Encyclopedia
company_name = International Business Machines Corporation |
company_logo =
|
company_type = Public |
foundation = 1888, incorporated 1911 |
location = Armonk, New York,
USA |
key_people =
Samuel J. Palmisano, Chairman & CEO
Mark Loughridge SVP & CFO
Dan Fortin, President
Frank Kern, President
Nick Donofrio, EVP
Colleen Arnold, President IOT Northeast Europe
Dominique Cerutti, President IOT Southwest Europe |
industry =
Computer hardwareComputer softwareConsulting
IT Services |
products =
See complete products listing |
revenue=
US$ 91.1 billion |
operating_income = US$12.4 billion Palmisano replaced
Louis V. Gerstner, who held the job from 1993 to 2002, taking over from John Akers, who left during a period of financial difficulty for the company.
IBM has engineers and consultants in over 170 countries and IBM Research has eight laboratories, all located in the
Northern Hemisphere, with five of those locations outside of the United States. IBM employees have earned five
Nobel Prizes, four Turing Awards, five
National Medals of Technology, and five
National Medals of Science.
As a chip maker IBM is among the Worldwide Top 20 Semiconductor Sales Leaders.
History
1888 - 1924: The founding of IBM
IBM's history dates back decades before the development of electronic computers when it developed
punched card data processing equipment. It originated as the Computing Tabulating Recording Corporation , which was incorporated on June 15 1911 in Endicott, New York a few miles west of
Binghamton.
CTR was formed through a merger of three separate corporations: Tabulating Machine Company , the Computing Scale Corporation and the International Time Recording Company . The president of the Tabulating Machine Company at that time was
Herman Hollerith, who had founded the company. The key person behind the merger was financier Charles Flint, who brought together the founders of the three companies to propose a merger and remained a member of the board of CTR until his retirement in 1930.
Thomas J. Watson Sr., the founder of IBM, became General Manager of CTR in 1914 and President in 1915. In 1917, the CTR entered the
Canadian market under the name of International Business Machines Co., Limited and in February 14 1924, CTR changed its name to
International Business Machines Corporation.
The companies that merged to form CTR manufactured a wide range of products, including employee time-keeping systems,
weighing scales, automatic meat slicers, and most importantly for the development of the computer,
punched card equipment. Over time CTR came to focus purely on the
punched card business, and ceased its involvement in the other activities.
Early Education & R&D
It was in the middle of the Depression, in 1932, that Watson formally established an Education Department at Endicott, then IBM's main plant; with the first three engineers graduating in 1934. By 1937 almost half the 32,000 factory employees at Endicott were enrolled; in 52 classes, studying 24 different subjects. Tool-making was an especially important skill being taught, but even the factory supervisors and executives had to attend its 'Supervisor's' School.
The education facilities were conveniently placed near the 'Homestead', the clubhouse which was the hub of IBM's leisure complex; as well as being the hotel for customers attending education. It was a near idyllic location for doing business and, according to his son Tom Jr., Thomas Watson Sr. - who had a permanent suite of rooms there - said it was his favorite IBM location.
The earliest research, at Endicott, focused on product needs, indeed largely on quality control, rather than the more fundamental investigations which were later, in the 1980s, to earn IBM two consecutive Nobel prizes for Physics. For example, the paper-testing laboratory was then especially important; where, by 1937, Endicott was producing up to 10 million cards a day. But a 'Methods Research Department' which, in the context of punched cards, was effectively the start of IBM's 'software development' , was started at much the same time.
World War II
During World War II 274 mobile IBM punched card units followed the front-line controlling the logistics of supply; and, in the process, exposing a new generation of users to the benefits of data processing. In any case IBM's business, in common with that of many other manufacturers, grew substantially on the back of the increased economic activity generated by the war effort. From a revenue of $34.8 million in 1939 sales climbed to a high of $143.3 million in 1944, before falling off slightly at the end of the war.
Towards the end of the war the research arms of the services started to develop requirements for the first true computers; the nuclear weapons industry perhaps being the most significant potential customer. In terms of commercial applications, however, the Bletchley Park code-breaking work in England was very much a side event; though it did produce Alan Turing as one of the great theoreticians of computing. IBM's contribution, in 1943, was the Mark I, an electro-mechanical monster 51 feet long by 8 feet high and containing 530 miles of wiring! It cost $200,000 and was installed at Harvard.
Even with this example IBM did not really get into computing in its modern form. It built a further electro-mechanical marvel, the Mark II, the IBM Selective Sequence Electronic Calculator with 21,000 relays and 13,000 vacuum tubes, which it grandly installed in its headquarters in 1948. The real action was, however, elsewhere at the University of Pennsylvania where the ENIAC team were developing the first electronic computer; unveiled at the University of Pennsylvania in 1946. Even in 1949, despite Watson's alarm at the progress shown by the UNIVAC , IBM was only just starting to design its first family of true, electronic computers; the 701. At that stage it was probably at least two years behind UNIVAC; which was subsequently, in 1950, sold to IBM's competitor, Remington Rand, which a year later also purchased the other group working in the field, Engineering Research Associates , to become the undisputed leader in computing..
1930s - 1940s: Holocaust era
During
World War II, IBM manufactured the
Browning Automatic Rifle and the
M1 Carbine. Allied military forces widely utilized IBM's tabulating equipment for military accounting, logistics, and other War-related purposes. There was extensive use of IBM punch-card machines for calculations made at
Los Alamos during the
Manhattan Project for developing the first
atomic bombs; this has been notably discussed by
Richard Feynman in his book,
Surely You're Joking, Mr. Feynman!. During the War IBM also built the
Harvard Mark I for the U.S. Navy, the first large-scale automatic digital computer in the U.S.
In 2001, author Edwin Black published [www.ibmandtheholocaust.com/
IBM and the Holocaust] , a book documenting how IBM's New York headquarters and CEO
Thomas J. Watson acted through its overseas subsidiaries to provide the
Third Reich with punch card machines knowing that the machines could help the Nazis conquer Europe and destroy European Jewry. The book extensively quoted from numerous IBM and governmental memos and letters chronicling how IBM in New York, IBM's
Geneva office and Dehomag, its German subsidiary, were intimately involved in supporting Nazi oppression. Black also published IBM's own internal reports admitting that these machines made the Nazis much more efficient in their efforts. For example, IBM's European manager J.D. Schotte in 1940, after WWII broke out, reported back to IBM in New York “in Germany a campaign started for, what has been termed … ‘organization of the second front.’” He elaborated, “In military literature and in newspapers, the importance and necessity of having in all phases of life, behind the front, an organization which would remain intact and would function with ‘Blitzkrieg’ efficiency … was brought out. What we had been preaching in vain for years all at once began to be realized.” Schotte’s memo made clear that only at IBM’s initiative did the militarists comprehend what magic they could achieve with Hollerith automation. “Lectures on the punched card system were held by our representatives before officials of the general staff of various countries and, with our men, the study of possible applications was begun. ...progress was rather slow, and it was not until about eight or nine months ago [summer 1939] when conditions in Europe clearly indicated that a war was more or less unavoidable, that the matter became acute.”
Regarding the Romaniam census for example, another IBM manager in Europe, W.C. Lier, wrote back to Thomas Watson's personal legal advisor in October 1941, “One of the first matters discussed with them, was that of the Romanian census and the machines destined for this business, which are actually blocked in Poland.” A day earlier, Lier had sent a more formal letter to Watson personally to assure: “On the occasion of my visit to Berlin, I also settled a few pending matters, such as the machines blocked in Poland [and] the Romanian census … I am addressing separate reports to the executives concerned in New York.” Lier also reported to IBM NY, “I obtained an interview with the Romanian Commercial Attaché who immediately endeavored to obtain the freeing of approximately seventeen machines at present blocked in Poland from the Devisenstelle [Foreign Currency Office] and the German Authorities … I have been given every assurance as to the satisfactory outcome of this demand.” The transfer of those machines to IBM’s Romanian subsidiary was then effected, and the Romanian census which located all Jews was undertaken and automated.
The 2003
documentary film The Corporation is a 2003 [i] Canadian [i] documentary film [i] and book critica ...
showed close-ups of several documents including IBM code sheets for concentration camps taken from the files of the National Archives.
Shortly after the war, IBM recovered the profit made from their Hollerith departments in the concentration camps, the printing of millions of punchcards used to keep track of the prisoners, the custom-built punchcard systems, and other business activities.
IBM asserts that, since their German subsidiary came under control by the Nazi authorities, they were not responsible for their role in the holocaust.. As in many cases, when the US entered the war, the Reich left in place the original IBM managers who continued their contacts via Geneva. The company has steadfastly avoided commenting in detail or explaining its conduct despite continuous inquiries from media and communal leaders.
1950s: Air Force and airline projects
In the
1950s, IBM became a chief contractor for developing computers for the
United States Air Force's automated defense systems. Working on the
SAGE anti-aircraft system, IBM gained access to crucial research being done at
MIT, working on the first real-time, digital computer . IBM built fifty-six SAGE computers at the price of US$30 million each, and at the peak of the project devoted more than 7,000 employees to the project. More valuable to the company in the long run than the profits, however, was the access to cutting-edge research into digital computers being done under military auspices. IBM neglected, however, to gain an even more dominant role in the nascent industry by allowing the RAND Corporation to take over the job of programming the new computers, because, according to one project participant , "we couldn't imagine where we could absorb two thousand programmers at IBM when this job would be over some day, which shows how well we were understanding the future at that time" IBM would use its experience designing massive, integrated real-time networks with SAGE to design its
SABRE airline reservation system, which met with much success.
1960s - 1980s: Success
IBM was the largest of the eight major computer companies through most of the 1960s. People in this business would talk of "IBM and the seven dwarfs", given the much smaller size of the other companies or of their computer divisions .
In 1970, GE sold most of its computer business to Honeywell and in 1971, RCA sold its computing division to Sperry Rand. With only Burroughs, UNIVAC,
NCR, Control Data, and Honeywell producing mainframes, people then talked of "IBM and the BUNCH."age:IBM PC 5150.jpg|thumb|left|The original
IBM PC ]]
Most of those companies are now long gone as IBM competitors, except for
Unisys, which is the result of multiple mergers that included UNIVAC and Burroughs. NCR and Honeywell dropped out of the general mainframe and mini sector and concentrated on lucrative niche markets, NCR's being
cash registers , and Honeywell becoming the market leader in
thermostats. General Electric remains one of the world's largest companies, but no longer operates in the computer market. The IBM computer, the
IBM mainframe, that earned it its position in the market at that time is still growing today. It was originally known as the
IBM System/360 and, in far more modern 64-bit form, is now known as the IBM
System z9.
IBM 360
Only 18 months after work had started on the 1401 Tom Watson Jr set the labs to work on what was to become the 360 range of computers. This was perhaps IBM's biggest gamble, and one on a scale that has rarely been equalled by governments let alone by companies. It was a decision on the part of Tom Watson Jr that can only be described as truly courageous.
The initial R & D reportedly cost $500 million, but this was merely the tip of the iceberg. The total investment, including six new plants built around the world , was estimated to have cost $5 billion over 4 years. It was indeed, at the time, the most costly privately financed programme in history; according to Tom Wise it cost more than the Manhattan project up to the time of Hiroshima. It eventually absorbed 2,000 programmers; when problems with the 'leading edge' software caused the delivery schedule to slip near disastrously. It also added 50,000 to IBM's total workforce world-wide.
Most adventurously of all it was incompatible with the preceding ranges of machines; at a time when the Honeywell 200 had been announced as the first 'plug compatible' to which the customers' existing programs could be easily transferred. It was the last time IBM could afford the luxury, for by the time of the launch of the subsequent 370 computer the customer base was too valuable, and too tightly locked in to the technology, for any such risk to be commercially viable.
It is understandable that Bob O Evans, then head of IBM Federal Systems Division, described it at the time to reporter Tom Wise as "You bet your company...". He did though add the much less publicised rider "....but it was a damn good risk and a lot less risk that it would have been to do anything else, or do nothing at all".
The gamble was of course a success, and made IBM virtually unassailable until the 1990s. The 360 range was announced on April 7th 1964 and the first 360/40 installed a year later in April 1965.
Although the project was Tom Watson Jr's greatest business achievement as reported outside IBM it was actually masterminded by his heir apparent, Vincent Learson, with Gene Amdahl , Albert Williams , and Dick Watson . It was later claimed that TVR used the predictably impossible task of bringing in the production on schedule to destroy Dick as his rival for the top job. Dick Watson was not assisted in his own campaign by his reputation for hard drinking and occasional falling down on the job, as he reportedly did at one dinner at the Hursley Labs.
Antitrust
IBM's success in the mid-
1960s led to inquiries as to IBM antitrust violations by the
U.S. Department of Justice, which filed a complaint for the case
U.S. v. IBM in the
United States District Court for the Southern District of New York, on January 17 1969. The suit alleged that IBM violated the Section 2 of the Sherman Act by
monopolizing or attempting to monopolize the general purpose electronic digital computer system market, specifically computers designed primarily for business. Litigation continued until 1983, and had a significant impact on the company's practices. In 1973, IBM was ruled to have created a monopoly via its 1956 patent-sharing agreement with Sperry-Rand in the decision of
Honeywell v. Sperry Rand, a decision that invalidated the patent on the
ENIAC.
At the time of the launch of the 360 range IBM was under considerable competitive pressure from the large 6600 computers offered by Control Data. To counter this IBM announced, in August 1964, the 360/91, followed over succeeding months by a number of replacement machines, Only a few of these were ever produced and in 1967 IBM stopped selling them.
Control Data, understandably, was less than happy with this spoiling strategy and claimed these were only 'fighting machines' purely designed to keep Control Data out. It is possible, as I for one believe, that IBM simply outstripped its own capabilities and just couldn't meet its promises; even IBM does not usually contemplate a $110 million loss to fund a fighting machine. The jury is still out, however, for although CDC instituted an anti-trust suit in December 1968 a settlement was reached in 1973. From IBM's point of view, the most important aspect of this settlement was that CDC was required to destroy its index to the millions of documents were about to be also used by the Department of Justice; and without which their case was to be much less powerful!
The history of the CDC anti-trust suit, and the host of copycat suits by other companies that it spawned is worthy of a book in itself . Ultimately, though, it adds little to one's knowledge of IBM as a whole. Of the literally millions of pages that have been archived in the case, those that have been abstracted - apparently almost exclusively by the prosecution in the case - were designed to show IBM in a bad light. More important, from the point of view of this book, they were not representative of how IBM then normally did business; no matter how reprehensible, or even illegal, each individual item so reported might be considered to be.
The most important impact, though, was that it possibly prompted the US Justice Department in January 1969 to mount its own anti-trust suit. This one was not so easily settled. It consumed the efforts of hundreds of lawyers and probably hundreds of millions of dollars over a decade and a half; until it was eventually withdrawn in January 1982. It is arguable that some of the most dubious of its practices were stimulated by the various cases brought against it. For instance, one of its covert offices, not listed in any IBM directory but located in Victoria Street in London during the early 1980s , probably really was set up - as IBM claimed - to ensure that IBM might fully meet the requirements of the EEC. On the other hand, the - possibly apocryphal - reports of that group's covert activities at the time did seem to suggest that there was at least some 'laundering' of IBM's key files to ensure that there was no evidence of IBM's past transgressions, rather than that there were no transgressions per se!
The key effect of this, though, was that, for a critical decade and a half, IBM was under the constant scrutiny of the US government; which was ready to pounce on the slightest transgression, and almost continuously threatened break-up on the lines of Standard Oil earlier in the century. The ethical standards promoted by Tom Jr might possibly have faded into obscurity under the pressure of normal business priorities. Under the scrutiny of the US Justice Department, on the other hand, they became the very backbone of IBM.
Thus, the anti-trust suit, which has usually been portrayed as a threat to IBM, was in perverse reality a critical element in its success; and indeed was essential to the development of the later company, founded more on philosophies than profits. The paradoxes did not cease with the departure of Thomas J Watson Sr and the succession of TV Learson and Frank Cary.
It is perhaps not coincidental that soon after the pressure of 'anti-trust' had been removed in 1982 IBM's results deteriorated.
Competition in the 1970s/1980s
Year of publication [newest first], 2) Author's surname [A-Z], 3) Title [A-Z] -->
| Tauqeer Ahmed Khan | 2001 | IBM vs. Pakistan: The Struggle for the Future | ISBN n/a |
| David Mercer | 1987 | IBM: How the World's Most Successful Corporation is Managed | Kogan Page 1987 |
| Robert Sobel | 1981 | IBM: Colossus in Transition | ISBN 0-8129-1000-1 |
| Robert Sobel | 1981 | Thomas Watson, Sr.: IBM and the Computer Revolution | ISBN 1-893122-82-4
|
