The Background

Fifty years ago, business computing was dominated by IBM and the Seven Dwarfs. Five of these companies made up what was known as the BUNCH group – Burroughs, Univac, NCR, Control Data and Honeywell – and the other two were RCA and GE. But IBM so dominated computing that its market share exceeded all the others put together. IBM was the original computing Master Brand. GE soon exited, selling to Honeywell, and RCA did the same to Sperry.  Other computer companies of the period included 1-1-binary-001Scientific Data (later becoming part of Xerox), Cray Research (super computers that today would fit inside an iPhone), Digital Equipment Corporation (minicomputers), HP (minicomputers), and Amdahl (cheaper IBM-like mainframes).

Today? IBM has weathered several waves of technology innovation that have swept most of the others away. Unisys (Univac plus Burroughs) is still in the game, although much diminished. HP (absorbing Digital and its PC acquirer Compaq) remains, and vestiges of Amdahl can be found in Fujitsu.  The key to IBM’s survival has been its resilient portfolio-management style, innovating and acquiring and divesting as the market has dictated. Yet despite IBMs success, and what it continues to do in R&D and M&A, its continued heavy dependency on mainframe margins has been a classic Innovator’s Dilemma.

The Foreground

No doubt, IBM has embraced the Cloud across many of its business units. Early on it did so reluctantly because its lower-margin business model threatened the overall enterprise.  Now, as a significant but more recent player to the Cloud, like Microsoft ironically, IBM is fighting to recapture the high ground it once held in a landscape driven by buyers often outside of its traditional IT target. In this environment, IBM is seen as the sober and steady hand in the back room, who may get the job done, but isn’t always recognized for what it does to help transform the business, as salesforce.com, Apple, Facebook, Twitter and Google often are.

As we have emphasized for the past four years, Cloud, Mobile, Social and Analytics is the mantra of today’s Boundary-free Enterprise™.  It’s what makes for new business models and makes the established ones more efficient. Despite the massive investments that it has made in building and acquiring a very significant SaaS portfolio (especially targeting Marketing, HR and Finance buyers), as well as trumpeting its Smart Cloud, MobileFirst, Connections and an array of Analytics solutions and platforms, IBM doesn’t always “get much respect” in these worlds (as Rodney Dangerfield used to say).  Today, the high ground there belongs to salesforce.com (Cloud Solutions and Platform), Apple and Android (Mobile), Facebook and Twitter (Social) and Google MapReduce, HADOOP and a swarm of innovative startups (Analytics).

Despite its massive investments, the issue at hand is whether this is merely a corporate-wide marketing, positioning and messaging challenge, or whether IBM is stuck in a me-too strategy that is more grey than blue.

The High Ground

IBM now pins its hopes for recapturing the high ground on Watson, a million-dollar winning Jeopardy! contestant in 2011. IBM is banking heavily on the heuristic capabilities of Watson to revolutionize computing in healthcare and other verticals.  IBM believes that “Cognitive systems, like Watson, are helping to usher in a new era of computing – an era that will transform how organizations think, act, and operate in the future.”

Saugatuck looks forward to learning more about IBM’s evolved strategy, that it believes will help drive significant new momentum. We believe it offers exciting possibilities, such as Watson in the Cloud, tweaked for serving specific verticals, with APIs that make its power widely accessible.

IBM has always been the indefatigable survivor, at times a market leader, and perhaps that time has come around again. With IT budgets projected to rebound significantly over the next few years, combined with the Cloud increasingly focusing on big-data analytics and high-performance computing in key vertical segments, IBM may well again be on the march.

This blog was originally published atSaugatuck's Lens360 blogon January 7, 2014. Published with permission.