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The Hollowing Out Of Ibm

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http://www.telegraph.co.uk/technology/news/10591863/Lenovo-acquires-IBMs-server-in-biggest-ever-Chinese-tech-deal.html

This looks like a classic MBA move, that ignores the inconvenient fact that the high margin mainframe and high end servers are in terminal decline.

It is one thing selling some consultancy services off the back of your extensive product portfolio, but what happens when you have sold every real business you have and you just have the CONsultants left??!!

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http://www.telegraph.co.uk/technology/news/10591863/Lenovo-acquires-IBMs-server-in-biggest-ever-Chinese-tech-deal.html

This looks like a classic MBA move, that ignores the inconvenient fact that the high margin mainframe and high end servers are in terminal decline.

It is one thing selling some consultancy services off the back of your extensive product portfolio, but what happens when you have sold every real business you have and you just have the CONsultants left??!!

In my experience, the IBM servers are not good value for money, and the remote management console is awful compared to the Dell and HP offerings. Also, most of their software is, in my opinion, also clunky to use, and it just "looks" ancient as well.

For some reason, there's a lot of big companies using IBM software, but personally I think there's better solutions for almost all their products. They certainly would not be my first choice for software (or hardware).

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The IBM mantra these days is 'get out of commodity businesses'. It makes some sense at one level but, if you're a company of 400,000 employees it's hard to see logically how you could possibly not be big in commodity products of some sort. The only obvious end point is a much smaller, much higher margin, operation.

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The IBM mantra these days is 'get out of commodity businesses'. It makes some sense at one level but, if you're a company of 400,000 employees it's hard to see logically how you could possibly not be big in commodity products of some sort. The only obvious end point is a much smaller, much higher margin, operation.

I find this really interesting.

I was talking to a colleague last week about the demise of ICI and he (an MBA grad himself) mentioned how ICI was the classic MBA study in what goes wrong when you take a massive, vertically integrated organisation and start selling off the bits that you think don't matter.

To use an example - you think your polyethylene products are high margin, but your ethylene business is low margin - so you sell your ethylene business to focus on polyethylene. Guess what - without your internal transfer pricing your polyethylene business isn't so high margin anymore. So that's next on the chopping block, and so on and so forth until you have no company left.

I know nothing about IBM but this looks exactly the same to me.

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To use an example - you think your polyethylene products are high margin, but your ethylene business is low margin - so you sell your ethylene business to focus on polyethylene. Guess what - without your internal transfer pricing your polyethylene business isn't so high margin anymore. So that's next on the chopping block, and so on and so forth until you have no company left.

I know nothing about IBM but this looks exactly the same to me.

Another interesting example is Sears. The CEO decided that each function within the organisation should be a separate business and each business unit should purchase the services it needed from the most economic source, not necessarily from within itself. The most recent articles I have seen say it is in terminal decline.

The lessons of synergy need to be relearnt.

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Maybe they should just put Watson in charge.

Thought he was dead. He must be getting on a bit, for sure. Didn't he have great big logos put up in all the offices, saying stuff like 'obey', so that whenever people looked up they saw them. In any case he's a salesman, which the original article suggests is a bad thing.

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I find this really interesting.

I was talking to a colleague last week about the demise of ICI and he (an MBA grad himself) mentioned how ICI was the classic MBA study in what goes wrong when you take a massive, vertically integrated organisation and start selling off the bits that you think don't matter.

To use an example - you think your polyethylene products are high margin, but your ethylene business is low margin - so you sell your ethylene business to focus on polyethylene. Guess what - without your internal transfer pricing your polyethylene business isn't so high margin anymore. So that's next on the chopping block, and so on and so forth until you have no company left.

I know nothing about IBM but this looks exactly the same to me.

Some of that is true, for sure. But ICI's biggest problem was the sheer number of managers doing nothing, or worse getting in everyone's way, and drawing a gigantic salary. When they were given management positions they would go around building paper pushing empires. Managers managing managers, managers who manage the process of managing the contract for the outsourced office plants. Not a joke, this really is the sort of thing they had.

They were almost impossible to sack too. Firstly because the management thought of themselves as a special club, and sacking managers would not be cricket. Also they had contracts which guaranteed them a years pay plus a bunch of other stuff if they were sacked.

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Thought he was dead. He must be getting on a bit, for sure. Didn't he have great big logos put up in all the offices, saying stuff like 'obey', so that whenever people looked up they saw them. In any case he's a salesman, which the original article suggests is a bad thing.

He's immortal, well as long as they can find the hardware to run him:

http://www-03.ibm.com/innovation/us/watson/

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I read all the comments on the article. Ibm do my payroll and more :)

Oh ive logged GSRs ans SSRs with HP which seems to be the same story as with IBM. Total process hell.

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Some of that is true, for sure. But ICI's biggest problem was the sheer number of managers doing nothing, or worse getting in everyone's way, and drawing a gigantic salary. When they were given management positions they would go around building paper pushing empires. Managers managing managers, managers who manage the process of managing the contract for the outsourced office plants. Not a joke, this really is the sort of thing they had.

They were almost impossible to sack too. Firstly because the management thought of themselves as a special club, and sacking managers would not be cricket. Also they had contracts which guaranteed them a years pay plus a bunch of other stuff if they were sacked.

Do you think it's any different in IBM? :D

I've got a rough idea of what it was like in ICI, I know enough people who worked for them. Some of them seriously senior managers. They could have plodded on like that for years, they probably made enough money. Ultimately the strategy of moving from commodity to high margin products killed them. Associated with that was borrowing to acquire high margin businesses and selling off what they thought were low margin businesses to pay for it .

There are almost certainly a lot of parallels with modern IT behemoths.

Edited by frozen_out

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Some of that is true, for sure. But ICI's biggest problem was the sheer number of managers doing nothing, or worse getting in everyone's way, and drawing a gigantic salary. When they were given management positions they would go around building paper pushing empires. Managers managing managers, managers who manage the process of managing the contract for the outsourced office plants. Not a joke, this really is the sort of thing they had.

They were almost impossible to sack too. Firstly because the management thought of themselves as a special club, and sacking managers would not be cricket. Also they had contracts which guaranteed them a years pay plus a bunch of other stuff if they were sacked.

That is not just ICI, i have seen that all my life in UK companies.

I heard a story about 2 sisters that purchased Foxs biscuits they removed large numbers of managers, which was also strangely a company that had large numbers of managers managing managers.

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Do you think it's any different in IBM? :D

I've got a rough idea of what it was like in ICI, I know enough people who worked for them. Some of them seriously senior managers. They could have plodded on like that for years, they probably made enough money. Ultimately the strategy of moving from commodity to high margin products killed them. Associated with that was borrowing to acquire high margin businesses and selling off what they thought were low margin businesses to pay for it .

There are almost certainly a lot of parallels with modern IT behemoths.

Yes, I remember visiting an ICI facility in the mid 90s. It was vaguely being mothballed. I say vaguely because no-one seemed quite sure, but there was plenty of signs of closure and general winding down. But there was still a three tier staff canteen with silver service for the big bosses (and, yes I did eat there). I'd be willing to bet that would be the last thing to close.

Edited by StainlessSteelCat

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That is not just ICI, i have seen that all my life in UK companies.

I heard a story about 2 sisters that purchased Foxs biscuits they removed large numbers of managers, which was also strangely a company that had large numbers of managers managing managers.

The managers managing managers thing interests me greatly, it's something I've thought a lot about. I've come to the conclusion that it's what happens in organisations that employ high potential employees, but don't have the right structure to progress them. The last company I worked for had a department where a number of managers only had one direct report, who only had one direct report and so on.

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The managers managing managers thing interests me greatly, it's something I've thought a lot about. I've come to the conclusion that it's what happens in organisations that employ high potential employees, but don't have the right structure to progress them. The last company I worked for had a department where a number of managers only had one direct report, who only had one direct report and so on.

True.

Remember the big accountancy firms in the 90s?

Always used to make a big thing of recruiting the brightest and best of the best.

And then putting them into a job which you could do with an A level maths.

Then they started doing all these things with computers, or other clever schemes that blewup in their faces sometime later down the line.

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True.

Remember the big accountancy firms in the 90s?

Always used to make a big thing of recruiting the brightest and best of the best.

And then putting them into a job which you could do with an A level maths.

Then they started doing all these things with computers, or other clever schemes that blewup in their faces sometime later down the line.

I remember those firms! ;)

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worked as an IT contractor for IBM back in the nineties and there were far too many managers managing (impeding) the work of the ones who were doing the real work (i.e. the contractors). they had lots of big projects on the go at the time and making big profits because IBM was seen as the way to go even if they charged more. :o

oh - and their 'consultants' were paid way more than us 'experienced contractors'

Edited by olliegog

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There are probably 9 levels of management and 5 levels of non management in my company. Managers managing managers is 100% the norm.

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The IBM mantra these days is 'get out of commodity businesses'.

That's been the mantra for the UK economy for decades. Clearly a winner! :lol:

Too many chiefs not enough Indians. ;)

Not enough indians being paid well enough to be satisfied or financially secure staying indians?

There are probably 9 levels of management and 5 levels of non management in my company. Managers managing managers is 100% the norm.

This seems to be the problem across many UK public services as well, to which the solution most commonly touted is that they should be run by private companies that will naturally streamline these positions away, despite the fact that the private sector is often similarly encumbered dry.gif

Edit: typo

Edited by Lo-fi

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That's been the mantra for the UK economy for decades. Clearly a winner! :lol:

Not enough indians being paid well enough to be satisfied or financially secure staying indians?

This seems to be the problem across many UK public services as well, to which the solution most commonly touted is that they should be run by private companies that will naturally streamline these positions away, despite the fact that the private sector is often similarly encumbered dry.gif

Edit: typo

Very true......but all good Indians will want to become a chief.......no more room, because the not so good chiefs who no longer have ambition are blocking up the positions, so they create a new unnecessary chief post. ;)

Edited by winkie

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worked as an IT contractor for IBM back in the nineties and there were far too many managers managing (impeding) the work of the ones who were doing the real work (i.e. the contractors). they had lots of big projects on the go at the time and making big profits because IBM was seen as the way to go even if they charged more. :o

oh - and their 'consultants' were paid way more than us 'experienced contractors'

I was sponsored by IBM during my degree in the late 80s.

Insanely good deal - £100/week at Uni, plus 2 summers of work.

Being a povo, I had a full grant too, so I was pulling in the equivalent to a decent wage.

Clueless why I got it. I did not apply. IBM just seemed to have been doing scenario planning and concluded that they need x'000 people to keep going.

This was at a point where the traditional IBM, which had been going for since WWII, was about to hit a brick wall.

I could not see how they could compete against those cr.ppy Amstrad all-in-ones with a golf ball typewrite + support.

At that time, the IBM sites I visited - offices rather than manufacturing plants - were about 50/50 employees/contractors.

I wiggled out of the job offer as I did not fancy the culture.

'But you'll have a job for life' said a couple of people I knew in the company.

And they meant it - IBM used to move you around a lot and yank your chain, but if you played the game you got good pay and conditions and a great pension.

Or at least they did til about 94-ish.

Then it went wierd.

Big layoffs - IBM never used to layoff employees. It didn;t need to 50% of heads on site were on contracts.

Big shock for the IBMers. Shell shock doesnot describe the response. A bit like the archbishop of canterbury losing his religion.

Robert X Cringley has nailed it on IBM. Read his site.

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Too many chiefs not enough Indians. ;)

Story of all my working life:

Big companies getting smaller,

Organisations getting flatter.

Great if you're good + competent.

Not so good if you;re the typical UK middle-manager type.

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I know someone who is regarded as being one of the best sales people in IBM Europe

She tells me that the biggest department in IBM is the 'Stop Sales' department - it is a huge department with tentacles everywhere and seems to have the sole purpose (energetically supported by a large number of senior managers) is to stop software being sold

She does OK by spending 95% of her time battling with this department

Many other sales people simply cave in in the face of it

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