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Robert Cringley has just posted an extended essay on how IBM can be turned around.
If there's one company that Cringley understands, it's IBM. He's done his research on this company and apparently has dozens of contacts inside the company, plus many more former employees who departed either voluntarily or as part of an "RA" (Resource Action = layoff).
I expected Cringely to go ballistic when CEO Ginny Rometty dropped a three-part bombshell on the financial markets last week: 1) IBM missed its expected revenue and earnings estimates for the quarter by a huge margin; 2) IBM was selling its semiconductor manufacturing business to Global Foundaries; and 3) Rometty was giving up on the infamous "Roadmap 2015" to $20 earnings/share established by her predecessor, Sam Palmisano, which Rometty had been following diligently since she took over the reins in 2012.
Instead, Cringely reacted in a measured way, writing a pair of short analysis pieces for Forbes; the first on how the IBM server business (the high end business the company retained, not the commodity business sold to Lenovo) will be at a huge cost disadvantage over the next 10 years, even after the sale of the microelectronics division to Global Foundaries; second, how IBM's software and services businesses have been badly damaged by frequent waves of layoffs, so that opportunities for revenue growth too often come from tightening enforcement of software licenses and similar gadgetry.
Now, a week after the announcement, comes the longer reaction piece. Bear in mind that Cringley is a journalist and blogger, not a management consultant or financial analyst, so his advice won't be confused with a bound report prepared for management's eyes only by McKinsey & Co. Cringley's prescription follows...
1. Stop cutting staff, particularly in Global Services. The layoffs are damaging quality and alienating customers.
2. Look for Cloud Computing opportunities higher in the stack, in SaaS (Software as a Service) rather than in the commodity PaaS (Platform as a Service). Look for sales opportunities from smaller customers outside the Fortune 1000 (IBM's traditional customer base).
3. Acquire more business software companies (e.g. Intuit, Computer Associates) to obtain products that can be converted into SaaS offerings for the cloud.
4. Create a mobile app store, not to compete against Apple, Google and Microsoft, but rather to entice ISVs to develop mobile applications for IBM's enterprise and cloud software.
5. Fire Ginny Rometty as CEO
Ginni’s plan to save the company will involve further cuts. You can’t cut your way to prosperity.
6. Ask several members of the board to follow Ms. Rometty out the door.
This reminds me of a curmudgeonly quote made several decades ago by W. Edwards Deming, the statistician and quality guru who is credited for helping to revive Japan's industry after World War II:
Populating management with financially oriented people has ruined this country (USA).
Apparently some folks in Armonk, NY didn't get the memo.
(Score: 2) by VLM on Tuesday October 28 2014, @01:26PM
In 2014 does IBM still have a purpose? I hate to make the old Apple quote about the best thing they could do is shut down and distribute the proceeds to the shareholders, but ...
So they've gotten rid of everything substantial other than consultative services. So they're pimps. And they're downsizing and outsourcing all their working girls. The long term outlook for that isn't very bright.
Alternately, they have a very deep patent portfolio. So they could go into the lucrative field of patent trolling.
The problem with being a middleman who automates and outsources the heck out of everything, is nobody needs a middleman anymore once they can use the same business processes and tools and not bother paying the middleman a profit anymore. You've gotta be a pretty dysfunctional company internally before you're better off having IBM do "it" for you.
Look for sales opportunities from smaller customers outside the Fortune 1000
Bzzzt that'll fail. If your company is so huge that its suffering from dinosaur nervous center paralysis, then IBM acting as a pimp to connect you with a script reader in India who does nothing other than tell users to keep reinstalling windows (on your mac) is not performing much of a service, but it is "a" service. A smaller less paralyzed company doesn't require providing a profit for middlemen.
to entice ISVs to develop
Why? Rats deserting a sinking ship and all that. Build it and they will come "works" for a little while with high end real estate and other scams, but eventually its not cool anymore. Look at the spectacular sales figures for Amazon's cell phone or Microsofts cell phone. Look at it from the point of view of an ISV not the point of view of IBM. From the ISV perspective, "I could dump expensive labor into something that won't sell, and if it did sell IBM would keep all the profit. Or I could just spin up some resources on AWS and sell it ourselves and keep all the profit... Its not like IBM will be able to compete, they're downsizing like crazy so I'll just hire the experts they just fired..."