A century of IBM: Technology pioneer continues to ‘Think’

By Associated Press

The Atlanta Journal-Constitution

ENDICOTT, N.Y. — International Business Machines, better known as IBM, turns 100 today without much fanfare. But its much younger competitors, such as Hewlett-Packard and Apple, owe a lot to Big Blue.

After all, where would Groupon be without the supermarket bar code? Or Google without the mainframe computer?

“They were kind of like a cornerstone of that whole enterprise that has become the heart of the computer industry in the U.S.,” says Bob Djurdjevic, a former IBM employee and president of Annex Research.

IBM dates to June 16, 1911, when three companies that made scales, punch-clocks for work and other machines merged to form the Computing Tabulating Recording Co. The modern-day name followed in 1924.

With a plant in Endicott, N.Y., the new business also made cheese slicers and — significantly for its future — machines that read data stored on punch cards. By the 1930s, IBM’s cards were keeping track of 26 million Americans for the newly launched Social Security program.

These sprawling machines might seem quaint in the iPod
era, but they had design elements similar to modern computers. They had places for data storage, math processing areas and output, says David A. Mindell, professor of the history of technology at the Massachusetts Institute of Technology.

Punch cards carted from station to station represented what business today might call “data flow.”

“It was very sophisticated,” Mindell says.

The force behind IBM’s early growth was Thomas J. Watson Sr., a demanding boss with exacting standards for everything from office wear (white shirts, ties) to creativity (his slogan: “Think”).

Watson, and later his son, Thomas Watson Jr., guided IBM into the computer age. Its machines were used to calculate everything from banking transactions to space shots. As the company swelled after World War II, IBM threw its considerable resources at research to maintain its dominance in the market for mainframes, the hulking computers that power whole offices.

By the late 1960s, IBM was consistently the only high-tech company in the Fortune 500’s top 10. IBM famously spent $5 billion during the decade to develop a family of computers designed so growing businesses could easily upgrade.

It introduced the magnetic hard drive in 1956 and the floppy disk in 1971. In the 1960s, IBM developed the first bar code, paving the way for automated supermarket checkouts. IBM introduced a high-speed processing system that allowed ATM transactions. It created magnetic strip technology for credit cards.

For much of the 20th century, IBM was the model of a dominant, paternalistic corporation. It was among the first to give workers paid holidays and life insurance.

IBM’s gold-plated reputation was based in part on ubiquity and reliability. But by the 1980s, Big Blue found itself adrift in a changing technology environment.

IBM had slipped with the rise of cheap microprocessors and rapid changes in the industry. In an infamous blunder, IBM introduced its influential personal computer in 1981, but it passed on buying the rights to the software that ran it — made by a startup called Microsoft.

With its legacy and very survival at stake, the company was forced to embark on a wrenching restructuring.

One of its major achievements turned out to be re-engineering itself during the upheavals of the 1990s.

Louis Gerstner, a former executive with American Express and RJR Nabisco, came in as CEO in 1993. He broke up old fiefdoms, slashed prices and eliminated jobs. IBM, which had peaked at 406,000 employees in 1985, shed more than 150,000 in the 1990s as the company lost nearly $16 billion over five years.

Gerstner focused on services, such as data storage and technical support. Services could be sold as an add-on to companies that had already bought IBM computers.

The shift allowed IBM to ride out two recessions: When times are tough, businesses pay IBM to help them find ways to cut costs and handle technology chores that would be more expensive to perform in-house.

With around $100 billion in annual revenue today, IBM is ranked 18th in the Fortune 500. It’s three times the size of Google and almost twice as big as Apple. Its market capitalization of around $200 billion beats Google and allowed IBM last month to briefly surpass its old nemesis, Microsoft.

Though transformed, IBM remains a pioneer, the envy of the technology industry. Hewlett-Packard Co.’s new CEO, Leo Apotheker, says one of his primary goals is to strengthen the company’s software and services businesses to compete better with IBM.

Some things haven’t changed. It still comes up with flashy feats of computing prowess, most recently when its Watson computer system handily defeated the world’s best “Jeopardy” players.

And, just as in 1911, it’s still in the business of finding data solutions.

The company wants to put Watson to real-world use as a medical diagnostic tool that can understand plain language and analyze mountains of information. That’s in line with IBM’s focus on other big data projects.

The company that built its success making sense of millions of punch card records sees future innovations in the analysis of the billions and billions of bits of data being transmitted in the 21st century.