody would really bother
to buy IBM’s mainframes.
Now, does that mean IBM will die out in a few years?
Probably not.
With the amount of money they can throw at people, I’m sure they have the best minds
working on their next move right now.
Will they survive the age of cloud computing?
Who knows.
I guess eventually we’ll find out.
Until then, stay smart.
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