Definition

IBM (International Business Machines)

Contributor(s): Paul Woodrow, John Moore

IBM (International Business Machines) ranks among the world's largest information technology companies, providing a wide spectrum of hardware, software and services offerings.

IBM, frequently referred to as "Big Blue," got its start in hardware and prospered in that business for decades, becoming the top supplier of mainframe computers. Over the years, the company shifted its focus from hardware to software and services. By the 2010s, IBM further modified its business mix to emphasize such fields as cloud-based services and cognitive computing. IBM Watson, a cognitive system, has become the company's high-visibility offering in the latter technology segment.

IBM, while still a major IT player, has lost the dominance it enjoyed during the mainframe era. The company, as of October 2016, had seen 18 consecutive quarters of revenue declines amid its transition into new technologies and lines of business. IBM had a 2015 revenue of $81.7 billion compared with $106.9 billion in 2011.

History of IBM

In its early years, IBM was widely associated with the punched card, invented by Herman Hollerith. Hollerith was part of the Computing-Tabulating-Recording (CTR) Company, when, in 1914, Thomas J. Watson joined the company as general manager. The CTR Company itself had been formed from three companies that sold grocery store scales, time recording devices and tabulators. Over the next few decades, Watson built the business machine company of the future, now known as International Business Machines.

In 1964, IBM introduced what was to become the de facto standard for large company business computers with its System/360. Orders for the mainframe computer line outpaced sales forecasts, and IBM received more than 1,000 orders within four weeks of the product's announcement, according to the company. The System/360 ran the OS/360 operating system (OS), but a successor OS, Multiple Virtual Storage (MVS) became particularly influential.

MVS, which debuted in 1974, has been at the center of IBM's mainframe OS technology for more than 40 years. The OS for IBM's current-generation z Systems mainframes, z/OS, can trace its lineage to MVS. Over the decades, IBM has aimed to maintain forward-compatibility as its mainframe OSes have evolved.

The popularity of System/360 and the subsequent mainframe models gave IBM an enduring market advantage, but the company faced a number of rivals in the mainframe space. Amdahl Corp., founded in 1970 by former IBM engineer Gene Amdahl, also emerged as a mainframe supplier. In addition, the so-called "BUNCH" companies -- Burroughs Corp., UNIVAC, NCR Corp., Control Data Corp. and Honeywell -- were active in the mainframe sector.

IBM also faced the challenge of minicomputers, or midrange systems, which were less expensive than mainframes and were targeted toward smaller businesses or departments within large enterprises. Digital Equipment Corp. and its Programmed Data Processor product line took off in the 1960s, as well. IBM's midrange response, the System/3, launched in 1969. That hardware platform eventually begat a series of IBM midrange systems including the System/34, System/36, System/38 and the AS/400.

However, IBM was in for additional technology changes. By the early 1970s, the punched card was gradually being replaced by the interactive display terminal, and especially by the IBM 3270. Personal computing began to hit its stride with the arrival of the Apple II in 1977, along with similarly oriented machines from Commodore International and Tandy Corp.

In 1981, Big Blue went small with the launch of the IBM Personal Computer. The IBM PC architecture soon became the standard for business use, and numerous vendors, including Compaq, soon entered the market with IBM-compatible PCs, also known as PC clones. IBM's selection of Microsoft Disk Operating System (MS-DOS) as the IBM PC's OS, and its subsequent adoption by IBM PC-compatible vendors, led to the dominance of Microsoft in the PC software market.

In the late 1980s, IBM added another hardware platform to its product mix: Unix workstations. IBM's RT system, eventually supplanted by the RS/6000, was the company's entry into the market, running IBM's AIX implementation of Unix.

As the 1990s dawned, IBM's core platforms included AIX, OS/2 (the company's attempt to distinguish itself from PC clone makers), MVS and OS/400.

While industry watchers questioned IBM's disparate platform strategy, IBM took steps to restructure its operations, granting more autonomy to its various product divisions in a bid to improve time to market. The restructuring program, under IBM CEO and chairman John Akers, hit the wall, however. The company announced a $5 billion loss for calendar year 1992. The loss was attributed, in part, to the restructuring initiative's costs, which included early retirements and the shuttering of production lines.

Amid the financial struggle, IBM began its push into IT services. The company captured a watershed data center outsourcing contract with Eastman Kodak Co. in 1989. Two years later, IBM Global Services was launched as the focal point of Big Blue's IT services business.

IT outsourcing became an important element of IBM's services enterprise, as did management consulting. IBM cemented its role in the latter service with its $3.5 billion acquisition of PricewaterhouseCooper's management consulting arm, PwC Consulting, in 2002.

As it happens, IBM tapped the management consulting ranks to run the company, hiring Louis Gerstner, a former McKinsey & Co. consultant and chairman of RJR Nabisco, to become IBM CEO in 1993. Under Gerstner, IBM continued its service push in addition to expanding its role in software. In 1995, IBM acquired Lotus Development Corp., and then merged with Tivoli Systems Inc. the following year.

Former IBM CEO discusses the platform enterprise.

While software and services grew in importance, IBM looked to shed some of its hardware operations. In 2005, under IBM CEO Sam Palmisano, who had earlier led IBM Global Services, the company sold its PC division to Lenovo Group. The PC division included the ThinkPad line of notebook computers. At the time, the companies inked a strategic alliance in which IBM became Lenovo's preferred services provider. Nearly a decade later, IBM sold another hardware business to Lenovo: Big Blue's x86 servers.

In the 2010s, IBM began recasting itself as a cognitive solutions and cloud computing platform company. Ginni Rometty, appointed IBM CEO in 2011, emphasized a core group of strategic imperatives for IBM: analytics, cloud, mobility and security.

IBM products and services

Server hardware

Five decades since the launch of the IBM System/360, the company continues to sell mainframe-class computers. IBM positions its z Systems product line as enterprise infrastructure for its customers' cognitive business. IBM targets a range of solutions for its z Series products including analytics, blockchain, cloud and DevOps.

Meanwhile, the company aims its Power Systems enterprise servers toward big data and analytics applications. Power Systems run IBM's AIX and IBM i OSes as well as Linux. In another nod to open source, IBM introduced its LinuxONE system as a hardware platform.

Storage

On the hardware side, IBM offers products including its FlashSystem all-flash arrays, Storwize systems and other hybrid arrays, Fibre Channel storage-area network hardware, storage media, and tape products. The company is making a push into software-defined storage with its Spectrum Storage suite and Cleversafe object storage technology.

Software

IBM's varied software line includes analytics offerings such as IBM Cognos Analytics, IBM SPSS, IBM Maximo Asset Management and DB2. Many of IBM's products in this field came through acquisition: The company purchased Maximo in 2006, Cognos in 2008 and SPSS in 2009.

IBM also provides IT infrastructure software including its WebSphere Application Server and MQ messaging middleware.

The company's software lineup in the mobile and social space includes the IBM Verse business email offering and the IBM Notes collaboration product. In addition, IBM's security software includes MaaS360 for mobile device security and IBM QRadar Security Intelligence Platform, a security information and event management product.

IBM customers may acquire software licenses through Passport Advantage, the company's licensing program for larger enterprises, or Passport Advantage Express, a program designed for medium-sized businesses. Fix Central, meanwhile, is an element of IBM support that provides fixes and updates for IBM customers' software and operating systems. Fix Central provides hardware support, as well.

Services

IBM's service units include Global Business Services, which houses Big Blue's management consulting operations, and Global Technology Services, which provides mobility, networking, business continuity and outsourcing, among other services. Like other large IT services providers, in recent years, IBM has moved to purchase companies offering cloud consulting and implementation services. In 2016, for example, IBM purchased Bluewolf, a Salesforce channel partner and cloud consultant. Bluewolf was folded into IBM's Interactive Experience practice, which is part of Global Business Services. In 2015, IBM acquired Meteorix LLC, a Workday services partner.

Cloud

IBM's SmartCloud software and services offering got off the ground in 2011. That move was followed in 2013 by IBM's acquisition of SoftLayer Technologies Inc., an infrastructure as a service provider. Following that deal, SmartCloud and SoftLayer were grouped together in a cloud services division. Since then, however, IBM has coalesced its cloud services offerings around its Bluemix platform as a service offering. As of fall 2016, Bluemix had incorporated SoftLayer cloud products and services into a broader portfolio of infrastructure, platform and application services. IBM's more integrated cloud offering competes against such rivals as Amazon Web Services, Google and Microsoft.

Cognitive offerings

The IBM Watson supercomputer, which pulls together artificial intelligence and analytical software, is the company's flagship cognitive computing offering. A number of technologies and discrete products have spun out of IBM's cognitive computing system and its related research. Customers, for example, can use Watson APIs to embed cognitive computing components into their applications. IBM also offers products with built-in cognitive capabilities. Those offerings include the IBM Watson Internet of Things Platform and IBM Watson Analytics for Social Media. IBM has looked to leverage its cloud technology as it rolls out Watson-related products. Watson APIs, for example, are available via Bluemix.

Research and development

Thomas J. Watson Jr., who succeeded his father as IBM CEO in 1956, put the company on a research and development track. Big Blue's research center, launched in 1961, encompasses research labs in Yorktown Heights, N.Y. and Cambridge, Mass., as well as an industry solution lab in Hawthorne, N.Y. Notable developments out of IBM's research center include the invention of dynamic random access memory and the Fortran language. More recent research endeavors include blockchain, quantum computing and cognitive technology.

IBM also invests heavily in semiconductor research as it investigates chips to support cloud computing and big data systems. But while Big Blue conducts research on silicon, the company exited the microelectronics manufacturing business in 2015, selling that operation to GLOBALFOUNDRIES.

This was last updated in November 2016

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