IBM (Global Perspectives, NYU Stern)


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  • Good Morning. We will first take you through a brief history of IBM and the technology industry in the US. Then we will go back and talk about IBM’s growth and influence in relation to and over the tech industry and US economic system. Lastly we will discuss the future of IBM and what to expect from this innovative country in the 21 st century
  • CTR came into existence due to a merger of smaller firms. At this time in history, many companies began to merge to make stronger more consolidated businesses. It speaks to the opportunities for entrepreneurship in America early in the 20 th century and CTR ’s establishment was a product of the times. TJ Watson Sr brought a marketing and sales focus to CTR. He was responsible for the renaming of the company as well as the shift in focus from low tech machines to the more advanced punch card machines. One of the firm ’s that was part of the CTR merger was the Tabulating Machine Company. This acquisition was critical to IBM’s success because it already had the technology it needed in house for success in the tabulating market.
  • Dominance in punch card machine market held trust of major accounts as IBM moved into the computer market TJ and Young Tom wanted to ensure that IBM ’s systems knowledge trumped all other competitors. They aimed to continually educate themselves and their customers on IBM’s products, providing complete wraparound services to its customers System/360 consisted of a broad line of compatible computers. Customers could finally trade up or move laterally without buying new software/hardware.
  • Number of IT workers as a percentage of the US workforce started off small, but grew steadily over the course of 100 years. Profits also grew at a tremendous rate making the IT industry the worlds largest in the mid 90s with annual revenues of $400B Read third bullet. A few decades later, two important Acts were passed. Shift in the nations’ focus on how it wanted to utilize technology. Data Processing becomes a major focus for US Businesses and the Government. The NIR and SS Acts required data gathering and tabulation for the government, private businesses and their respective workforces. Acts mandated that business gather data in a way they hadn’t in the past. After these Acts were passed, IBM’s markets for growth became a clear and logical progression.
  • - Majority of tech industry funded through government spending. New laws necessitated government spending to develop the industry. Move from hand written documents and ledgers to cash registers and typewriters Read bullet one. These investments proved critical in WWII as all military agencies used punch card machines throughout the war. During the Depression, punch card machine orders rose dramatically (due to the aforementioned Acts) and barely a handful of companies could fulfill these orders, IBM being one of the few
  • After the military market, the next market that IBM thrived in was in the private business sector. Read bullet 1 & 2. - US had a stranglehold on computer technology. Other countries attempted to access the US technology through partnerships with US firms. Competing countries did not have the level of private sector funding to invest in R&D at the rate the US did which played a huge part in IBM’s success. - The final market that defined IBM was the Household market. Developers found more efficient ways of building computers without increasing the retail cost of the systems. Technology and knowledge of IT systems improved, and owning a PC became a reality to more households. In the early stages there were issues around compatibility across platforms, but we will discuss how IBM found a solution to that problem when Andrew discusses IBM’s influence on the Tech Industry
  • All military forces used IBM punch cards in WWII IBM was able to fulfill these orders due to the groundwork laid by defense investments and its success at war time. The space and arms race with the Soviet Union resulted in technologies that trickled down to the business world provided IBM with the resources necessary to make better, faster, smarter computers IBM World Trade ’s development helped make IBM a ‘local’ company in its foreign markets. The company was able to hire a local workforce and diffuse its technology across several regions, which assisted in the globalization of the computer industry. When IBM grew to the largest manufacturer of computer components with the introduction of System/360, its foreign manufacturing facilities were able to produce parts cheaply and help add to IBM’s overall revenues, after spending years of having the IBM World Trade leg of the company adding little value to the firm’s revenues Government contract gave IBM access to university research. 50% electronic data processing revenues came from these two contracts. Massive capital infusion and “free” R&D. Technology helped US win WWII and through destruction of European infrastructure IBM was able to gain predatory market advantage.
  • IBM ‘s size made it a target for Department of Justice. System 360 did what Ford did for mass production – modernization of data processing in the information age. DOJ impedes development and implementation of new products
  • IBM found it difficult to expand due to legal and customer relations dilemmas. Anti- trust litigation and diminished barriers to entry led to new competition IBM recorded 8 Billion loss in 1993 and laid off 170,000 jobs world wide in 1994.
  • IBM found it difficult to expand due to legal and customer relations dilemmas. Anti- trust litigation and diminished barriers to entry led to new competition IBM recorded 8 Billion loss in 1993 and laid off 170,000 jobs world wide in 1994.
  • IBM maintaining its roots in R&D through various labs around the globe. IBM achieved major technological innovations through these labs (DRAM and FORTRAN) and continues to push the envelope by developing first super com
  • IBM (Global Perspectives, NYU Stern)

    1. 1. David Hwang | John Lampariello | Andrew Morley | Jason Rawlins | Rich Stevens
    2. 2. ∗ Introduction to IBM ∗ History of the Tech Industry ∗ Markets for IBM Growth ∗ IBM’s Influence in the Tech Industry ∗ IBM’s Development in the Scope of the National Economic system ∗ The Future of IBM Agenda
    3. 3. ∗ Computing Tabulating Recording Company was found in 1911 ∗ Manufactured and sold machinery ∗ Commercial scales, industrial time recorders, tabulators, and punched cards ∗ CTR was renamed as International Business Machine in 1924 ∗ IBM dominated the tabulating market in the 1920’s alongside its sole competitor, Remington Rand Introduction to IBM
    4. 4. ∗ IBM grew both domestically and internationally between the late 1920’s through the 1940’s ∗ The firm operated offices out of 78 countries ∗ In 1950, IBM began producing computers ∗ IBM continued to invest heavily on R&D and Marketing ∗ Between 1950-55, IBM doubled its revenues and became the world’s leading producer in computers ∗ IBM introduced System/360 in the 1960’s Introduction to IBM
    5. 5. ∗ IT Workers as a % of the US workforce ∗ 1880 => 10%; late 1940’s => 25%; early 1980’s => +30% ∗ At the time of the case, the IT industry had grown to the the world’s largest with annual revenues of $400B in the mid-1990’s ∗ Punch card machines came about in the 1880’s ∗ National Industrial Recovery Act (1933) ∗ Social Security Act (1935) History of the Tech Industry
    6. 6. ∗ Military Market ∗ Most investments in IT R&D came from the Department of Defense because private companies were hesitant to invest in the computer/technology industry ∗ US military and government R&D investments in IT proved critical during WWII and the Cold War Markets for IBM Growth
    7. 7. ∗ Business Applications ∗ In late 1971, US companies had a 92% share of the world computer market ∗ IBM accounted for 62% of that market share ∗ Post-WWII, innovation came primarily from the private sector ∗ Household Market ∗ The cost of developing a PC declined dramatically ∗ While owning a PC became a reality to more households, compatibility across platforms and software applications remained an issue Markets for IBM Growth
    8. 8. ∗ In the late 1940’s, IBM held 90% of the US market for punch card machines ∗ At the end of WWII, US manufactured goods were in high demand internationally ∗ Two huge military contracts ∗ “Bomb-Nav” guidance computer in the B-52 Bomber ∗ SAGE Air Defense System ∗ IBM World Trade (Int’l leg of the company) built manufacturing plants outside the US IBM’s Influence in the Tech Industry
    9. 9. ∗ IBM designed ‘Stretch’ for the Atomic Energy Commission and the National Security Agency in 1962. ∗ Creation of System/360 ∗ Modernization of data processing ∗ Development fit the entrepreneurial mold of IBM ∗ Related Industries experienced growth as a result IBM’s success and antitrust judgments. IBM’s Influence in the Tech Industry
    10. 10. ∗ National economic system rewards entrepreneurs ∗ IBM conduit for national advancement in technology through government spending ∗ IBM’s growth made it a target for anti-trust litigation ∗ Department of Justice reduced barriers to entry for competitors ∗ Difficulties maintaining original entrepreneurial spirit in new economic environment IBM’s Relationship with the Economy
    11. 11. ∗ Technological advancements aided growing US economy ∗ US shifting from a manufacturing based economy to a service oriented economy. ∗ IBM products created new industries ∗ IBM technological contributions ∗ Magnetic Stripes ∗ Lasik Eye Surgery ∗ Computerized Scale ∗ UPC Barcodes ∗ PC’s IBM’s Relationship with the Economy ∗ Automated Test Scoring ∗ Automated Teller Machines ∗ Hard Drives ∗ Mainframes ∗ Digital Calculators
    12. 12. ∗ Paradigm Shift ∗ Emergence of Personal Computers ∗ Increase in consumer knowledge ∗ IBM realized decline in market share ∗ Barriers to entry dissipated ∗ IBM reliant on smaller producers ∗ Intel and Microsoft IBM’s Relationship with the Economy
    13. 13. ∗ New Business Model ∗ Helping our clients succeed in delivering business value by becoming more efficient and competitive through the use of business insight and information technology solutions ∗ IBM sold it’s personal computer business to Lenovo in 2005 ∗ Focus Services Sector: Business, IT, Outsourcing and Training ∗ Product offerings: Software, Systems and Storage Future of IBM
    14. 14. ∗ Continued pursuit of new technological innovations through various research facilities. ∗ Global Technology Outlook (GTO) ∗ Annual Study conducted by IBM Research that identifies significant technology trends ∗ Thomas J. Watson Research Center ∗ Dynamic Random Access Memory (DRAM) ∗ FORTRAN programming language ∗ Super Computer Development ∗ Peta-Floating Point Operations per Second (Flop) Achievement Future of IBM
    15. 15. Q&A