The New Old IBM - Page 2

Rob Enderle

Intel Standard Servers


The System X generation of servers are perhaps the most interesting because they drift the farthest from IBM's historic proprietary roots. Focused on building on top of the efforts from Intel, Microsoft and the Linux community, this product set has done well in the market this year. The company had to fight off the perception that it was killing the product this year and differentiate in a market that seems dominated by cookie-cutter offerings.


It did this by focusing on areas in which IBM had intellectual property leadership, such as energy efficiency, cooling and analytics. The result is a line of servers that is standard where it needs to be and differentiated in areas where the IT buyer wants it to be differentiated -- perhaps the most perfect balance between proprietary technology and standards that I have seen in this market. It is an impressive effort.

Problems Remain: Smart Planet


However, with all of these improvements, it wasn't hard to see that some of the problems and frustrations I had with IBM continue to exist. The umbrella model that both IBM and HP use helps make a complex system more manageable, but makes it nearly impossible to use the company's full resources to address a critical strategic issue. For me, it was AD-Cycle; for this decade's IBM, it is Smarter Planet.


This concept is powerful and imagines a global structure of resources dynamically managed and providing the perfect balance of scalability, performance and cost. No other company could do this, but IBM might not be able to do it either. Looking under the covers, I could feel the conflicts between the needs and goals of the divisions at the event and the corporate drive for this concept. Blending Smarter Planet presentations is not the same as integrating them. To me, the shift between corporate and divisional goals was stark and obvious.


It isn't just IBM's problem. The only initiative like this I've seen succeed was .NET, and that required the personal efforts of Bill Gates, who has no equal in managing a complex company. (Apple uses a different organizational model that is vastly easier to manage.)


In the end, for major corporate-driven initiatives that attempt to use the entire company to corner a market, IBM still is self limiting. Without a near-death crisis, I don't see companies in IBM's class, which include HP and Microsoft, showcasing a capability to fix this. Until it is fixed, these large companies will be unable to effectively defend against smaller companies or partnerships like EMC, Cisco and VMware.


Marketing and Margins


One of the problems in the technology industry is that the massive focus on competitive price has removed much of the budget and competence from marketing. Add to this an approval process that can often scare the hell out of any marketing professional, and you get an endemic problem for companies in IBM's class and the industry in general. Apple constantly demonstrates the benefits of marketing-driven development in that its choices are based on what resonates in a market and its marketing programs are designed to maximize the resonance for key choices. This is why it is the most profitable in its segment and Steve Jobs was named CEO of the year (and Apple ranks first in innovation).


For IBM to get the most out of what it showcased at the event, the company needs to convince buyers and investors of the related advantages. Without stronger marketing, the company is unlikely to get the revenue and profit potential its products are capable of, and it is likely to trade off higher-revenue choices for those more attractive to engineers. Marketing continues to be one of IBM's weaknesses, one shared with other companies in its class and industry.


Wrapping Up


I saw in IBM a company with vastly different products and with a solid shift away from the proprietary approach that was killing it two decades ago. It is much more aligned with today's market and vastly more successful as a result. I also saw that it still has the bureaucracy that often defines and limits all umbrella-type multinational companies and the marketing weakness that unfortunately defines the segment. If IBM could continue its excellent progress on product while addressing problems in its organizational model and industry, it could become much more than it is. Still, it remains one of the most powerful and financially successful companies in a troubled market, and that is a point of pride.

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