Smile of the Day June 15, 2022: IBM was Incorporated

On this Day:

On June 15, 1911 Tabulating Computing Recording Corporation (which later changed its name to IBM) was incorporated.

International Business Machines Corporation (IBM) is an American multi-national technology corporation headquartered in Armonk, New York, with operations in over 171 countries. The company began in 1911, founded in Endicott, New York, by trust businessman, Charles Ranlett Flint. It began as the Computing-Tabulating-Recording Company (CTR) and was renamed “International Business Machines” in 1924. IBM is incorporated in New York.

IBM produces and sells computer hardware, middleware and software, and provides hosting and consulting services in areas ranging from mainframe computers to nanotechnology. IBM is also a major research organization, holding the record for most annual U.S. patents generated by a business (as of 2020) for 28 consecutive years.

Inventions by IBM include the automated teller machine (ATM), the floppy disk, the hard disk drive, the magnetic stripe card, the relational database, the SQL programming language, the UPC barcode, and dynamic random-access memory (DRAM). The IBM mainframe, exemplified by the System/360, was the dominant computing platform during the 1960s and 1970s.

IBM is one of 30 companies included in the Dow Jones Industrial Average and one of the world’s largest employers, with over 282,100 employees as of December 2021.

History

In the 1880s, technologies emerged that would ultimately form the core of International Business Machines (IBM). Julius E. Pitrap patented the computing scale in 1885; Alexander Dey invented the dial recorder (1888); Herman Hollerith (1860–1929) patented the Electric Tabulating Machine; and Willard Bundy invented a time clock to record a worker’s arrival and departure time on a paper tape in 1889. On June 16, 1911, their four companies were amalgamated in New York State by Charles Ranlett Flint forming a fifth company, the Computing-Tabulating-Recording Company (CTR) based in Endicott, New York. The five companies had 1,300 employees and offices and plants in Endicott and Binghamton, New York; Dayton, Ohio; Detroit, Michigan; Washington, D.C.; and Toronto.

They manufactured machinery for sale and lease, ranging from commercial scales and industrial time recorders, meat and cheese slicers, to tabulators and punched cards. Thomas J. Watson, Sr., fired from the National Cash Register Company by John Henry Patterson, called on Flint and, in 1914, was offered a position at CTR. Watson joined CTR as general manager then, 11 months later, was made President when court cases relating to his time at NCR were resolved. Having learned Patterson’s pioneering business practices, Watson proceeded to put the stamp of NCR onto CTR’s companies. He implemented sales conventions, “generous sales incentives, a focus on customer service, an insistence on well-groomed, dark-suited salesmen and had an evangelical fervor for instilling company pride and loyalty in every worker”. His favourite slogan, “THINK”, became a mantra for each company’s employees. During Watson’s first four years, revenues reached $9 million ($141 million today) and the company’s operations expanded to Europe, South America, Asia and Australia. Watson never liked the clumsy hyphenated name “Computing-Tabulating-Recording Company” and on February 14, 1924, chose to replace it with the more expansive title “International Business Machines” which had previously been used as the name of CTR’s Canadian Division. By 1933, most of the subsidiaries had been merged into one company, IBM.

IBM has several leadership development and recognition programs to recognize employee potential and achievements. For early-career high potential employees, IBM sponsors leadership development programs by discipline (e.g., general management (GMLDP), human resources (HRLDP), finance (FLDP)). Each year, the company also selects 500 IBM employees for the IBM Corporate Service Corps (CSC), which gives top employees a month to do humanitarian work abroad. For certain interns, IBM also has a program called Extreme Blue that partners top business and technical students to develop high-value technology and compete to present their business case to the company’s CEO at internship’s end.

The company also has various designations for exceptional individual contributors such as Senior Technical Staff Member (STSM), Research Staff Member (RSM), Distinguished Engineer (DE), and Distinguished Designer (DD). Prolific inventors can also achieve patent plateaus and earn the designation of Master Inventor. The company’s most prestigious designation is that of IBM Fellow. Since 1963, the company names a handful of Fellows each year based on technical achievement. Other programs recognize years of service such as the Quarter Century Club established in 1924, and sellers are eligible to join the Hundred Percent Club, composed of IBM salesmen who meet their quotas, convened in Atlantic City, New Jersey. Each year, the company also selects 1,000 IBM employees annually to award the Best of IBM Award, which includes an all-expenses-paid trip to the awards ceremony in an exotic location.

IBM’s culture has evolved significantly over its century of operations. In its early days, a dark (or gray) suit, white shirt, and a “sincere” tie constituted the public uniform for IBM employees. During IBM’s management transformation in the 1990s, CEO Louis V. Gerstner, Jr. relaxed these codes, normalizing the dress and behaviour of IBM employees. The company’s culture has also given to different plays on the company’s acronym (IBM), with some saying it stands for “I’ve Been Moved” due to relocations and layoffs, others saying it stands for “I’m By Myself” pursuant to a prevalent work-from-anywhere norm, and others saying it stands for “I’m Being Mentored” due to the company’s open door policy and encouragement for mentoring at all levels. In terms of labor relations, the company has traditionally resisted labor union organizing, although unions represent some IBM workers outside the United States. In Japan, IBM employees also have an American football team complete with pro stadium, cheerleaders and televised games, competing in the Japanese X-League as the “Big Blue”. IBM built the Automatic Sequence Controlled Calculator, an electromechanical computer, during World War II. It offered its first commercial stored-program computer, the vacuum tube based IBM 701, in 1952. The IBM 305 RAMAC introduced the hard disk drive in 1956. The company switched to transistorized designs with the 7000 and 1400 series, beginning in 1958.

In 1956, the company demonstrated the first practical example of artificial intelligence when Arthur L. Samuel of IBM’s Poughkeepsie, New York, laboratory programmed an IBM 704 not merely to play checkers but “learn” from its own experience. In 1957, the FORTRAN scientific programming language was developed. In 1961, IBM developed the SABRE reservation system for American Airlines and introduced the highly successful Selectric typewriter.

In 1963, IBM employees and computers helped NASA track the orbital flights of the Mercury astronauts. A year later, it moved its corporate headquarters from New York City to Armonk, New York. The latter half of the 1960s saw IBM continue its support of space exploration, participating in the 1965 Gemini flights, 1966 Saturn flights, and 1969 lunar mission. IBM also developed and manufactured the Saturn V’s Instrument Unit and Apollo spacecraft guidance computers.

On April 7, 1964, IBM launched the first computer system family, the IBM System/360. It spanned the complete range of commercial and scientific applications from large to small, allowing companies for the first time to upgrade to models with greater computing capability without having to rewrite their applications. It was followed by the IBM System/370 in 1970. Together the 360 and 370 made the IBM mainframe the dominant mainframe computer and the dominant computing platform in the industry throughout this period and into the early 1980s. They and the operating systems that ran on them such as OS/VS1 and MVS, and the middleware built on top of those such as the CICS transaction processing monitor, had a near-monopoly-level market share and became the thing IBM was most known for during this period.

In 1969, the United States of America alleged that IBM violated the Sherman Antitrust Act by monopolizing or attempting to monopolize the general-purpose electronic digital computer system market, specifically computers designed primarily for business. They subsequently alleged that IBM violated the antitrust laws in IBM’s actions directed against leasing companies and plug-compatible peripheral manufacturers. Shortly after, IBM unbundled its software and services in what many observers believed was a direct result of the lawsuit, creating a competitive market for software. In 1982 the Department of Justice dropped the case as “without merit”.

Also in 1969, IBM engineer Forrest Parry invented the magnetic stripe card that would become ubiquitous for credit/debit/ATM cards, driver’s licenses, rapid transit cards, and a multitude of other identity and access control applications. IBM pioneered the manufacture of these cards, and for most of the 1970s, the data processing systems and software for such applications ran exclusively on IBM computers. In 1974, IBM engineer George J. Laurer developed the Universal Product Code. IBM and the World Bank first introduced financial swaps to the public in 1981, when they entered into a swap agreement. The IBM PC, originally designated IBM 5150, was introduced in 1981, and it soon became an industry standard. In 1991 IBM spun out its printer manufacturing into a new business called Lexmark.

In 1993, IBM posted an $8 billion loss – at the time the biggest in American corporate history. Lou Gerstner was hired as CEO from RJR Nabisco to turn the company around.

In 2002 IBM acquired PwC Consulting, the consulting arm of PwC which was merged into its IBM Global Services.

In 2005, the company sold its personal computer business to Chinese technology company Lenovo and, in 2009, it acquired software company SPSS Inc. Later in 2009, IBM’s Blue Gene supercomputing program was awarded the National Medal of Technology and Innovation by U.S. President Barack Obama. In 2011, IBM gained worldwide attention for its artificial intelligence program Watson, which was exhibited on Jeopardy, where it won against game-show champions Ken Jennings and Brad Rutter. The company also celebrated its 100th anniversary in the same year on June 16. In 2012 IBM announced it had agreed to buy Kenexa and Texas Memory Systems, and a year later it also acquired SoftLayer Technologies, a web hosting service, in a deal worth around $2 billion. Also that year, the company designed a video surveillance system for Davao City.

In 2014, IBM announced it would sell its x86 server division to Lenovo for $2.1 billion. Also that year, IBM began announcing several major partnerships with other companies, including Apple Inc., Twitter, Facebook, Tencent, Cisco, UnderArmour, Box, Microsoft, VMware, CSC, Macy’s, Sesame Workshop, the parent company of Sesame Street, and Salesforce.com.

In 2015, IBM announced three major acquisitions: Merge Healthcare for $1 billion, data storage vendor Cleversafe, and all digital assets from The Weather Company, including Weather.com and the Weather Channel mobile app. Also that year, IBM employees created the film A Boy and His Atom, which was the first molecule movie to tell a story. In 2016, IBM acquired video conferencing service Ustream and formed a new cloud video unit. In April 2016, it posted a 14-year low in quarterly sales. The following month, Groupon sued IBM accusing it of patent infringement, two months after IBM accused Groupon of patent infringement in a separate lawsuit.

In 2015, IBM bought the digital part of The Weather Company; Truven Health Analytics for $2.6 billion in 2016. In October 2018, IBM announced its intention to acquire Red Hat for $34 billion, which was completed on July 9, 2019.

IBM announced in October 2020 that it would divest the Managed Infrastructure Services unit of its Global Technology Services division into a new public company. The new company, Kyndryl, was to have 90,000 employees, 4,600 clients in 115 countries, with a backlog of $60 billion. IBM’s spin off would be greater than any of its previous divestitures, and welcomed by investors. In January 2021, IBM appointed Martin Schroeter, who had been IBM’s CFO from 2014 through the end of 2017, as CEO of Kyndryl.

On 7 March 2022 a few days after the start of the Russian invasion of Ukraine, IBM CEO Arvind Krishna published a Ukrainian flag and announced that “we have suspended all business in Russia”. All Russian articles were also removed from the IBM website. Said Krishna on 7 June, “As the consequences of the war continue to mount and uncertainty about its long-term ramifications grows, we have now made the decision to carry out an orderly wind-down of IBM’s business in Russia.”

IBM has regularly sold off low margin assets while shifting its focus to higher-value, more profitable markets. Examples include:

1991: Spun off its printer and keyboard manufacturing division, the IBM Information Products Corporation, to Lexmark

2002–2020: Acquired PwC Consulting (2002), SPSS (2009), The Weather Company (2016), Red Hat (2019), and European cloud consultant Nordcloud (2020)

2005 and 2014, respectively: Sold its personal computer (ThinkPad/ThinkCentre) and x86-based server businesses to Lenovo

2015: IBM adopted a “fabless” model with semiconductors design, while offloading manufacturing to GlobalFoundries

2021: IBM spun-off its managed infrastructure services unit into a new public company named Kyndryl. IBM also announced the acquisition of the enterprise software company Turbonomic for $1.5 Billion.

2022: IBM announced that it would sell Watson Health to the private equity firm Francisco Partners.

Brand and reputation

IBM is nicknamed Big Blue in part due to its blue logo and colour scheme, and also partially since IBM once had a de facto dress code of white shirts with blue suits. The company logo has undergone several changes over the years, with its current “8-bar” logo designed in 1972 by graphic designer Paul Rand. It was a general replacement for a 13-bar logo, since period photocopiers did not render narrow (as opposed to tall) stripes well. Aside from the logo, IBM used Helvetica as a corporate typeface for 50 years, until it was replaced in 2017 by the custom-designed IBM Plex.

IBM has a valuable brand as a result of over 100 years of operations and marketing campaigns. Since 1996, IBM has been the exclusive technology partner for the Masters Tournament, one of the four major championships in professional golf, with IBM creating the first Masters.org (1996), the first course cam (1998), the first iPhone app with live streaming (2009), and first-ever live 4K Ultra High Definition feed in the United States for a major sporting event (2016). As a result, IBM CEO Ginni Rometty became the third female member of the Master’s governing body, the Augusta National Golf Club. IBM is also a major sponsor in professional tennis, with engagements at the U.S. Open, Wimbledon, the Australian Open, and the French Open. The company also sponsored the Olympic Games from 1960 to 2000, and the National Football League from 2003 to 2012.

In 2012, IBM’s brand was valued at $75.5 billion and ranked by Interbrand as the third-best brand worldwide. That same year, it was also ranked the top company for leaders (Fortune), the number two green company in the U.S. (Newsweek), the second-most respected company (Barron’s), the fifth-most admired company (Fortune), the 18th-most innovative company (Fast Company), and the number one in technology consulting and number two in outsourcing (Vault). In 2015, Forbes ranked IBM as the fifth-most valuable brand, and for 2020, the Drucker Institute named IBM the No. 3 best-managed company.

During the 2022 Russian invasion of Ukraine IBM donated $250,000 to Polish Humanitarian Action and the same amount to People in Need, Czech Republic (per Wikipedia).

First, a Story:

In 1970, Xerox Corp sued IBM for patent infringement.

Who would have thought Xerox would get upset over somebody copying…

Second, a Song:

Courtesy of IBM and YouTube.com, we have a video by IBM on Let’s Lead in a Changing World.  They state:

Change. It’s all around us. But today’s leaders are getting ahead of it by using technology in creative, new ways. Learn more at https://www.ibm.com/lets-create #LetsCreate. We hope you enjoy this!

(https://www.youtube.com/watch?v=XH4m3i_DP04)

Thought for the Day:

“Follow the path of the unsafe, independent thinker. Expose your ideas to the danger of controversy. Speak your mind and fear less the label of ‘crackpot’ than the stigma of conformity.” – Thomas J. Watson

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Have a great day!

Dave & Colleen

© 2022 David J. Bilinsky and Colleen E. Bilinsky