Why IBM Is the Most Innovative Company in IT

By Darryl K. Taft  |  Posted 2011-08-04

Why IBM Is the Most Innovative Company in IT

IBM is the most innovative company in IT, period.

The Aug. 8 issue of Forbes contains a list of what the well-heeled magazine sees as the "World's Most Innovative Companies." The print edition ranks 50 companies, and if you go online there are an additional 50 companies ranked. Yet, in that list of 100, Forbes did not see fit to include IBM. That is a slap in the face of Big Blue. That is a shame.

IBM has more innovation going on in its pinky than Forbes' No. 1 ranked innovator, Salesforce.com, has in its whole body.  Of course, Forbes has some fancy formula -- involving something they're calling the "Innovation Premium" -- for calculating just who is innovative. And they have some big-time professors from some fancy schools to back up their thinking. What's more is their list appears to have more to do with a company's ability to provide a targeted return on investment than with pure innovation. I don't care how they calculate it or who supports the methodology, to come up with a list of 100 "innovative" companies and not include IBM is a joke. And then to name Salesforce.com as No. 1 on a list that doesn't include IBM is an insult.

It's an insult because IBM, by the sake of its IBM Research arm alone, is more innovative than pretty much anybody else out there. IBM invests more than $6 billion annually on research and development and employs about 3,000 researchers worldwide. IBM's $6 billion annual R&D spend is more than three times the annual sales at Salesforce.

IBM's got an image of being stodgy and stiff - a company for old folks. This is unfortunate, because in the company of more than 400,000 people, there are gobs of young people, and 50 percent of its employees have been with IBM for five years or less. But I'll grant it that the average age of attendees at IBM conferences is probably a bit older than what you'd see at Google I/O, Apple WWDC, Microsoft MIX or Adobe MAX.

However, IBM is 100 years old! That in itself indicates a culture of innovation; it shows resolve. IBM has had to constantly re-create itself to keep abreast of trends in the industry.

And then there are all those patents. In January, IBM announced that its inventors received a record 5,896 U.S. patents in 2010, marking the 18th consecutive year it has topped the list of the world's most inventive companies. IBM became the first company to be granted as many as 5,000 U.S. patents in a single year.

IBM's press release on the issue says IBM received patents for a range of inventions in 2010, such as a method for gathering, analyzing and processing patient information from multiple data sources to provide more effective diagnoses of medical conditions; a system for predicting traffic conditions based on information exchanged over short-range wireless communications; a technique that analyzes data from sensors in computer hard drives to enable faster emergency response in the event of earthquakes and other disasters; and a technology advancement for enabling computer chips to communicate using pulses of light instead of electrical signals, which can  deliver increased performance of computing systems.

I know the number of patents is not necessarily the best measure of innovation. I also know that IBM's aggressive pursuit of patents could be perceived as the company building a defense (or even compiling an offensive arsenal) in an increasingly litigious tech landscape. But here again, this shows foresight and strategy. And it indicates just how innovative IBM's engineers and researchers are. As IBMer Bala Subramanian put it, the 5,896 patents in 2010 "works out to an invention every 1/2 hour of an 8 hour working day (5,896/365=16.15 not excluding any holidays or weekends)."

But, to be sure, patents can be used for good or other purposes. Perhaps that's what prompted Google to recently acquire more than 1,000 patents from IBM. Google is No. 7 on Forbes' list, by the way.

In this now-famous story told by prominent tech attorney Gary Reback (and broken in Forbes no less!), Reback talks of how when he was a lawyer for Sun Microsystems in the 1980s IBM came in and claimed Sun infringed seven of its patents. Sun stood up to the IBM team and provided evidence the company did not infringe all seven patents, but perhaps only one.

Then, according to Reback:

An awkward silence ensued. The blue suits did not even confer among themselves. They just sat there, stone-like. Finally, the chief suit responded. "OK," he said, "maybe you don't infringe these seven patents. But we have 10,000 U.S. patents. Do you really want us to go back to Armonk [IBM headquarters in New York] and find seven patents you do infringe? Or do you want to make this easy and just pay us $20 million?"

After a modest bit of negotiation, Sun cut IBM a check, and the blue suits went to the next company on their hit list.

Making Stuff That Matters


Unfortunately, IBM's Armonk location also could play into it being overlooked. As a longtime tech journalist, I'm aware of a West Coast bias in technology reporting. More specifically, companies in the San Francisco Bay area and Silicon Valley seem to get the love and adulation of the tech press, even with those in New York and other East Coast cities. Being old and based in a swank New York City suburb is just not cool, I guess.

Yet, IBM continues to make stuff that matters. Real stuff, not just cool gadgets that twinkle and make you look hip when you pull them out. Any time you use WiFi, or get money from an ATM, or swipe your credit card, or use a GPS system or play on a gaming console (practically all of the majors, including Sony PlayStations, Xbox and Nintendo), you have IBM to thank for it. IBM technology is everywhere. The company makes stuff that makes the world better for us all.

That's part of the theme behind IBM's Smarter Planet play. It's not just a marketing slogan. With the world becoming more instrumented, interconnected and intelligent, there is a need for smarter systems to help achieve economic growth, near-term efficiency, sustainable development and societal progress. IBM is building these systems.

Bernard Meyerson, vice president of Innovation and IBM Fellow, invented the silicon germanium chip, also known as SiGe. SiGe chips emerged as a variation of the complementary metal-oxide semiconductor (CMOS) transistors found in IBM's chips for 20 years. However, the reliability, speed and low cost of SiGe enabled rapid growth in various wired and wireless networks, shrinking the size and power needs of WiFi, cellular phones, GPS systems, mobile TV and many other products, IBM said.

In another breakthrough, Edgar F. "Ted" Codd, an IBM researcher, invented the relational database. And IBMers followed with the invention of the Structured Query Language (SQL), the language for managing data in relational database management systems (RDBMS). Relational databases revolutionized the database landscape.

IBM invented the reduced instruction set computer (RISC) architecture. And IBM became the first company to deliver a 3.5-inch rewritable optical drive to the market.

By combining genetics and semiconductor technologies, IBM researchers invented a mechanism called the IBM DNA Transistor, which is designed to make it possible to sequence genetic material accurately and cheaply-eventually, they hope, for a few hundred dollars per person.

Practically from Day 1, IBM supported the NASA space flight missions, including the Apollo missions to put a man on the moon. Over the years, IBM supported NASA in all phases, including building guidance and tracking systems, and ground control systems to monitor the missions.

IBM created the first magnetic tape storage unit. And IBM invented DRAM. IBM also created magnetic stripe technology, which enables you to swipe your credit cards and pay for things.

IBM also invented CICS, the Customer Information Control System, which revolutionized transaction processing. And IBM invented FORTRAN, the high-level language that opened up programming to mathematicians and scientists.

Invention, Watson, Diversity


Invention is simply in IBM's DNA. Herman Hollerith, who founded IBM's precursor, Tabulating Machine Company, invented a tabulating machine that was used in U.S. censuses. IBMers also invented the technology behind Excimer Laser Surgery, which became the foundation for LASIK surgery.

And IBM also was the first major IT vendor to get behind Linux. IBM helped establish the open-source operating system as a mainstream software platform in business by declaring in 2005 that it would not enforce its patents against the Linux kernel.

For its part, IBM became a leader in the supercomputer space and was the first to break the petaflop barrier - to operate at speeds faster than one quadrillion calculations per second.

In another type of innovation, IBM led the way for equal employment opportunity, particularly in IT. Before the H-1B frenzy to draw qualified IT workers from abroad, IBM made efforts to integrate its workforce in the U.S. during a time when it was not popular. A description of the policy on IBM's site reads:

One year before the 1954 Supreme Court decision Brown v. the Board of Education and 11 years before the Civil Rights Act of 1964, Thomas J. Watson, Jr. issued a policy letter to his employees stating: "It is the policy of this organization to hire people who have the personality, talent and background necessary to fill a given job, regardless of race, color or creed." IBM has historically taken an intellectual approach to its hiring process, being truly blind to human traits beyond expertise and character. Its diversity initiatives reflect this thinking and have helped redefine the workplace.

But perhaps the hottest and most recent illustration of IBM's innovative prowess can be summed up in one word: Watson. An IBM summary says Big Blue's computer, code-named Watson, leverages leading-edge Question-Answering (QA) technology, allowing the computer to process and understand natural language. It incorporates massively parallel analytical capabilities to emulate the human mind's ability to understand the actual meaning behind words, distinguish between relevant and irrelevant content, and ultimately, demonstrate confidence to deliver precise final answers.

Watson demolished human competitors in a highly touted series of Jeopardy! games. It is a technology with enormous upside. In discussing Watson with eWEEK, Steve Mills, IBM's senior vice president and group executive for Software & Systems, compared Watson to a search engine, specifically Google, and said Watson is a totally different type of technology. Though Mills added that "We can do what they do." But IBM decided to build Watson. "We built it to come back with THE answer or a relatively few answers and then you apply your judgment on top of that," Mills said.

Mills' comment sort of reminds me of how the rock group Led Zeppelin once talked about their love for all forms of music, particularly R&B. And they said something to the effect of: "We can play what they play, but they can't play us." The group then went on to back up its claim by throwing down on a rocked out version of James Brown's "Sex Machine." The two versions are now part of an innovative mashup.

IBM's research and engineering prowess gives the company that same kind of capability to be whatever it wants to be. It's part of the culture.

As IBM director and American Express CEO Kenneth Chenault put it at IBM's Centennial celebration: "The greatest invention ever created by IBM is the IBMer." And he noted that IBM is marked by "Reinvention and constant values - unchanging change. It may sound like an oxymoron but it's at the heart of IBM."

Anyway, let me wind this up. IBM is the most innovative company in IT hands down. As part of its story on Salesforce.com being the No. 1 innovator, Forbes gives you Chatter, which is Facebook for the CRM world. As part of my selection of IBM as most innovative, I give you Watson. Who you gonna call? Chatter is basically a clone of Facebook. And Salesforce will acknowledge as much. It says so in the Forbes piece - that Salesforce.com CEO Marc Benioff assigned his development team to make the company look like a social network.

This piece here is not meant to be a Forbes or Salesforce hate fest. I gain tons of insight from Forbes. And I have the utmost respect for Salesforce.com and its "No Software" strategy - particularly its pioneering efforts in the cloud. Yet, my personal vote for the company's most innovative move - after the initial cloud play - is its pioneering of the whole PaaS (platform-as-a-service) phenomenon with Force.com. That was a smart move. Plus, I can't totally hate on Salesforce because some of my former colleagues and industry icons work there. They make my top 10 most innovative list.

The Forbes' print edition includes a beautiful photo of Benioff that absolutely captures the man and the character of his company. He's peering around a corner with a total Cheshire cat smile that makes you wonder where the canary is. Yeah, they're innovative; just not as innovative as IBM.

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