Editors Note: February 26, 2001
IBM has good news to share with its allies at its PartnerWorld conference this week in Atlanta. The current alliance strategy is workingso much so, in fact, that the company is firing on almost every cylinder for the first time in decades.
There are five basic drivers behind this top-to-bottom turnaround. First and foremost, IBM is no longer trying to do everything itself. Back in the 1960s and 1970s, when IBM made money it all went to IBM (minus the cut taken by the government through taxes). Microsoft got credit for revolutionizing the sales model in the IT industry, building its power base on the backs of ISVs, resellers and integrators, and sharing the explosion in wealth from desktop PCs.
But even Microsofts model wasnt all that revolutionary. Novell helped create the indirect sales channel based upon what transpired in the automobile industry several decades earlier. Automobile manufacturers found it was much more efficient to farm out parts manufacturing to a slew of smaller, more agile companies with lower overhead costs than to try to do everything themselves.
Second, IBM has embraced everything that is open, realizing its far better to play into every market than just a few key ones. This is the driving force behind the companys Linux push, its middleware initiatives and its overall pervasive computing efforts. IBM has always done best with a surround-and-conquer strategy, and no company can play this card better than Big Blue.
Third, IBM has managed to get the government off its back at a time when the Justice Department has been extremely active elsewhere. Microsoft has been sweating under federal scrutiny for the past several years, but IBM will be fully free of 46 years of government regulation by next year. Just to put that in context, IBM has been working under a consent decree ever since Bill Gates was in diapers.
Fourth, say what you will about IBMand over the years Ive said plentythe company isnt going away and IT managers still arent getting fired for buying its products. At a time when dot-coms are going under in droves, corporations want vendors that have staying power.
Finally, IBM has identified weaknesses in every part of its empire and systematically turned around each of them. Even the PC division is profitable these days.
The one blemish on IBMs record is software sales, which fell in Q4. Still, theres still reason to be upbeat: Database sales are up, middleware sales are booming and mainframes are back in vogue.
Given IBMs current performance, youd have to assume the economy isnt so bad after all. Its amazing what a solid business plan and some strong partner programs can do for a company.