Next month an IBM computer called Watson will go head-to-head against the top two human Jeopardy champs for a prize worth $1 million. Whether Watson wins or not, what I wonder about this contest that was four years and untold millions of dollars in the making is how it squares with the image I’ve presented here over the last several years of a penny-pinching, greedy, avaricious, and not particularly smart IBM? The answer is simple: IBM has a split personality.
IBM values research and development. The research organizations like the one behind this Jeopardy stunt still share in a specific percentage of IBM’s gross sales. That’s how IBM keeps coming up with the amazing technologies we read about in Scientific American and Wired. Those divisions have not been looted and continue to operate.
So we can expect many noteworthy research innovations from IBM in coming years as well as more publicity blitzes like this Jeopardy thing that are substitutes for actual marketing because they involve no real products.
As for the rest of IBM, the product teams are small and still enjoy some level of autonomy and power. They have many constraints in their jobs — limited funding and the fact anyone in the company can veto their plans — but they still get stuff done.
It is the really big IBM teams like strategic outsourcing that are under constant change, constant threat (of resource action), under constant pressure, horribly over-managed, and badly managed. They are under attack from three sides — ridiculous budget constraints; very troubled contracts; and a sales organization that can and will sell anything at any price, no matter how much it damages the company.
So IBM will continue to roll out new hardware and try to get top money for it. IBM will continue to sell lots of software, but put very little money back into that business. IBM will continue to loot and damage its services business. The effects on the services business are now beginning to show up in the quarterly reports. It will take years, though, for the collateral damage to become apparent. By then the executives who did the damage will be long gone.
IBM’s competitive advantage over HP and Sun was IBM had a services business. Then HP bought EDS. Sun was swallowed by Oracle. While IBM understands it needs a services business it is mismanaging and damaging it. In doing so IBM is not only hurting one part of its company, it is souring its relationship with customers. An upset customer will be inclined to not only drop its services business with IBM, but also its hardware and software business too. In time IBM’s services business will become a detriment to the company.
And that’s IBM’s real jeopardy.