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Like Apple, IBM doing its own thing

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Steve Lohr, perhaps one of the most underrated tech writers at the New York Times, argued in a post Monday that IBM is no longer a tech bellwether. Instead it is an class of its own, much like Apple (s aapl). This is the relevant bit in his article:

I.B.M. (s IBM) is doing its own thing in the enterprise market, much as Apple is in consumer technology. Both are separated from the industry pack. In I.B.M.’s case, to be sure, that separation has been a more subtle and evolutionary process than it has been at Apple, the blockbuster product machine.

I.B.M. talks about the “industrialization of services” as a key strategic goal. That industrialization process includes paring services jobs down to standardized, repeatable tasks; spreading the work around the world to where it can be done most efficiently and most inexpensively; and steadily automating simpler tasks with software.

The benefits of a globalized work force should diminish over time, as wages rise for skilled workers in India, for example. But if more and more services work can be done with software instead of people, I.B.M.’s profit margins could well keep improving — and the company could separate itself further from other tech suppliers.

Lohr is spot on. Apple (s AAPL) has been marching to its own drum, creating markets by producing products that eschew the conventional wisdom. IBM has done this by moving away from commodity hardware to a more “insights”-based platform approach.

By selling these intelligent platforms (Smart Cities and Smarter Commerce) as solutions instead of offering them as “packages,” the company has distinguished itself from the likes of Dell (s DELL) and HP (s HPQ), which are weighed down by their past and reliance on an older way of doing business.

9 Responses to “Like Apple, IBM doing its own thing”

  1. Over the past 15 years Apple has gone from a few days of cash on hand to the largest-cap most-profitable company on the planet—selling nothing but hardware. Over the same period of time IBM has seen hardware go from 50% to less than 20% of its business as software and services became dominant. In real terms over the past 15 years its revenues have actually declined even though profits have increased steadily. IBM has transformed into a business management platform. Last year Apple’s revenues surpassed IBM for the first time. IBM’s secret to keeping revenues steady after near-death in the early 90s was an aggressive smart acquisition of well over 130 companies over an 18 year period only a couple of which were services firms. All the rest were software—the most profitable business there ever was and where 90% margins are not uncommon.

    Acquisitions aren’t the only reason for IBM’s survival. IBM today is a massively complex quilt of nearly a couple hundred businesses each with long term customers, license maintenance contracts, and excellent products. Today IBM’s mojo is their business management acumen and hard-nosed capabilities in core process areas like procurement, billing, and outsourcing. In essence IBM the company is a business management platform. It’s quite likely their top management could run nearly any type of business along the lines of the way Amazon was able to leverage its business process expertise and move beyond books. That won’t happen but it could.

    IBM’s acquisitions and survival prove that it wasn’t technology innovation that saved it and continues to sustain it—it’s business innovation. Apple’s model is vastly simpler revolving around technology innovation but it could turn out that business process innovation is more important for a sustainable business model in the 21st century. We shall see. IBM is nothing if not a survivor.

  2. ricphillips

    If you are going to hang your entire article on the distinction between solutions and packages I think it is just a matter of polite reader-respectful writing to elucidate what you intend by these terms.

  3. ronald

    IBM reminds me of Xerox, good research, indifferent Management. I have yet to find anybody from the business site of companies who likes them, any Enterprise SW for that matter. Part of it might be that Management is forced to think through Process and Organization in great detail for the first time in a long time when they go into Enterprise SW, they seem more accustomed to patch work in one or the other.

    But comparing IBM to Apple seems to be a very long stretch if one looks at customer satisfaction with implementation. IBM talks a good story, simulation of cat brain (yeah right, how about simulating C. Elegan first?) but customers talk a different one(at least my neighbor who runs a few hundred million $$ integration with them).

    Once upon a time nobody got fired for using IBM, now I have heard a few stories that people got fired for using IBM.

  4. Mark S

    If you had worked at IBM you would know the “solutions” are just marketing. Smart planet, smarter commerence is just marketing bs for applications and packages of applications a lot of which are just kludged together and don’t really work as advertised. They have good marketing spin but under the covers it’s still websphere, lotus and Tivoli on aix and as400. Nothing new but the spin.

    • dicksanchez

      spot on Mark. They are just the same old products with a marketing name on them. Call it smarter and you can re-name any product at IBM. There is nothing new here. Since some of the products are from acquisitions, they don’t even work that well together.