Ann Arbor Area Business Monthly
Small Business and the Internet

Failing Big

August 2012

By Mike Gould

“Too big to fail”

Well, maybe so, but IBM and Microsoft seem to be having problems. Wait, what? Two of the USA’s major corporations aren’t looking so hot? No Way!


Let’s start with IBM. Back in the dim dark past when I was starting to get into computers, the choices were IBM PCs and their clones, or Macintosh. (And short-lived computers from Tandy (Radio Shack) and Osborne and others, but we’re concentrating on the ones that made it to the present day.) IBM started out as a mainframe (“big iron”) computer company, but got into the personal computer biz in 1981 when it introduced the PC 5150, which evolved into the XT, the AT, PS/2 and a variety of other models over the years.

For a short time, all other computers that ran on the system that IBM PCs used (MS DOS) were referred to as “clones” – that would be Compaq, HP, Acer, etc. Eventually the clone word went away and we were left with PCs and Macs. IBM dominated the business computing world for both mainframes and personal computers for many years. Then globalization happened and the race to the bottom started: price competition turned PCs into commodities and IBM threw in the towel, selling its remaining ThinkPad laptop biz to the Chinese company Lenovo in 2005.

But IBM kept its server services running, and started basing its company on supporting businesses who needed big apps on big iron. Then they started to offshore their technical support, and they have now announced the following plan to increase their business:

IBM’s internal plan [is] to grow earnings-per-share (EPS) to $20 by 2015. The primary method for accomplishing this feat, according to the plan, will be by reducing US employee head count by 78 percent in that time frame.

The above is a quote from Robert Cringely, a technology analyst and writer. He recently wrote a series of articles on his blog “I, Cringely” about this (the URL for the first one is below).

Think about this: IBM is laying off 78% of its staff. Guess who gets the ax:

Top management will remain, the sales organization will endure, as will employees working on US government contracts that require workers to be US citizens. Everyone else will be gone. Everyone.

Let’s see a show of hands from our readers who have never had a bad experience dealing with computer support in a far-away land. Nobody? How do you think this will pan out, happy customer-wise? Do you see this might be a problem? I encourage you to read the entire series of Cringely articles and then, if you are a customer of Big Blue, think deep and hard about your relationship (and maybe your investments as well…).

Cringely sums up thusly:

… the company is being run by executives who for the most part don’t understand the products and services they sell. The IBM of today is a sales organization. There is nothing wrong with sales if you can also deliver, but increasingly IBM can’t deliver.

OK, lets turn to the other company that used to be a competitor to Apple, Microsoft (MS).

I could go into a long litany of statistics regarding Microsoft’s losses to Apple in various arenas (Zune? Windows Mobile? Etc., etc. …) but I will spare you the obvious and recommend another article to you: Vanity Fair magazine, August 2012 – “Microsoft’s Lost Decade”. Writer Kurt Eichenwald spent a lot of time interviewing past and present MS workers (“Microsofties”) and he paints a pretty dismal picture of bloated bureaucracy, massive mid-management molasses and general lack of responsiveness to markets, or much of anything, for that matter.

One of the crushing blunders MS seems to have adapted as a management device is that of “Stack Ranking”. Under this system, all employees in a group are rated on a performance curve from “under-performing” to “exceeds expectations”. So employees found themselves competing with their fellow workers instead of focusing on competing with MS’s rivals. It is as if your entire team is working their tails off, but somebody has to be ranked last, and maybe lose their job. This tends to create a poisonous working environment that focuses on back-biting and sabotage instead of getting things done.

And the head ‘softie, Stephen Ballmer, seems to have the same problem as the IBM upper echelon: a background in marketing and business instead of technology. Whereas MS founder Bill Gates was an uber-geek who, while no Steve Jobs, had a grip on the technological underpinnings of the business, Ballmer is an uber-bean counter. Who throws chairs around when riled up.

So what are we, small-ish business people that we are, to make of and take from this? I think it comes down to innovation, passion, and employee respect. The business of technology is one of change and taking advantage of the zigs and zags of the market place as new tech evolves and hits the streets. After years of struggle, Apple is currently at #55 in the Fortune 500 list, and their stock trades today (July 2012) at $605. It got that way by thinking up cool stuff and seeing it through to production in a zippy-quick fashion. Apple’s CEO, Tim Cook, has an engineering degree as well as an MBA, and seems to be cranking out the new stuff in a fashion most Jobs-ian. And Apple employees are paid pretty well and seem to be happy. The folks in retail are not paid much, but their dollars are above average. And every time I call for help, I get somebody in Texas, not Mumbai. There is a marked difference in corporate cultures between Apple, IBM, and Microsoft, and that is affecting their performance in the marketplace.

IBM article by Robert Cringely (first of several):

Microsoft article at Vanity Faire: (paywalled after first paragraphs – I recommend you seek out the print magazine.)

Mike Gould has issues with IBM, was a mouse wrangler for the U of M for 20 years, runs the MondoDyne Web Works/Macintosh Training/Digital Photography mega-mall, builds laser display devices, performs with the Illuminatus 2.2 Lightshow, and welcomes comments addressed to

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