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Big Blue on the Brink

Monday, June 16, 2014

IBM Blue Gene/P supercomputer Argonne computer scientist Jonathon Anderson inspects Argonne's new IBM Blue Gene/P supercomputer, recently named the fastest computer for open science in the world (2007). (Argonne National Laboratory/flickr)

The company IBM has a history dating back to the 19th century. It has been one of the most powerful information technology companies in the world, but the last 20 years have been rocky. Robert Cringely discusses how IBM fell from grace, where it is headed, and what can be done to save the company. He's the author of The Decline and Fall of IBM: End of an American Icon? 

Guests:

Robert Cringely

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Comments [23]

CB from Texas

"First of all, have they read the book? It's $3.99. Rather than speculate about what I might have said or meant"

But Robert, the comments here are feedback about your interview. If your interview did not manage to accurately convey the information in your book, well, whose fault is that?

If you're looking for comments about the actual content of your book, I'd guess they're at amazon.com?

Jun. 24 2014 10:47 AM
Robert X. Cringely from Santa Rosa, CA

It's a shame this comment system isn't threaded so I can respond to each commenter in turn, given it's my work they are generally criticizing.

First of all, have they read the book? It's $3.99. Rather than speculate about what I might have said or meant why not spend four bucks and actually read the book?

Second, the commenter who claims to have run the Watson project may very well have but he has NO IDEA what the budget was. IBM doesn't divulge budget numbers below the VP level, nor does it give direct spending authority, so he's guessing as much or more than I have. That $1 billion figure came directly from an IBM VP in a position to know. Between building and promoting and whatever else they decided to put on the tab I'm not surprised at the number and the commenter should feel sorely under-paid.

Third, the average $600,000 cost of IBM even bidding a services contract isn't because they are being scrupulously careful to avoid missing items that should be in the bid. If that were the case IBM wouldn't have so many disgruntled customers canceling contracts and suing. Nor is this bidding style even needed to avoid the problems this commentator cites. Most of IBM's services competitors count the users and multiply by a number, that's it. If the number of users changes the cost changes. IBM instead uses the contract as a weapon against the customer, so carefully defining the scope of services to increase the number of exceptions that can be separately billed. Clever, but the result is the company essentially excludes a huge part of the market. And using the contract in that manner is exactly what ultimately results in so many unhappy customers. IT'S ALL IN THE BOOK IN AGONIZING DETAIL -- MUCH OF IN THE WORDS OF CURRENT IBM EMPLOYEES.

Fourth, IBM has a lot of patents, true, and produces more than $1 billion per year in patent royalties. It's right there in the annual report. But $1 billion isn't much for a $100 billion company, so I wouldn't say the business is about patents.

Fifth, IBM's use of Indian and other foreign workers is explained in great detail in the book. The company has a misguided belief that an engineer is an engineer and any one can replace any other. Yet more than half of IBM's Indian workforce doesn't have a university degree (the company has en extensive program to improve on that number). Why bother if Indians are just as good? For that matter, why CAN'T IBM get enough university graduates to work in India? Can you imagine a single technical job applicant for an IBM U.S. position without at least an undergraduate degree? THIS is the vaunted Indian excellence?? Hardly.

Read the book, it's just $3.99.

Jun. 19 2014 04:27 PM
fomerBlue from New York

The timing and opinion of these above comments is suspicious. I wonder if Ginnie sent out a little note to execs to reply?

Jun. 18 2014 11:06 AM
David A. Ferrucci from NY

I am the AI scientist that started and led the Watson project that won Jeapordy. I started it from scratch in 2006 with a team of 12 people and finished it at the end of 2010 with a total of about 25 people. Watson won the game in 2011. I know the precise cost of the entire research project and it was a tiny, tiny, tiny fraction of what was reported here. My team of PhDs and engineers published 20+ research papers describing the work. Read these scientific papers to best judge the technology.

There are several here: http://ieeexplore.ieee.org/xpl/tocresult.jsp?reload=true&isnumber=6177717

Dave Ferrucci

Jun. 16 2014 10:36 PM
EdJ from New york

This so-called interview was worse than boring, it was one falsehood after another. IBM's Watson was a billion-dollar publicity stunt? I can't believe Lopate let anyone get away with such drivel. Even a simple Google search shows how IBM is using Watson technology with Memorial Sloan Kettering and other ospitals on cancer projects.

I guess curing cancer is not a big enough deal for Cringely.

Jun. 16 2014 09:29 PM
Eric from Albany CA

IBM has a storied history in information technology and Lou Gerstner did a great job turning around the company in the 1990s but I think Mr. Cringley's critique is on target. See 05/22/14 cover story on IBM in Bloomberg Business Week---IBM is far behind rivals like Amazon in cloud computing, and their slavish devotion to returning $ to shareholders in form of dividends and stock buybacks leaves little capital left to invest in innovations.

Jun. 16 2014 04:01 PM
jgarbuz from Queens

IBM will be here long after GM is a fading memory. IBM invests in patents and that is why will keep IBM around regardless of what changes future technologies throw at us. IBM invests 10% of it profits in R&D and that will keep it alive for very, very long.

Jun. 16 2014 12:39 PM
jgarbuz from Queens

IBM will be here long after GM is a fading memory. IBM invests in patents and that is why will keep IBM around regardless of what changes future technologies throw at us. IBM invests 10% of it profits in R&D and that will keep it alive for very, very long.

Jun. 16 2014 12:38 PM

Robert Cringely has a big axe to grind regarding IBM. I left IBM (took a package) after 23 years. There are a lot of missteps that IBM has made and continues to makes. However it is making me "CRINGE" to listen to Mr. Cringley twist facts and portray an extremely negative skewed view. Two examples, Mr. Cringley talks about the huge expense that IBM incurs on their large outsourcing contracts in the bid and proposal stage. What he doesn't say is that these contracts, if not carefully scoped and costed, can end up with HUGE losses. And when the losses occur, IBM, because of their platinum brand, will stand by the contract and continue to perform and deliver, unlike some competitors who will walk away and leave the customer holding the bag. Second example is Watson. Watson on Jeopardy was a fun way to illustrate what high end computing and Artificial Intelligence can do. What Mr. Cringley doesn't mention is how the Watson technology is being extended to healthcare (there are several partnerships with major hospitals today) to assist physicians with generating clinical diagnostic and treatment alternatives. Mr. Cringley, you know better; this is shameless self promotion. Mr. Leonard, you should be more informed on the interview topic so you can ask probing questions with the intent of informing listeners, rather than allowing yourself to be led wherever your guest chooses to take you.

Jun. 16 2014 12:37 PM
Chriss from Montclair, NJ

Your guest has crossed the line from commentary, to something personal. Leaving me wondering: "Did Mommy not get him that IBM Thinkpad he wanted in college?"

Jun. 16 2014 12:37 PM
Jackie C

This author's commentary is pretty fact free. And did he really say that share buybacks are an unusual business practice? Really? Really no other companies with tax rates less than 15%? Hard to take this seriously.

Jun. 16 2014 12:33 PM
John A

Description of workloads - accurate. Description of level of technology - wildly inaccurate.
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What is your guests Actual Name BTW? RXC is an alias.

Jun. 16 2014 12:32 PM
RosieNY from NY

Indian workers are and will continue replacing American I.T. workers here in the U.S. because they are not only cheaper but they are obedient, submissive and highly compliant. No kidding big I.T. corporations keep pushing for more and more H1B visas: Will work for less money and will do whatever the boss wants.

Jun. 16 2014 12:29 PM
jgarbuz from Queens

I disagree that IBM doesn't know what it's doing.Quite the contrary, IBM spends less R&D per patent than any other company. IBM knows exactly what it's doing. It's shedding costs and it is accumulating patents which will pay off if not doing so already. I think IBM is still a very safe investment by comparison to most other hi-tech companies.

Jun. 16 2014 12:28 PM
John A

I'm mining this interview for actual facts, getting a few, but warning: the BS detector has been going off fairly frequently.
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The Wikipedia page for RXC iirc had some warnings about his accuracy years ago.
So, this is a direct to paperback book...

Jun. 16 2014 12:18 PM
Mary from NYC

Not just the Soviet Union makes 5 year plans - most large companies do. They call it the Strategic Plan. However, most don't follow it religiously. And I think this is falling out of favor, but this is used to show investors that there is a plan and management is "competent" at implementing it (forget the value of the plan, it's execution that apparently is valued by investors.)

Jun. 16 2014 12:17 PM
jgarbuz from Queens

http://www.fool.com/investing/general/2012/08/16/5-companies-you-can-treat-like-royalty.aspx

"Since 1911, IBM has been granted more than 70,000 patents, of which 34,000 are still active. No other company out there has as many patents as IBM, period! Without question, Microsoft's portfolio of software and gaming patents is more valuable than IBM's, but IBM is willing to spend about $6 billion each year adding to its patent trove with the hope of creating billions in additional recurring revenue."

Jun. 16 2014 12:16 PM
Amy from Manhattan

Really? Not even any PR value for IBM in Watson's win on "Jeopardy"?

Jun. 16 2014 12:15 PM
korgy from brooklyn

please ask your guest:

my sister was laid off from IBM about 3 years ago after working for them for about 20 years. she claimed the company was setting its sights on Africa, and was planting offices there to pioneer the tech industry there. is that true?

Jun. 16 2014 12:15 PM
korgy from brooklyn

please ask your guest:

my sister was laid off from IBM about 3 years ago after working for them for about 20 years. she claimed the company was setting its sights on Africa, and was planting offices there to pioneer the tech industry there. is that true?

Jun. 16 2014 12:14 PM
jgarbuz from Queens

Your guest is wrong. What IBM produces today is PATENTS not products. Patents are their main product. EVeryone producing consumer products for your home is paying IBM some royalties. That is why IBM is still here. Patents are their main product.

Jun. 16 2014 12:11 PM
jgarbuz from Queens

The issue comes down to patents. The company with the most patents is most likely to survive. I think IBM still produces more patents than any other hi-tech company ,but I could be wrong now. But what I am sure of is that in this fast-changing hi-tech world, patents are their lifeblood. IBM is still the leader. See the following graph:

http://www.minyanville.com/sectors/technology/articles/Top-US-Patents-2012253A-Which-Tech/4/11/2013/id/49196

Jun. 16 2014 12:08 PM
jgarbuz from Queens

The issue comes down to patents. The company with the most patents is most likely to survive. I think IBM still produces more patents than any other hi-tech company ,but I could be wrong now. But what I am sure of is that in this fast-changing hi-tech world, patents are their lifeblood. See the following graph:

http://www.minyanville.com/sectors/technology/articles/Top-US-Patents-2012253A-Which-Tech/4/11/2013/id/49196

Jun. 16 2014 12:07 PM

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