IBM dominated the mainframe computer market in the 1960s through aggressive sales and marketing rather than technical superiority. IBM outspent its competitors by millions on advertising, marketing, and sales commissions to establish an image of leadership. As a result, the mantra of the time was "Nobody ever got fired for buying IBM". IBM's annual healthcare revenue in the mid-1980s was about equal to its next six competitors combined. The company's dominance finally began to weaken in the early 1990s.

1. “H.I.S.-tory” by Vince Ciotti
© 2011 H.I.S. Professionals, LLC, All Rights Reserved
Episode # 7:
IBM’s Dominance
2011 = the year of IBM’s 100th
anniversary!

2. IBM’s Mainframe Dominance
• IBM’s rule over the 1960s mainframes was as total as
Microsoft Windows & Office dominate PCs today
• It was decidedly not due to technical superiority!
– BUNCH group devotees swear they had equal or better price
performance, MIPS, memory, storage, peripherals, etc.
• IBM’s revenue
during the 60s
grew about as
rapidly as the
length of men’s
hair (& inversely
to the length of
ladies skirts!)

3. What Gave Big Blue the Lead?
• It was IBM’s corporate emphasis on sales & marketing gave
them dominance in Healthcare as well as most other industries:
– Sales:
• Known for the best paid, trained & supported $alesmen
• Easily recognizable in their expensive suits, starched white
shirts and shiny wing-tip shoes!
– Marketing
• Huge advertising, T & E, and “other” budgets as well…
• IBM spent millions in marketing versus the BUNCH
Group’s thousands, creating an imageimage of superiority that
stuck.
• Leading to the famous ‘60s mantra:
– ““Nobody ever got fired for buyingNobody ever got fired for buying

4. Just How Big?
• The earliest document I could find
in my archives of old HIS magazines
was in 1987, when figures were
published from Sheldon Dorenfest,
whose “Guide” to the HIS industry
lives on today as HIMSS Analytics.
• This chart shows how IBM’s annual
revenue in Healthcare for 1985
(red) and 1986 (blue) about equaled
the entire total of their next six
competitors combined!
• Their bubble finally burst in the
early 1990s, when IBM recorded its
first quarterly loss in decades…
• Today, “service” outsells hardware.

5. System/360 “Breakthrough”
• The System/360 was IBM’s mainstay 60’s mainframe,
both in terms of technical details & marketing hype
- Technical:
• 19 memory options, 40 peripherals, remote telecom,
billionth of a second cycles, 8 meg core, 5 meg DASD…
– Hype:
– Only Apple can create such a media sensation today:
• “…100,000 businessmen
in 165 US cities attended
today’s System/360
announcement...”

6. System/360 Pricing
• Like Microsoft in the 90s, IBM ran afoul of anti-trust
monopoly investigations several times due to their
pricing policies of lease rather than purchase, and
bundling of hardware with OS & utilities.
• Lawyers as good as their salesmen saved the day
however, as the “consent decree” forced the
unbundling of hardware and software, and gave
clients the option of buying or leasing each.
• Typical 360 prices? Ranged widely by model: 360-
20, 360-40, 360-50, etc.,:
– Monthly rentals = from $3K to $115K
– Purchase = from $133K up to $5.5M
- (note $1 in 1960 economy ≈ $6 in today’s!)

7. System/360 Pricing
• Like Microsoft in the 90s, IBM ran afoul of anti-trust
monopoly investigations several times due to their
pricing policies of lease rather than purchase, and
bundling of hardware with OS & utilities.
• Lawyers as good as their salesmen saved the day
however, as the “consent decree” forced the
unbundling of hardware and software, and gave
clients the option of buying or leasing each.
• Typical 360 prices? Ranged widely by model: 360-
20, 360-40, 360-50, etc.,:
– Monthly rentals = from $3K to $115K
– Purchase = from $133K up to $5.5M
- (note $1 in 1960 economy ≈ $6 in today’s!)