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Boardroom Despatches: IBM's second wind
...or should that be its third wind, fourth wind, fifth...?

By René Carayol

Published: Friday 24 September 2004

Much of the progress that came from the 1990s recovery at IBM under Lou Gerstner could have been for nothing if the company's 2002 purchase of PwC had flopped. But Rene Carayol says IBM now leads the tech pack - again.

For the past 20 or 30 years IBM has remained a tech titan. No one has come near it in terms of size, revenues and scope. But the rise of a new breed of technology company, symbolised most potently by Microsoft but also including a host of other aggressive vendors, has meant few have considered Big Blue the leader of the pack for a while.

I would now question such thinking.

I would argue that as important as the turnaround overseen by the now legendary Lou Gerstner has been the acquisition of PricewaterhouseCooper's (PwC's) IT consultancy arm, news of which broke in the summer of 2002.

For one thing IBM paid around $3.5bn - a far sight less than the $18bn HP was rumoured to have bid two years earlier. But that's not my point here - a $3.5bn bad deal would still be a bad deal.

And for a while there it did look like PwC might have been a mistake. There was word of discontent at various IBM offices. Some staffers were said to be upset at finding their new colleagues earning more than them. The first six months, post-acquisition, then saw the weeding out of various fat cats. The wasters exited.

Where did this leave IBM? Well after a lot of hard work it now seems to me that it is once again the industry's 800lb gorilla and not just because it is literally the biggest vendor out there.

In the pre-PwC days, even when IBM Global Services was starting to go great guns, the company always had a tendency to go into any organisation and want to open the bonnet, to tinker around. Now IBM 'speaks with business voice'.

Before users were faced with a company that had solutions looking for problems. That's changed.

The PwC people really do understand business. They are hard-hitting, business-literate IT consultants.

The company doesn't pull the well-worn trick either - arrange a meeting with a prospect/client and then see how many of its people it can squeeze into it.

What's attractive to user organisations is also good business for IBM. That's not an accident.

The company doesn't bid for everything. It tries to understand what it would be getting itself in to.

It also tries to understand its competitors better. It has 'kill units'. It identifies major competitors such as HP with a view to blasting them out of the water.

And thirdly, it fires customers. You heard me right. In fact, some readers of this column will know that's just good business practice. A la GE, it culls the bottom 10 per cent - those that get the company tap dancing around for no good reason. It knows what sort of business it wants.

What are the lessons for other technology vendors? What should buyers be thinking?

For one thing, don't be a tech vendor. I don't just mean don't market yourself that way. Really have business literacy in technology delivery. Be selective in what you take on and aggressive in terms of the competition.

It's my feeling that others must start to follow IBM. For one thing, hardware alone doesn't cut the mustard anymore. It's a commodity. No one is going to make it selling a pair of disks.

Software, too, has its limitations as a business. But software and services together, married to the right business approach, will work.

My final point is (also, perhaps) an obvious one. The best strategies are borne out of mistakes. Nine out of 10 times you hear about those mistakes from customers. So listen to your customers. Always. Keep those lines of communication open.

If you're a customer - which we all are - keep on telling your suppliers where they're going wrong. The good ones will listen and change. If they don't, look elsewhere.

And if you get blinded with technical speak, tell them about those business consultants over at IBM.