IBM’s Powerful Open Strategy to Assure Immortality

    Last week, IBM’s new CEO Ginni Rometty made a powerful statement at Almaden Labs about IBM’s leadership in R&D but her real message was how IBM is vastly different from every other company in its class. IBM was uniquely designed to be immortal and to achieve this it focuses more on agility and building for the future than it does on achieving quarterly results. That’s why, unlike executives like Mark Hurd while he was HP who cut R&D massively to keep financial analysts happy, it increased investment and the result is that IBM is actually doing very well financially and it is at virtually no risk of becoming obsolete or irrelevant. 

    Today, IBM is showcasing both how much it has transitioned over the last couple of decades and its current strategy, which is in sharp contrast to the old IBM that companies like Oracle are emulating. This isn’t a subtle contrast, but once you understand the foundation of the model IBM is creating, you’ll likely agree that IBM has found a unique way to assure its immortality by ensuring its customers succeed.  

    Let’s discuss this in the context of the IBM Smart Cloud Orchestrator announcement today. 

    Open vs. Lock-in

    Lock-in is a seductive approach to business and you can see it executed in the consumer market by Apple and in the corporate market by Oracle. This was IBM’s model first and it successfully locked up most of the technology market by the mid-80s. But the problem with lock-in is it turns the customer into a resource — basically a money mine, as an old mentor of mine told me at IBM; it’s like selling air. The customer has to pay what you charge and that leads to the kind of problems IBM had in the 1980s.

    You see, what lock-in does is make the company feel like the customer isn’t important because it believes the customer can’t leave. This is, however, a false assumption because the customer can always leave; it’s simply a matter of deciding they want the pain to end and/or the industry comes up with a better solution and moves on. In short, while lock-in is incredibly lucrative for a time, it virtually assures the vendor will eventually fail.

    Open is a very different approach; think of it like a warrior who always trains in order to stay sharp for the next battle. By assuring competition but driving technology, particularly if you are already in a leadership position, you stay focused on the customer and you evolve and adapt. We saw this play out with Microsoft over the last couple of decades. It achieved massive dominance with Windows and Internet Explorer, and then took that dominance for granted and now it is fighting for relevance. Competition keeps a company vibrant and focused on the right things. When it is eliminated that focus declines, and with it the firm’s fortunes.

    IBM SmartCloud Orchestrator

    One of the most painful areas of the industry is the dynamic between public and private cloud. What makes this conflict particularly painful is public cloud resources are not only less expensive, but they are often far easier to set up and use. This has line employees bypassing IT to get access to this inexpensive resource. The pain comes not only in IT appearing redundant, but that often these public cloud resources aren’t secure or reliable enough, causing serious problems. 

    To compete, IT has to be able to blend by policy its private cloud with these same resources so it can ensure the company’s security and performance requirements while minimizing costs. But to blend resources, public and private cloud solutions have to work together and that’s where Open Stack comes in.  

    An initiative started by Rackspace for NASA, it has evolved into an open source effort second only to Linux. At the core of this is 400 companies actively using the technology and driving it forward through actual use cases. There are 190 vendors involved in the effort, making the list of big names not participating smaller than the list that are involved. Those not participating are Amazon, Salesforce, Google and, of course, Oracle. 

    SmartsCloud Orchestrator manages public and private resources across compliant vendors to not only address the problem of balancing private and public cloud resources, but to assure competition. 

    Wrapping Up

    Companies like to focus and talk about killing each other. But if they are successful, it seldom ends well. IBM needed competition to keep from dropping into decline in the 1980s and Microsoft needed competition so it continued to innovate on operating systems and browsers. IBM has relearned this lesson and now leads in its open efforts, with SmartCloud Orchestrator the latest example of its efforts. It should be obvious that striving to win keeps a company sharp and focused on becoming ever more capable. I think Apple is the latest victim of not having enough competition for a while and now it is struggling against Samsung.   

    Going back to Ginni Rometty’s talk last week, IBM plans to be around in 100 years and by staying focused on the needs of its customers, rather than trying to lock them in and bleed them, IBM’s own customers will assure that result. That’s the power of open and that’s the power of a company that can think in terms of long-term survival.

    Rob Enderle
    Rob Enderle
    As President and Principal Analyst of the Enderle Group, Rob provides regional and global companies with guidance in how to create credible dialogue with the market, target customer needs, create new business opportunities, anticipate technology changes, select vendors and products, and practice zero dollar marketing. For over 20 years Rob has worked for and with companies like Microsoft, HP, IBM, Dell, Toshiba, Gateway, Sony, USAA, Texas Instruments, AMD, Intel, Credit Suisse First Boston, ROLM, and Siemens.

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