As IBM continues to sink, a look at what went wrong
International Business Machines (IBM) has reported another successive quarter of loss. The latest report is the worst in 14 years – and the sixteenth straight quarter of revenue decline. This mega brand seems to be consistent in its decline, and it's scary when one sees how the mighty can fall.
There's a lot of analysis on why this elephant that CEO Louis Gerstner had once made to dance, is now struggling. Asianet Newsable spoke to current and former IBMers to understand what went wrong.
- The infamous 'Roadmap 2015' that got crafted in 2010 with a sole focus on shareholders. The $20 Earnings Per Share (EPS) was a financial Frankenstein's monster that CEO Gini Rometty's predecessors handed over to her.
The plan was a rarity of sorts, where IBM became one of the only companies to devise a business strategy with shareholder return as the only agenda. It was a financially fantastic model - that showed how every action in the ecosystem will lead to more for the shareholder. But business-wise it was bankrupting.
This bizarre pecuniary obsession, which can be killing, was graciously dropped by Gini in 2014, but only after the damage was done.
- A strong focus on productivity over performance which made them penny-pinch. This fallout of Wall Street's obsession with the company, outcome of this were the travel freezes, which reduced customer connects and employee rewards.
- An over-complication of internal systems, where the customer had to wrangle with the IBM ecosystem to get things moving. For many of the delivery centres “the client” was another IBMer who marked up their costs.
These heavy doses of internal sub-contracting and task-based engagement compromised direct customer experience. Great talent ended up having little visibility into the big things that they were making happen.
- A denial mode on India, though it was evident there was every need for India to be at the centre of the IBM universe. While visiting executives waxed eloquent on how “India was the jewel of the IBM Crown”, the scheme of things never played out that way. India had fewer layoffs – though strategically it could have taken centre-stage. There was a wealth of leadership and capability that was doing a lot less than what it was capable of.
- The intellectualization of transactional engagements which wasn’t a great customer experience nor an employee experience. Leadership was overburdened with tactical fixes as opposed to strategic adaptations.
From high-costing Boston Consulting Group engagements to fix common-sense problems, to complex management practices, IBM has indulged itself in intellectual excesses for simple fixes.
- The drain of great talent that loved what IBM stood for but couldn’t quite get along. Illustrious ex-IBMers are shaping the world.
- The inability to demonstrate agility, which became the norm in the new normal. This trait was ably demonstrated by the competition, who’s having IBM's breakfast.
The growth of the India-centric Services competition – Cognizant, TCS and Infosys specifically - that repeatedly took over customers from the Big Blue is a loud statement in itself.
Will the Big Blue ever see a speck of green and reverse its tailing fortunes? Time will tell.