IBM
History of Computing
William Aspray and Thomas J. Misa, editors
Janet Abbate, Gender in the History of Computing: Reimagining Expertise, Opportunity, and Achievement through Women’s Lives
John Agar, The Government Machine: A Revolutionary History of the Computer
William Aspray, John von Neumann and the Origins of Modern Computing
William Aspray and Paul E. Ceruzzi, The Internet and American Business
Charles J. Bashe, Lyle R. Johnson, John H. Palmer, and Emerson W. Pugh, IBM’s Early Computers
Martin Campbell-Kelly, From Airline Reservations to Sonic the Hedgehog: A History of the Software Industry
Paul E. Ceruzzi, A History of Modern Computing
I. Bernard Cohen, Howard Aiken: Portrait of a Computer Pioneer
I. Bernard Cohen and Gregory W. Welch, editors, Makin’ Numbers: Howard Aiken and the Computer
James W. Cortada, IBM: The Rise and Fall and Reinvention of a Global Icon
Thomas Haigh, Mark Priestley, and Crispin Rope, ENIAC in Action: Making and Remaking the Modern Computer
John Hendry, Innovating for Failure: Government Policy and the Early British Computer Industry
Marie Hicks, Programmed Inequality: How Britain Discarded Women Technologists and Lost Its Edge in Computing
Michael Lindgren, Glory and Failure: The Difference Engines of Johann Müller, Charles Babbage, and Georg and Edvard Scheutz
David E. Lundstrom, A Few Good Men from Univac
René Moreau, The Computer Comes of Age: The People, the Hardware, and the Software
Arthur L. Norberg, Computers and Commerce: A Study of Technology and Management at Eckert-Mauchly Computer Company, Engineering Research Associates, and Remington Rand, 1946–1957
Emerson W. Pugh, Building IBM: Shaping an Industry and Its Technology
Emerson W. Pugh, Memories That Shaped an Industry
Emerson W. Pugh, Lyle R. Johnson, and John H. Palmer, IBM’s 360 and Early 370 Systems
Kent C. Redmond and Thomas M. Smith, From Whirlwind to MITRE: The R&D Story of the SAGE Air Defense Computer
Raúl Rojas and Ulf Hashagen, editors, The First Computers—History and Architectures
Alex Roland with Philip Shiman, Strategic Computing: DARPA and the Quest for Machine Intelligence, 1983–1993
Dinesh C. Sharma, The Outsourcer: A Comprehensive History of India’s IT Revolution
Dorothy Stein, Ada: A Life and a Legacy
John Vardalas, The Computer Revolution in Canada: Building National Technological Competence, 1945–1980
Maurice V. Wilkes, Memoirs of a Computer Pioneer
Jeffrey R. Yost, Making IT Work: A History of the Computer Services Industry
IBM
The Rise and Fall and Reinvention of a Global Icon
JAMES W. CORTADA
The MIT Press
Cambridge, Massachusetts
London, England
© 2019 Massachusetts Institute of Technology
All rights reserved. No part of this book may be reproduced in any form by any electronic or mechanical means (including photocopying, recording, or information storage and retrieval) without permission in writing from the publisher.
This book was set in Adobe Garamond Pro and Berthold Akzidenz Grotesk by Westchester Publishing Services. Printed and bound in the United States of America.
Library of Congress Cataloging-in-Publication Data
Names: Cortada, James W., author.
Title: IBM : the rise and fall and reinvention of a global icon / James W. Cortada.
Description: Cambridge, MA : The MIT Press, [2019] | Series: History of computing | Includes bibliographical references and index.
Identifiers: LCCN 2018023090 | ISBN 9780262039444 (hardcover : alk. paper)
Subjects: LCSH: International Business Machines Corporation—History. | Computer industry—United States—History.
Classification: LCC HD9696.2.U6 C67 2019 | DDC 338.7/61004—dc23
LC record available at https://lccn.loc.gov/2018023090
To IBMers, customers, and historians who taught me what I know about IBM
Contents
Preface
I From Birth to Identity: IBM in Its Early Years, 1880s–1945
1 Origins, 1880s–1914
2 Thomas J. Watson Sr. and the Creation of IBM, 1914–1924
3 The Emergence of IBM and the Culture of THINK
4 IBM and the Great Depression
5 IBM in World War II, 1939–1945
II IBM the Computer Behemoth, 1945–1985
6 IBM Gets into the Computer Business, 1945–1964
7 How Customers, IBM, and a New Industry Evolved, 1945–1964
8 System 360: One of the Greatest Products in History?
9 “The IBM Way”: How It Worked, 1964–1993
10 “The IBM Way”: What the World Saw, 1964–1993
11 IBM on the Global Stage
12 Two Decades of Antitrust Suits, 1960s–1980s
13 Communist Computers
14 “A Tool for Modern Times”: IBM and the Personal Computer
III A Time of Crisis, 1985–1994
15 Storms, Crisis, and Near Death, 1985–1993
16 IBM’s Initial Response, 1985–1993
17 How IBM Was Rescued, 1993–1994
IV IBM in the New Century
18 A New IBM, 1995–2012
19 Hard Times, Again, and Another Transformation
20 THINK: IBM Today and Its Legacy
Author’s Note: In the Spirit of Transparency
Bibliographic Essay
Index
List of Figures
Figure 1.1
Charles Flint was highly creative in forming new stock-holding companies, including C-T-R, the core of the future International Business Machines Corporation. Photo courtesy of IBM Corporate Archives.
Figure 1.2
Tabulating machine. Herman Hollerith’s machines were used by U.S. and European census takers and companies in the 1890s and early 1900s. They were considered the most sophisticated data processing equipment of their day. Photo courtesy of IBM Corporate Archives.
Figure 1.3
Herman Hollerith, inventor of the tabulating equipment used by governments and corporations for half a century. Photo courtesy of IBM Corporate Archives.
Figure 1.4
Thomas J. Watson Sr. in his 40s, when he had taken over C-T-R to shape it into IBM. Photo courtesy of IBM Corporate Archives.
Figure 2.1
John H. Patterson was the creator of NCR and had a reputation for being an innovative and successful executive. Photo courtesy of IBM Corporate Archives.
Figure 2.2
An early branch office (1927), this one located in Washington, D.C., with its staff. These offices were a combination retail outlet and training center. Photo courtesy of IBM Corporate Archives.
Figure 2.3
Number of C-T-R branch openings, 1914–1924.
Figure 3.1
C-T-R/IBM had only two logos until the end of the 1940s. The IBM logo did not become a highly recognized image until the late 1940s, although it was respected earlier by its customers. Photo courtesy of IBM Corporate Archives.
Figure 3.2
The IBM Type 405 was sold as a “system,” not as one product, and was introduced just as IBM’s customers’ volume and complexity of work expanded dramatically. Photo courtesy of IBM Corporate Archives.
Figure 4.1
The U.S. government became a massive user of IBM punch cards beginning in the 1930s
in support of the Social Security Act. Photo courtesy of IBM Corporate Archives.
Figure 4.2
The IBM exhibit at the New York World’s Fair, 1939–1940. Photo courtesy of IBM Corporate Archives.
Figure 5.1
IBM Mark I. This system gave IBM engineers exposure to the possibilities of advanced electronics. It was the largest calculator built in the United States before the arrival of the computer. Photo courtesy of IBM Corporate Archives.
Figure 5.2
IBM 604. The success of the IBM 604 convinced many executives that advanced electronics was the wave of the future, including Thomas Watson Jr., who would lead the charge into computing. Photo courtesy of IBM Corporate Archives.
Figure 5.3
Arthur Watson in uniform. Arthur is the lesser known of the Watson boys. It was during his military service that he, like his brother, matured before assuming significant responsibilities at IBM. Photo courtesy of IBM Corporate Archives.
Figure 6.1
The IBM 704 computer established IBM as a serious supplier of digital computing for commercial users, suggesting that business uses would expand. Photo courtesy of IBM Corporate Archives.
Figure 6.2
IBM’s 650 computer was its most successful data processing product of the late 1950s. Mass-produced and widely accepted by customers, it solidified IBM’s lead in the computer industry. Photo courtesy of IBM Corporate Archives.
Figure 6.3
The IBM 305 Disk Storage Unit made it possible for data processing users to access data directly, making online systems possible in the 1960s. The device was also known as RAMAC. Photo courtesy of IBM Corporate Archives.
Figure 7.1
A summary of IBM’s business performance and growth while led by Thomas J. Watson Sr. Courtesy of Peter E. Greulich, copyright © 2017 MBI Concepts Corporation.
Figure 8.1
This image of the System 360—known as the fisheye 360—was widely used in IBM’s advertising and marketing materials. Photo courtesy of IBM Corporate Archives.
Figure 8.2
Revenue, income, and employee growth under Thomas J. Watson Jr. Courtesy of Peter E. Greulich, copyright © 2017 MBI Concepts Corporation.
Figure 10.1
IBM System 370 Model 158, introduced in 1972, became a computer workhorse for large organizations. Photo courtesy of IBM Corporate Archives.
Figure 10.2
IBM’s information ecosystem, 1960s to 1980s.
Figure 11.1
Arthur K. Watson, the first leader of World Trade Corporation. Photo courtesy of IBM Corporate Archives.
Figure 11.2
More than any other IBM CEO, Frank T. Cary turned IBM into a global behemoth. Photo courtesy of IBM Corporate Archives.
Figure 11.3
Revenue, income, and employee growth under Frank T. Cary, 1972–1983. Courtesy of Peter E. Greulich, copyright © 2017 MBI Concepts Corporation.
Figure 12.1
Thomas Barr led IBM’s defense against the federal antitrust suit in the 1970s and early 1980s. Photo courtesy of IBM Corporate Archives.
Figure 14.1
Bill Lowe. A lifelong IBMer, Lowe was the “Father of the PC” at IBM. Photo courtesy of IBM Corporate Archives.
Figure 14.2
Don Estridge, the popular PC executive who ran the IBM PC business during its successful period. Photo courtesy of IBM Corporate Archives.
Figure 14.3
Charlie Chaplin. The PC/1, introduced in 1981, had one of the most iconic advertising campaigns in IBM’s history. Photo courtesy of IBM Corporate Archives and Charlie Chaplin Estate. Charlie Chaplin™ © Bubbles Inc. S.A.
Figure 15.1
John F. Akers was the first CEO at IBM to be dismissed by the company for poor performance. He was IBM’s chairman of the board from 1986 to 1993 and CEO from 1985 to 1993. Photo courtesy of IBM Corporate Archives.
Figure 15.2
A representation of the chart used in the 1982 sales meeting that forecast revenue growth to $100 billion by 1990.
Figure 15.3
John Opel was the CEO who expanded IBM’s factories and number of employees in the belief that the company would grow massively in the 1980s. Photo courtesy of IBM Corporate Archives.
Figure 16.1
James E. Burke, member of the IBM board of directors, who negotiated the resignation of John Akers and recruited IBM’s next CEO, Louis V. Gerstner Jr. Photo courtesy of IBM Corporate Archives.
Figure 17.1
Louis V. Gerstner Jr., while CEO and chairman of the board of IBM in the 1990s. Photo courtesy of IBM Corporate Archives.
Figure 17.2
Jerome York, a leading architect of IBM’s recovery in the 1990s. Photo courtesy of IBM Corporate Archives.
Figure 18.1
IBM’s revenue by segment, 1980–2015. Courtesy of James Spohr.
Figure 18.2
Dennie Welsh, IBM’s services leader during IBM’s transformation into a services firm. Photo courtesy of IBM Corporate Archives.
Figure 18.3
“Sam” Palmisano, IBM’s CEO after “Lou” Gerstner, led IBM deeply into the IT services industry. Photo courtesy of IBM Corporate Archives.
Figure 19.1
Virginia Marie “Ginni” Rometty served as IBM’s chairman, president, and CEO beginning in 2012, during a difficult period in IBM’s history. Photo courtesy of IBM Archives.
Figure 20.1
Figure 20.2
Figure 20.3
Figure 20.4
IBM service personnel rode these vehicles in large urban centers, quickly delivering parts. This British example from the 1920s symbolized IBM’s commitment to customer service. Photo courtesy of IBM Corporate Archives.
Figure 20.5
IBM’s culture was also flexible. At a time when drinking alcohol was forbidden by IBM, here we see a group of Brazilian IBMers cheering on their 100 Percent Club achievement with mugs of beer. Photo courtesy of IBM Corporate Archives.
List of Tables
Table 2.1
C-T-R/IBM revenue, net earnings, and number of employees, 1914–1924, select years (revenue and earnings in millions of dollars)
Table 3.1
IBM’s revenue, earnings, and employee population, 1914–1940, select years (revenue and earnings in millions of dollars)
Table 3.2
Tabulating technology evolution, 1920s–1930s
Table 4.1
Chronology of IBM’s global expansion, 1930s
Table 4.2
IBM’s growth, 1914–1940, select years (revenue in millions of dollars)
Table 10.1
IBM net earnings, 1984–1990 (in billions of dollars)
Table 11.1
World Trade net income, select years, 1949–1990 (in millions or billions of dollars)
Table 12.1
Chronology of antitrust lawsuits filed against IBM, 1969–1975
Table 13.1
Technical specifications of early RYAD and IBM 360 series computers
Table 13.2
Chronology of IBM-Soviet activities, 1949–1995
Table 15.1
IBM’s good years: Financials and number of employees, 1980–1985, select years (revenues and earnings in billions of dollars)
Table 15.2
IBM’s transition years: Financials and number of employees, 1986–1990 (revenue and earnings in billions of dollars)
Table 15.3
IBM’s disaster years: Financials and number of employees, 1991–1993 (revenue and earnings in billions of dollars)
Table 17.1
IBM’s business performance, 1992–1997 (revenue, net income, and cash flow in billions of dollars)
Table 18.1
IBM’s business performance, select years, 1998–2011 (revenue, net income, and cash flow in billions of dollars)
Table 19.1
Changes in IBM’s U.S. employee benefits, 1999–2014
Table 20.1
Timeline of IBM’s technolog
y life cycles, 1888–2017 (phases in years)
Preface
Nobody ever lost their job for recommending the purchase of IBM products.
—COMPUTER INDUSTRY FOLK WISDOM
MORE THAN ANY other company since World War II, IBM has shaped the way the modern world goes about its business. Large corporations and governments began to use IBM’s products before 1900. Its computers served as global computing gearboxes for decades before the public “discovered” the Internet in the 1990s. Many of IBM’s computers had been part of the Internet since the early 1970s and part of even older networks since the 1960s. The U.S. census of 1890 was the first in the world to be done using automation tools—the punch card—and that too came from what would come to be IBM. For a long time, the company has been at the center of much of what makes a modern society function.
By working in conference rooms and data centers for over a century, IBM made this achievement possible. For that reason, few people outside those two places knew what it did, or how. They just knew that it was big, important, and usually well run. What they understood was largely the product of a century-long marketing and public relations campaign by IBM to manage carefully what we imagine when thinking about the firm. Its influence proved so powerful for so long that whenever there were problems at IBM—and there always seemed to be—the information technology world was affected, including the operation of large enterprises and government agencies, stock markets, and even how national governments armed themselves for global wars.
So what? We live in an increasingly dangerous world, profoundly influenced by computing, so understanding the role of one of the world’s most important providers of such technologies is crucial and urgent. We face three problems: ongoing acts of terrorism; a cyberwar involving the United States, Russia, and China but also affecting other countries caught in the crossfire, evidenced by cyberattacks on German elections, Chinese hacking of companies, and Russian influence on the U.S. presidential election in 2016, for example; and a global political and economic environment that is becoming increasingly uncertain as nations flirt with trade restrictions and efforts to keep jobs from migrating to other countries. In the thick of all these conditions, information processing plays a profound role, and in the middle of that role stands a few technology companies, notably IBM. Which would be more important for the security of a nation under a cyberattack, IBM or Netflix, IBM or Apple? For decades, commercial enterprises and government agencies in the United States and in other nations considered IBM a national treasure.