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0 pointsedw51917y ago0 comments

Mary Maxwell Gates was never an IBM employee. She was on United Way's executive committee at the same time as then IBM CEO John Akers. Their casual conversation led to IBM's introduction to Microsoft.

IBM never meant to give anything to anyone. They were as ruthless then as Microsoft is now. IBM, along with most of the rest of the enterprise world, never imagined the microcomputer as anything but a toy. They didn't even enter the market until 6 years after Apple.

In 1980, IBM was a hardware company. Today they are a service company. The makeovers in between were not painless and were not by choice. Just for not taking the PC seriously.

In 1980, you were as likely to find a job in a Fortune 500 company as anywhere else. Not anymore. New jobs are being created at a much faster rate by smaller, more nimble companies. After all, economies of scale don't mean as much in service economies. These smaller companies don't have the same decision making matrix as the enterprises and will use SaaS. Look at Salesforce.com.

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bilbo0s17y ago

Good point on Mary Gates, though my material point was that only Bill Gates was going to get the contract. Any one else would have faced significant challenges. Also, given the fact that Bill was in his early twenties at the time, I suspect, and I think you do too, that those conversations were anything but casual.

Additionally, IBM has been a services company for over a hundred years. With the greatest service rendered at the Nuremberg trials in my opinion. Hardware has been a way for them to sell services for quite some time. That said, a review of their historical financials, will bear out the fact that they have made far more money on service and support than hardware. That is true if you zoom in per year as well by the way. The computer industry emerged around the 1950s, and IBM was the guy selling the most of them, it's true. But, take a look into their training, service and support contracts if you want to see some serious revenue growth charts.

As to your last point, it is the same point made by Microsoft fanboys in the 80s. It is, in a way, the original 'long tail' argument. It has merit, in that companies that can monopolize the long tail, as Microsoft has done, will make a lot of money. But the fact remains that even with its 'long tail' monopolization, Microsoft still generates less revenue than IBM. FAR less. Why? Because the smaller companies are not willing to pay as much as larger organizations. Which is why they choose Microsoft, it is cheaper, and it is good enough.

Now your assertion is that they will choose Google in the future, because it will be cheaper still, and good enough.

Consider, however, what happens as these customers get more and more frugal. Suppose everyone on the long tail thinks that your product should not cost as much as Microsoft's. Or let's suppose that they believe that everything you get over the internet should be ... say ... free. The amount of money that the monopolizer can generate goes down. But IBM's service and support contracts stay the same price for the big guys! That's the beauty of being IBM. You always win in the end.