Monday, August 11, 2014

Book review: The Decline and Fall of IBM

Since I spent more than 16 years in IBM, I read with interest a small book authored by Robert Cringley, a journalist that has investigated the insides of IBM during the last few years. The title is a paraphrase on the famous book: "The decline and fall of the Roman Empire", and indeed when I was young and IBM dominated the IT market it looked like the Roman Empire from the outside.  Cringley starts by surveying IBM's history , getting to Lou Gerstner period where he saved IBM for a while,  while he mentions the good things that Gerstner did for IBM he also mentions some of his mistakes:  building competitive services arm using cheaper labor, which deteriorated the quality, the second mistake is selling the networking business to AT&T, and the biggest mistake according to Cringley is nominating Sam Palmisano to be his successor.

His main criticism is indeed addressed at Palmisano by taking the "shareholder only" approach to extreme (I have written before about the shareholder value myth).  Maximizing the shareholder value, and the "2015 roadmap" making the $20 Earning Per Share as the only game in town.  Kringley claims that by doing it IBM became a cash cow,  Meeting the 2015 roadmap involves financial engineering, such as spending $101 Billion dollars on buying back around third of its shares, inflating the value artificially, moreover, IBM does it with borrowed money.  The problem is not only the financial aspect, constants cutbacks in workforce hurt the quality of service of IBM to customers, and IBM suffered various contract cancellations. He also criticises the HR aspect, IBM is calling its employees "resources" and the workforce reduction is called "resource action".   My note:  once when I worked in IBM we had a meeting of HR director from the USA with all manager, and when she kept talking about people as "resources", one of my colleagues remarked that in the Israeli culture is considered as a big insult, like calling person "it" in English. She tried her best to use the term "people" or "employees", but it was difficult for her, since she really thinks on people as resources, however, people don't like to be treated as resources, and the current policies create a dissonance between the upper management and many employees. Finally he analyzes the areas where IBM is active:  hardware, software, services, analytics, mobile and cloud, analyzes IBM problems in each of the area, and talks about possible solution.    The author's conclusion is quite pessimistic for the future of IBM unless the current CEO Ginni Rommety will make fundamental changes.  He also brings a lot of letters from insiders to reinforce his opinions.

As a veteran IBMer, many of the things he talked about were familiar to me.  I am not qualified to judge IBM strategy,  but there is a general sentiment  among many people inside IBM that is consistent with his conclusions.  However, I believe that IBM which survived more than 100 years will survive this, but probably it will need another Gerstner-like person to get it out of the box it is now...  

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