IBM the rise and fall and reinvention of a global icon

History of Computing William Aspray and Thomas J Misa, editors Janet Abbate, Gender in the History of Computing: Reimagining Expertise, Opportunity, and Achievement through Women’s Lives John Agar, The Government Machine: A Revolutionary History of the Computer William Aspray, John von Neumann and the Origins of Modern Computing William Aspray and Paul E Ceruzzi, The Internet and American Business Charles J Bashe, Lyle R Johnson, John H Palmer, and Emerson W Pugh, IBM’s Early Computers Martin Campbell-Kelly, From Airline Reservations to Sonic the Hedgehog: A History of the Software Industry Paul E Ceruzzi, A History of Modern Computing I Bernard Cohen, Howard Aiken: Portrait of a Computer Pioneer I Bernard Cohen and Gregory W Welch, editors, Makin’ Numbers: Howard Aiken and the Computer James W Cortada, IBM: The Rise and Fall and Reinvention of a Global Icon Thomas Haigh, Mark Priestley, and Crispin Rope, ENIAC in Action: Making and Remaking the Modern Computer John Hendry, Innovating for Failure: Government Policy and the Early British Computer Industry Marie Hicks, Programmed Inequality: How Britain Discarded Women Technologists and Lost Its Edge in Computing Michael Lindgren, Glory and Failure: The Difference Engines of Johann Müller, Charles Babbage, and Georg and Edvard Scheutz David E Lundstrom, A Few Good Men from Univac René Moreau, The Computer Comes of Age: The People, the Hardware, and the Software Arthur L Norberg, Computers and Commerce: A Study of Technology and Management at Eckert-Mauchly Computer Company, Engineering Research Associates, and Remington Rand, 1946–1957 Emerson W Pugh, Building IBM: Shaping an Industry and Its Technology Emerson W Pugh, Memories That Shaped an Industry Emerson W Pugh, Lyle R Johnson, and John H Palmer, IBM’s 360 and Early 370 Systems Kent C Redmond and Thomas M Smith, From Whirlwind to MITRE: The R&D Story of the SAGE Air Defense Computer Raúl Rojas and Ulf Hashagen, editors, The First Computers—History and Architectures Alex Roland with Philip Shiman, Strategic Computing: DARPA and the Quest for Machine Intelligence, 1983–1993 Dinesh C Sharma, The Outsourcer: A Comprehensive History of India’s IT Revolution Dorothy Stein, Ada: A Life and a Legacy John Vardalas, The Computer Revolution in Canada: Building National Technological Competence, 1945– 1980 Maurice V Wilkes, Memoirs of a Computer Pioneer Jeffrey R Yost, Making IT Work: A History of the Computer Services Industry IBM The Rise and Fall and Reinvention of a Global Icon JAMES W CORTADA The MIT Press Cambridge, Massachusetts London, England © 2019 Massachusetts Institute of Technology All rights reserved No part of this book may be reproduced in any form by any electronic or mechanical means (including photocopying, recording, or information storage and retrieval) without permission in writing from the publisher This book was set in Adobe Garamond Pro and Berthold Akzidenz Grotesk by Westchester Publishing Services Printed and bound in the United States of America Library of Congress Cataloging-in-Publication Data Names: Cortada, James W., author Title: IBM : the rise and fall and reinvention of a global icon / James W Cortada Description: Cambridge, MA : The MIT Press, [2019] | Series: History of computing | Includes bibliographical references and index Identifiers: LCCN 2018023090 | ISBN 9780262039444 (hardcover : alk paper) Subjects: LCSH: International Business Machines Corporation—History | Computer industry—United States—History Classification: LCC HD9696.2.U6 C67 2019 | DDC 338.7/61004—dc23 LC record available at https://lccn.loc.gov/2018023090 To IBMers, customers, and historians who taught me what I know about IBM Contents Preface   I   From Birth to Identity: IBM in Its Early Years, 1880s–1945   1   Origins, 1880s–1914   2   Thomas J Watson Sr and the Creation of IBM, 1914–1924   3   The Emergence of IBM and the Culture of THINK   4   IBM and the Great Depression   5   IBM in World War II, 1939–1945  II   IBM the Computer Behemoth, 1945–1985   6   IBM Gets into the Computer Business, 1945–1964   7   How Customers, IBM, and a New Industry Evolved, 1945–1964   8   System 360: One of the Greatest Products in History?   9   “The IBM Way”: How It Worked, 1964–1993 10   “The IBM Way”: What the World Saw, 1964–1993 11   IBM on the Global Stage 12   Two Decades of Antitrust Suits, 1960s–1980s 13   Communist Computers 14   “A Tool for Modern Times”: IBM and the Personal Computer III   A Time of Crisis, 1985–1994 15   Storms, Crisis, and Near Death, 1985–1993 16   IBM’s Initial Response, 1985–1993 17   How IBM Was Rescued, 1993–1994 IV   IBM in the New Century 18   A New IBM, 1995–2012 19   Hard Times, Again, and Another Transformation 20   THINK: IBM Today and Its Legacy Author’s Note: In the Spirit of Transparency Bibliographic Essay Index List of Figures Figure 1.1 Charles Flint was highly creative in forming new stock-holding companies, including C-T-R, the core of the future International Business Machines Corporation Photo courtesy of IBM Corporate Archives Figure 1.2 Tabulating machine Herman Hollerith’s machines were used by U.S and European census takers and companies in the 1890s and early 1900s They were considered the most sophisticated data processing equipment of their day Photo courtesy of IBM Corporate Archives Figure 1.3 Herman Hollerith, inventor of the tabulating equipment used by governments and corporations for half a century Photo courtesy of IBM Corporate Archives Figure 1.4 Thomas J Watson Sr in his 40s, when he had taken over C-T-R to shape it into IBM Photo courtesy of IBM Corporate Archives Figure 2.1 John H Patterson was the creator of NCR and had a reputation for being an innovative and successful executive Photo courtesy of IBM Corporate Archives Figure 2.2 An early branch office (1927), this one located in Washington, D.C., with its staff These offices were a combination retail outlet and training center Photo courtesy of IBM Corporate Archives Figure 2.3 Number of C-T-R branch openings, 1914–1924 Figure 3.1 C-T-R/IBM had only two logos until the end of the 1940s The IBM logo did not become a highly recognized image until the late 1940s, although it was respected earlier by its customers Photo courtesy of IBM Corporate Archives Figure 3.2 The IBM Type 405 was sold as a “system,” not as one product, and was introduced just as IBM’s customers’ volume and complexity of work expanded dramatically Photo courtesy of IBM Corporate Archives Figure 4.1 The U.S government became a massive user of IBM punch cards beginning in the 1930s in support of the Social Security Act Photo courtesy of IBM Corporate Archives Figure 4.2 The IBM exhibit at the New York World’s Fair, 1939–1940 Photo courtesy of IBM Corporate Archives Figure 5.1 IBM Mark I This system gave IBM engineers exposure to the possibilities of advanced electronics It was the largest calculator built in the United States before the arrival of the computer Photo courtesy of IBM Corporate Archives Figure 5.2 IBM 604 The success of the IBM 604 convinced many executives that advanced electronics was the wave of the future, including Thomas Watson Jr., who would lead the charge into computing Photo courtesy of IBM Corporate Archives Figure 5.3 Arthur Watson in uniform Arthur is the lesser known of the Watson boys It was during his military service that he, like his brother, matured before assuming significant responsibilities at IBM Photo courtesy of IBM Corporate Archives Figure 6.1 The IBM 704 computer established IBM as a serious supplier of digital computing for commercial users, suggesting that business uses would expand Photo courtesy of IBM Corporate Archives Figure 6.2 IBM’s 650 computer was its most successful data processing product of the late 1950s Massproduced and widely accepted by customers, it solidified IBM’s lead in the computer industry Photo courtesy of IBM Corporate Archives Figure 6.3 The IBM 305 Disk Storage Unit made it possible for data processing users to access data directly, making online systems possible in the 1960s The device was also known as RAMAC Photo courtesy of IBM Corporate Archives Figure 7.1 A summary of IBM’s business performance and growth while led by Thomas J Watson Sr Courtesy of Peter E Greulich, copyright © 2017 MBI Concepts Corporation Figure 8.1 This image of the System 360—known as the fisheye 360—was widely used in IBM’s advertising and marketing materials Photo courtesy of IBM Corporate Archives Figure 8.2 Revenue, income, and employee growth under Thomas J Watson Jr Courtesy of Peter E Greulich, copyright © 2017 MBI Concepts Corporation Figure 10.1 IBM System 370 Model 158, introduced in 1972, became a computer workhorse for large organizations Photo courtesy of IBM Corporate Archives Figure 10.2 IBM’s information ecosystem, 1960s to 1980s Figure 11.1 Arthur K Watson, the first leader of World Trade Corporation Photo courtesy of IBM Corporate Archives Figure 11.2 More than any other IBM CEO, Frank T Cary turned IBM into a global behemoth Photo courtesy of IBM Corporate Archives Figure 11.3 Revenue, income, and employee growth under Frank T Cary, 1972–1983 Courtesy of Peter E Greulich, copyright © 2017 MBI Concepts Corporation Figure 12.1 Thomas Barr led IBM’s defense against the federal antitrust suit in the 1970s and early 1980s Photo courtesy of IBM Corporate Archives Figure 14.1 Bill Lowe A lifelong IBMer, Lowe was the “Father of the PC” at IBM Photo courtesy of IBM Corporate Archives Figure 14.2 Don Estridge, the popular PC executive who ran the IBM PC business during its successful period Photo courtesy of IBM Corporate Archives Figure 14.3 Charlie Chaplin The PC/1, introduced in 1981, had one of the most iconic advertising campaigns in IBM’s history Photo courtesy of IBM Corporate Archives and Charlie Chaplin Estate Charlie Chaplin™ © Bubbles Inc S.A Figure 15.1 John F Akers was the first CEO at IBM to be dismissed by the company for poor performance He was IBM’s chairman of the board from 1986 to 1993 and CEO from 1985 to 1993 Photo courtesy of IBM Corporate Archives Figure 15.2 A representation of the chart used in the 1982 sales meeting that forecast revenue growth to $100 billion by 1990 Figure 15.3 John Opel was the CEO who expanded IBM’s factories and number of employees in the belief that the company would grow massively in the 1980s Photo courtesy of IBM Corporate Archives Figure 16.1 James E Burke, member of the IBM board of directors, who negotiated the resignation of John Akers and recruited IBM’s next CEO, Louis V Gerstner Jr Photo courtesy of IBM Corporate Archives Figure 17.1 Louis V Gerstner Jr., while CEO and chairman of the board of IBM in the 1990s Photo courtesy of IBM Corporate Archives Figure 17.2 Jerome York, a leading architect of IBM’s recovery in the 1990s Photo courtesy of IBM Corporate Archives Figure 18.1 IBM’s revenue by segment, 1980–2015 Courtesy of James Spohr Figure 18.2 Dennie Welsh, IBM’s services leader during IBM’s transformation into a services firm Photo courtesy of IBM Corporate Archives Figure 18.3 “Sam” Palmisano, IBM’s CEO after “Lou” Gerstner, led IBM deeply into the IT services industry Photo courtesy of IBM Corporate Archives Figure 19.1 Virginia Marie “Ginni” Rometty served as IBM’s chairman, president, and CEO beginning in 2012, during a difficult period in IBM’s history Photo courtesy of IBM Archives Figure 20.1 Figure 20.2 Figure 20.3 Figure 20.4 IBM service personnel rode these vehicles in large urban centers, quickly delivering parts This British example from the 1920s symbolized IBM’s commitment to customer service Photo courtesy of IBM Corporate Archives Figure 20.5 IBM’s culture was also flexible At a time when drinking alcohol was forbidden by IBM, here we see a group of Brazilian IBMers cheering on their 100 Percent Club achievement with mugs of beer Photo courtesy of IBM Corporate Archives List of Tables Table 2.1 C-T-R/IBM revenue, net earnings, and number of employees, 1914–1924, select years (revenue and earnings in millions of dollars) Table 3.1 IBM’s revenue, earnings, and employee population, 1914–1940, select years (revenue and earnings in millions of dollars) Table 3.2 Tabulating technology evolution, 1920s–1930s Table 4.1 Chronology of IBM’s global expansion, 1930s Table 4.2 IBM’s growth, 1914–1940, select years (revenue in millions of dollars) Table 10.1 IBM net earnings, 1984–1990 (in billions of dollars) Table 11.1 World Trade net income, select years, 1949–1990 (in millions or billions of dollars) Table 12.1 Chronology of antitrust lawsuits filed against IBM, 1969–1975 Table 13.1 Technical specifications of early RYAD and IBM 360 series computers Table 13.2 Chronology of IBM-Soviet activities, 1949–1995 Table 15.1 IBM’s good years: Financials and number of employees, 1980–1985, select years (revenues and earnings in ... Printed and bound in the United States of America Library of Congress Cataloging-in-Publication Data Names: Cortada, James W., author Title: IBM : the rise and fall and reinvention of a global icon / James W... Cortada, IBM: The Rise and Fall and Reinvention of a Global Icon Thomas Haigh, Mark Priestley, and Crispin Rope, ENIAC in Action: Making and Remaking the Modern Computer John Hendry, Innovating for Failure: Government Policy and the Early British Computer Industry... so globalized that only its senior leaders are U.S citizens? What are the implications for Russia, China, Germany, the United States, the Netherlands, Saudi Arabia, Taiwan, Australia, and so many other countries?