
IBM's Lost Decade - wilkystyle
https://www.platformonomics.com/2020/02/ibms-lost-decade/
======
derefr
It's interesting to talk about what "IBM" has been doing, because after all
the A&M IBM has done this last decade, they've actually got plenty of
"activity" to their name. Just, activity that was previously known under the
names of Softlayer, Cognos, Redhat...

Go to
[https://en.wikipedia.org/wiki/List_of_mergers_and_acquisitio...](https://en.wikipedia.org/wiki/List_of_mergers_and_acquisitions_by_IBM#Acquisitions_since_2000)
and sort the table there by value, descending. "IBM" is a shorthand for more
(un-dissolved!) subsidiaries at this point than GE or Samsung.

IBM itself is just a consulting "solution provider" company that provides
"solutions" in terms of the products and services of its subsidiaries. They're
never going to look like they're on the cutting edge of some space, unless
that's what one of their (equally-stodgy) enterprise clients wants to pay them
to do. (And even then, why build when you can buy? IMHO IBM would only ever
build a new technology at this point if there was no existing company out
there in the market, _with_ that tech IP, that they could just acquire.)

Certainly, there's the Watson AI lab, though I don't think anyone's expecting
much of it at this point; nor, importantly, _was_ anyone inside IBM _ever_
expecting much of it. Watson (the lab specifically, not the brand strategy of
calling all their cloud OLAP SaaS products "Watson") is more a nod to their
clients to say "of course we're looking into AI", and a pool of people
competent enough that they could _clone_ the existing ML approach of one of
their competitors if one of their clients demanded it.

IBM _could_ be a really innovative company if they rearranged their talent
pool, certainly. But innovation—getting ahead of the market and so needing to
educate the market on the problem their products solve—hasn't been IBM's
business model since the 1950s. IBM makes money by listening to clients'
"unique" needs, and then meeting them with "custom" solutions at low CapEx
cost, by using an ever-larger flywheel of existing solutions pre-tuned to
_almost_ fit every possible business use-case.

~~~
vbhavsar
I don't know why people overlook the progress IBM seems to have made in the
quantum computing world. Perhaps not as impressive as Google's progress but
impressive none the less.

~~~
bronson
Two reasons I can think of:

\- "seems to have made" is important. A decade ago, Watson seemed to be a lot
of progress in the AI world.

\- Where's the revenue?

~~~
MR4D
Watson has become IBM's Clippy....it never came close to living up to
expectations.

~~~
mark-r
That's being unfair to Clippy. I expected Clippy to be an annoying joke that
wouldn't last long, and my expectations were met perfectly.

~~~
machinecoffee
Well, clippy didn't last long (although I miss the cat a bit), but the clippy
jokes seem to have lasted forever.

------
berbec
Hugged

[http://web.archive.org/web/20200203151544/https://www.platfo...](http://web.archive.org/web/20200203151544/https://www.platformonomics.com/2020/02/ibms-
lost-decade/)

------
pscz
IBM should give IBM Cloud to the Red Hat people and rebrand it as Red Hat
Cloud.

Red Hat is the only subsidiary of IBM that is respected by the developer
community. The rest of IBM has a very MBAsque reputation.

~~~
wmf
IBM should _not_ rebrand bad products as Red Hat (redwashing? hatwashing?).
Maybe Red Hat could come up with a better public cloud than IBM but that would
be a long-term project.

~~~
zapita
Red Hat already has a public cloud offering, it's called OpenShift Online:
[https://www.openshift.com/products/online/](https://www.openshift.com/products/online/)

It doesn't seem to be very successful, which is understandable since Red Hat
is historically an on-premise software company, and a very successful one too.
Internally they probably view Online as a sales enablement tool.

Since Openshift is already Red Hat's big bet to keep growing, presumably if
they were willing and able to make OpenShift Online a major success, they
would have done it by now.

------
tomjohnneill
I remember reading an article back in 2011, a puff piece about IBM in the
Economist for the company's 100th birthday:
[https://www.economist.com/briefing/2011/06/09/1100100-and-
co...](https://www.economist.com/briefing/2011/06/09/1100100-and-counting)

It's pretty interesting to look at some of the quotes from that article now:

\- "As IBM enters its second century in good health, far younger IT giants,
such as Cisco Systems, Intel, Microsoft and Nokia, are grappling with market
shifts that threaten to make them much less relevant."

\- "By 2015 the firm wants its earnings per share almost to double, to “at
least” $20." (It was actually $11, and kept falling from there)

\- "given the complexity of the world and how much of it is still to be
digitised, IBM's human platform looks unlikely to reach its limits soon.
Perhaps not for another 100 years."

------
ineedasername
I was curious a out some of their early sort-of cloud offerings around
2013/2014, partly under the Watson brand. They had some interesting services
for text analysis similar to services like AlchemyAPI (which IBM actually
purchased not much later) that I wanted to check out. But they were also
starting to try and offer more general purpose cloud services, albeit it beta
forms, and I poked around a bit.

My recollection is that nearly all of them were attempts to back-door users
into their traditional enterprise software, not to actually offer true cloud
platforms.

For example I remember an "analytics" offering that promised on demand instant
analytics environments for exploring data and generating insights. I was
interested! In reality, it was a thinly veiled portal into a hosted cognos
environment. And if you're not familiar with cognos, let me tell you, while
still entrenched in some Enterprise environments, it is an object case study
in crufty klunky product design that has accreted disparate layers of
functionality over decades. The Advent of Cognos 8 in 2005 simply smashed
together a bunch of prior products like report net, power play,metric manager,
and others that worked together poorly, if at all. I won't bore you further
with the details except to say this, along with similar non-strategic product
design by Business Objects, is why products like Tableau grew so fast in
popularity.

So, yeah, as the cloud hit its stride in the 2012-2015 era, IBM was just
trying to slap "cloud" labels on something they could use to sell the same old
stagnant products.

------
jhallenworld
IBM is trapped by their very wealthy legacy customers [banks, insurance
companies, governments and a few fortune 100 stores]. IBM certainly has the
talent to create new products, but unless they appeal to those customers, the
effort is pointless. The existing customers are so wealthy that it's not worth
the effort of the IBM sales machine to target anyone else.

When IBM buys a company, it's not to get new customers. It's only to get
products that their legacy customers have been buying from someone else.

~~~
pm90
To be fair, it is quite OK for them to do just that. To cater exclusively to
large businesses that require multi decade support and who demand specialized
features. The reason those wealthy clients are still with IBM is precisely
because they can trust IBM (it’s possibly the only tech company they do
trust).

IBM marketing is all smoke and mirrors to convince everyone that they’re
cutting edge in areas they’re not. They don’t need to be; their important
customers are fine. The customers just want to feel like they’re working with
an “innovative” company, and that feeling is delivered by IBM marketing and
M&A.

~~~
jhallenworld
>The customers just want to feel like they’re working with an “innovative”
company

Actually this fully explains their foray into "blockchain". It's the hottest
thing to happen to banking since the web, even though it may be pointless.

~~~
girvo
As someone who's built "production" software on top of IBM's "private
blockchain" tech... it isn't quite pointless, but it's not far off; though
that was a few years ago at this point lol

~~~
jhallenworld
Well I have to ask.. What problem did the private block tech solve for you?

------
2sk21
> And the big bet on a ridiculously over-hyped Watson could make sense if you
> saw incomplete and underperfoming products as merely the top of a consulting
> sales funnel

I worked on Watson Assistant for a few years and it’s not a bad product at all
compared to the competitors but, sadly, I have to agree with the above
assessment. It was completely overhyped.

~~~
jimbokun
Is there even a significant market for such a product?

~~~
tootie
I have a dumb idea. IBM should release an Echo/Alexa competitor with Watson
branding. It should be brightly colored, made of metal with large-print
buttons and be preprogrammed with older, male voice. Then they market it as
home automation for Boomers.

"Watson, open the lights."

"Watson, how much of the green pill do I take?"

"Watson, play Lou Dobbs."

~~~
kevin_thibedeau
Buy Wolfram and integrate alpha into the Watson knowledge base.

~~~
ineedasername
Alpha looked so promising on release, but every time I've checked in on it, it
just seemed like there was some tinkering around the edges and absolutely
nothing fundamentally new or groundbreaking since its inception.

------
chrisseaton
> Revenue - Down and to the right

How could a revenue curve move in any other direction than to the right? A
revenue curve that loops back on itself and starts moving to the left, back in
time?

~~~
awinter-py
also known as 'up and to the left'

~~~
chrisseaton
> up and to the left

The x axis is time. How can you move to the left, back in time?

~~~
RookyNumbas
Hint: it's a joke.

------
closeparen
Paying an infrastructure provider and a managed k8s / other "cloud" API vendor
separately is actually very reasonable. There is no good reason those two
things should be tightly coupled. Amazon should not get to charge a markup on
hardware because of the software that runs on it. That's a regression not only
from open source, but from shrink-wrapped proprietary software too. Putting
the cloud back in shrink-wrap world could add a lot of value: buy commodity
capacity, still write "cloud" applications for it, split the hardware savings
with IBM.

To compete, Amazon will have to either lower its markup or innovate in
proprietary hardware (as it's starting to do with Graviton2) to provide value-
added services that software on commodity hardware can't effectively
replicate. And IBM basically invented that game, so good luck.

Not to say IBM is capable of executing it, but it’s an interesting strategy.

~~~
wmf
Speaking of k8s markup, AWS only charges for the masters and they recently cut
those prices by 50%. This problem doesn't exist.

~~~
ablekh
Why do you think AWS charges for K8s master nodes (control plane), when both
of their major competitors do not?

~~~
wmf
Because they can, of course. But it's still hard to imagine a third-party
product (e.g. OpenShift) being cheaper than $0.10 per hour.

~~~
ablekh
They surely can. But so is true for Azure and GCP as well. Thus, I'm curious
about whether it is a feasible pricing strategy for AWS, considering the fact
that EKS is not much different from their competition's managed K8s offerings.

~~~
wmf
I mean AWS can charge more because they're viewed as the "default" or "leader"
cloud; Google and Azure are not.

~~~
ablekh
Understood. This IMO is a bit of a shaky ground, because, while still being
(or being perceived as) a cloud leader - though Azure a formidable competitor
across the cloud spectrum - AWS is definitely not a leader in the managed K8s
area (where GCP clearly is, at least, as of now).

------
jngreenlee
In context, this explains a big of the reason why they need changes, which are
now in place: [https://www.forbes.com/sites/jonobacon/2020/01/31/jim-
whiteh...](https://www.forbes.com/sites/jonobacon/2020/01/31/jim-whitehurst-
becomes-president-of-ibm-why-he-gets-culture/#67633ca26394)

------
tabtab
After getting behind, why should it be assumed automatic to "just catch up" in
cloud? Microsoft fell behind mobile and never caught up despite pouring
billions on it. Same with Google and social networks. Oracle also got behind
in the cloud race and will probably also lose it all.

The early bird gets the worm, stop blaming the CEO.

Although "Watson" seems a PHB toy to trick investors or job seekers into
thinking it had magic AI.

~~~
DebtDeflation
> Oracle

Another perfect example, along with SAP.

In the 1990s and 2000s, Oracle and SAP used to win on the basis of their
"fully integrated suite of business applications" that they contrasted with
the "best of breed" approach that (they claimed) would cost more to integrate
than they delivered in additional value. However, over the last 10 years,
Oracle and SAP went on a buying spree scooping up all those best of breed
enterprise applications and then failed to integrate them with their core
offerings, creating the same problem they claimed to be addressing. At the
same time, R&D spend on organic product innovation slumped.

Buying up the competition isn't the panacea many tech companies seem to think
it is.

~~~
tabtab
It sounds like it "worked" from their financial standpoint, at least for a
while. You don't have to compete if you buy up competitors. Remember when MS
bought FoxPro? Customer choice and prices may be a different story.

------
zzzeek
the ratio of super-trolly-know-it-all (Red Hat is just a "proprietary
Kubernetes distribution", really? do you even know what Red Hat does?) to "no
500 server error on my blog" is pretty high here

------
why_only_15
In the first-approximation analysis of stock buybacks, they keep the share
price the same but reduce the market cap of the company by however much was
bought. This is known and intended. If $55B of their $95B drop in market cap
is simply by returning cash to the investors, that isn't such a bad thing.

~~~
villahousut
That's incorrect. A company's market cap includes any cash the company has.
Buying stock means spending that cash but increasing the value of the stock by
an equal amount.

Stock buybacks don't affect market cap.

~~~
twic
I don't think this is correct either. A company's cash, or other assets, are
not included in its market cap. It's just share price times number of shares
outstanding.

Where why_only_15 is incorrect is in saying that buybacks don't affect share
price. The whole point of a buyback is to increase the share price.

~~~
why_only_15
I don't think that's true.

Consider a company with 1T shares that's valued at $1T with $100B of cash.
Presumably, $100B of that valuation is for the cash, because investors know
they could give that money back through dividends or the like. Let's say the
company buys back 100B shares for its $100B. Because the company no longer has
the cash, the overall value decreases (to $900B) to the same degree that there
are less shares on the market (100B less).

~~~
sk5t
You should think of a stock buyback as another way of paying a dividend
without triggering a taxable event for stockholders. The value transitions
into a greater price of the now-fewer-outstanding shares.

------
cryptoz
No mention of their acquisition of the Weather Channel's digital properties,
or any other M&A for that matter. Hard to see how this decade was lost for
them, rather than a significant investment into the future.

~~~
wmf
IBM has had a continuous pipeline of acquisitions over decades, but where is
the money? At some point the profit from the older acquisitions has to cancel
out the cost of the newer ones and that isn't apparent for IBM.

~~~
throwaway55554
> IBM has had a continuous pipeline of acquisitions over decades, but where is
> the money?

They used it for stock buybacks.

~~~
coredog64
...and?

This whole idea that stock buybacks are necessarily bad needs to die. Can they
be bad? Sure. But there are valid reasons to pursue a strategy of buybacks vs.
dividends.

~~~
TomMarius
And nothing, the question was

> but where is the money?

------
williamDafoe
It's really hard to decline so consistently with the same rotten management at
the helm year after year. Did they hire management from Qualcomm to achieve
this?

------
aphextim
One thing IBM has been working on is trying to solve the issue of worldwide
remittances and global payments by using Stellar (XLM) and their block-chain
solution to bridge various assets and fiat currencies.

[https://www.ibm.com/blockchain/solutions/world-
wire](https://www.ibm.com/blockchain/solutions/world-wire)

[https://www.stellar.org/papers/stellar-consensus-
protocol.pd...](https://www.stellar.org/papers/stellar-consensus-protocol.pdf)

------
peter303
MicroSoft went to sh*t under its 2nd CEO, but recovered under its successor.
Hopefully IBM can revive under future leadership.

------
kediz
Now the site get's error 500

------
marcosdumay
What does IBM sell nowadays?

~~~
rhexs
Outsourcing, or as another comment called it, “services”.

~~~
wstrange
Otherwise known as "Your mess for less"

------
femto113
I worry that addiction to stock buybacks is a terminal disease for companies
like IBM. Imagine what $65B invested in R&D over the last eight years could
have yielded in the future instead of being poured down a financial sewer.

~~~
throwaway55554
They used to be illegal. They should be illegal again. If they were, then that
$65B _would_ have been invested in R&D (and in their employees!).

~~~
robocat
The money would have been returned as dividends instead. For-profit companies
are not intended to exist just to spend all profits on themselves (although
Amazon is one obvious counter example amongst many).

