IBM’s 26% Layoff Is NOT Enough To Pull It Out Of Its Terminal Downward Spiral. Needs A 40% Cut.

.ibmjan265yearAnura Guruge December 2014 thumbnail

by Anura Guruge

Related Posts:
>> Punch-drunk IBM, 40% layoff — Oct. 21, 2014.
Continue to punish shareholder — Oct. 20, 2014.

>> Spin Off Watson — Oct. 8, 2014.
>> “Think” sign — Aug. 28, 2014.
>> Hursley’s John Fairclough … — Aug. 27, 2014.
>> Mainframe 50th — Apr. 7, 2014.
>> Gene Amdahl & I Mar. 29, 2014.
>> IBM Hursley pictures Mar. 16, 2014.
>> Malaysia flight 370: And ‘Poor’ IBM — Mar. 11, 2014.

Search on “Hursley”, “IBM” & “mainframes” for other IBM (Hursley) related posts >>>>


From ‘MarketWatch’. Click to ENLARGE and read. Above stock price chart is also from ‘MarketWatch’.

What I said on October 21, 2014 — 3 months earlier.


The problems being faced by IBM are not trivial. They are NOT easy to fix and it is possible that there might NOT even be a fix — ever! IBM, like say DEC or SUN, may just fade away to be acquired by Google, Oracle or possibly even Apple!

What so many people, normally smart people at that, just fail to grasp is that there has been a tectonic shift that has totally disrupted the very footings on which IBM has been anchored for so long. Analyst, mistakenly, because this is what IBM has fed them, refer to it as ‘legacy systems’. Try calling them ‘Proprietary Solutions’ and THEN you will quickly grasp what the problem is.

IBM, since the advent of the Hollerith punch card systems c. 1925 IBM thrived in selling and servicing Proprietary Solutions. The list of their MAIN Proprietary Solutions is long and storied and reads like: S/360, MVS, S/370, CICS, SNA, NetView, WebSphere, AS/400, z/OS etc. etc. Yes, this is why IBM, in the 1970s faced the largest anti-trust case leveled against any corporation.

It was easy to compete and make money when you were selling Proprietary Systems — especially if the products were marginally better than that of the competition and you had the BEST sales force in the Universe.

But to IBM’s chagrin the Web, Linux, PCs, the Cloud and everything to do with contemporary IT is NOT, by definition and design, not proprietary. IBM cannot provide enough differentiation.

Moreover, for the first time since modern computers came to be c. 1950, the MAJORITY of IT professionals, worldwide, are those that grew up, from day one, in a world full of PCs and Windows. For the first time, in nearly 4 generations of IBM management, IBM does not have the luxury of having a worldwide IT force that was in awe of the name ‘IBM’. The adage “you can’t get fired for buying IBM” can now be turned on its head. “You most likely WILL BE fired if you buy IBM (at their inflated prices”!

This, in a nutshell, is the problem.

Non-proprietary systems, and that includes ‘the Cloud’, being standards-based do not have the profit margins that IBM requires to finance its huge, bloated infrastructure. 26% cut is so not enough. 40% will be a decent start.

IBM also can’t provide enough specialized, differentiated, value-added expertise in today’s standard-based world. A kid in India, willing to work for $15/hour, probably knows as much about implementing a Linux-based server system as a smartly dressed, MIT-educated IBM consultant who has to charge $3,000/hour to meet IBM’s goals!

You can take it from here.

All the best. IBM was my life for 40 years! I would not be here if NOT for IBM. Everything I achieved in my professional life is because of IBM. I am very fond of IBM and proud that I am an ex-IBMer. That I was lucky enough to be “Mr. SNA” was a bonus. So I am the last person on earth that wants to see bad things happen to IBM. But, I also know IBM, at a level that few others do, and can spot the problems. I did that for a living for 30 years. Now I do it because I care.

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