Why Big Blues in the Black

At the end of 1999, ibms 7 percent revenue growth was “stuck at an Old Economy rate,” in the dismissive phrase of a popular business weekly. At the end of last year, IBMs 6 percent growth was suddenly “a stark contrast to the slumping tech sector,” as noted by a major metropolitan newspaper. What a difference a year makes.

When people talk about Cisco or Sun, with their routers and servers that underpin so much e-business, they often compare those companies with the entrepreneurs who sold picks and shovels to Californias gold rush prospectors. IBM, some said, was slow to take advantage of the Internets equally speculative fever.

But IBM had other sales to make: specifically, to enterprise and government IT sites that were replacing decades-old equipment with modernized systems as part of their Y2K preparations. Remember Y2K? A year ago, relief was already turning to ridicule, but Ive sat across conference tables and heard former skeptics tell me that Y2K would have put them out of business if they hadnt spent tens of millions of dollars on new hardware—including, in many cases, AS/400s or other IBM machines.

IBM came out of 1999 as a leading supplier of reliable, fully supported hardware; the Internet economy, meanwhile, entered last year to find that the Net had become a dangerous place, with DoS and mail-bomb attacks getting headlines. One year later, many blithe New Economy mantras look pretty silly, but IBMs services volume alone rivals that of Accentures (formerly known as Andersen Consulting), Electronic Data Systems and Computer Sciences combined.

Retain good people, nurture your brand, and sell what people will pay for: When did these become secret weapons? Watch IBM, and learn from its example.