Author: Zhao Saipo
The century-old company IBM is again at a difficult time. The quarterly financial report issued at the end of March showed that IBM's revenue was 23.4 billion US dollars, down by 5% year-on-year; net profit was 3 billion US dollars, down by 1%, both falling below market expectations.
And in terms of product competition beyond Wall Street numbers, IBM's performance was also less than satisfactory. In the cloud hardware market worth 9.7 billion US dollars, data from Synergy Research Company shows that IBM has been overtaken by Cisco and now only holds 14% of the market share. Worse still, this market is shrinking as companies are reducing their demand to purchase hardware.
From the first quarter onwards, rumors about IBM layoffs have been circulating. IBM finally initiated a layoff plan last month for between 6,000-8,000 people, accounting for 2% of the global workforce.
In a sense, IBM's current layoffs seem more like pandering to Wall Street rather than an actual meaningful change. For this IT industry giant, the combination of hardware + software + services once led a generation of IT industry transformation. Now, Dell and HP are all imitating the path of the blue giant. But in the era where enterprise IT is shifting from informatization to internetization, IBM's three-pronged approach suddenly became ineffective: how to persuade budget-constrained enterprises to buy hardware - price reduction is obviously not possible; how to keep up with the fast delivery pace of software development and service in the internet age. Clearly, the speed of this giant is too slow.
IBM is indeed a great company. Reviewing some of IBM's major moves this century, we can see how the blue giant decisively made the transition from a pure hardware manufacturer to a combination of hardware and software plus services.
In 2002, IBM acquired the consulting department of PricewaterhouseCoopers to strengthen its service system; in 2003, it sold its hard disk business to Hitachi; in 2005, it sold its ThinkPad PC business. At this point, IBM completed a graceful transformation. Since proposing the concept of a "Smarter Planet" in 2009, IBM has continuously laid out strategies in cloud computing, big data, and intelligence. Despite going through the financial crisis, IBM's stock price remained strong, once again becoming a banner in the IT industry.
IBM's next transformation will not be achieved simply by laying off several thousand people. In the new era of concurrent development of the Internet and mobile Internet, in the period when public clouds are constantly eroding private cloud markets, what IBM needs to do is to put aside its established model, restart, and adapt to everything under the new climate.
There were rumors recently that IBM intended to sell its x86 server business to Lenovo. Regardless of how low the profit margin of the current hardware department is, whether or not to sell it does not make much difference. On the other hand, this also shows IBM's lack of confidence in real business updates.
IBM used its strong technical advantage to dominate the enterprise private cloud market and almost abandoned the public cloud market under the stimulation of high profits. But now consumer demands have changed, more and more small and medium-sized enterprises are abandoning private clouds and moving towards public clouds, and large enterprises are gradually undergoing this transformation. However, IBM's share in the public cloud market is almost negligible. What should IBM do?
In 1996, Steve Jobs, the founder of Apple, once evaluated IBM this way: "IBM's product developers can create better products or computers, but when you monopolize the market, what makes the company more successful are sales and marketing personnel, who will eventually control the company, and product personnel will be squeezed out of the decision-making circle. When the company gets bigger, they will think about replicating initial success, most people will unconsciously believe that there is some kind of magic in the process that can lead to success. So they start institutionalizing the process within the company, and before long, people will confusingly think that following the process is the work itself, which ultimately leads to IBM's decline."
This curse-like cycle repeats itself in the multiple transformations of the blue giant. Twenty years ago, when Lou Gerstner radically reformed IBM, one business approval required five layers of approval processes, and today, twenty years later, this number has exceeded ten layers.
Of course, IBM is also striving to innovate. At the IBM Technology Summit that just concluded last week, the blue giant vigorously promoted its mobile product portfolio - MobileFirst, hoping to use this product portfolio to complete the integration of mobility, big data, and cloud computing, and further layout the Internet of Things. But compared to the revolutionary innovations during previous transformations, this mobile-first strategy is more like passive defense rather than active attack. If there is no more innovation, the future of the blue giant is worrying.