Sep 21

Written by: Brian Seitz
9/21/2007 6:49 AM 

It wasn’t too long ago an upstart little company out of Redmond Washington surprised and delighted the Information Technology world, then called MIS.  Back then International Business Machines Incorporated was the big bad boogieman.  With an over sixty percent market share globally, IBM, appeared unstoppable.  If you were a small or medium size business you were overtaken, co-opted or assimilated.  During the latter half of the 1980s, troubles to the behemoth were surfacing.  A Justice Department lawsuit was draining time, attention, money, and market options as IBM had to restructure itself in the light of its competitive practices and size.  What was once seen as assertiveness and business prowess was now being viewed as aggressive, predatory, anticompetitive and arrogant.

During these years IBM had established its own ecosystem.  IBM was producing those ever famous manuals with “This Page Left Intentionally Blank”.   There were Executive Seminars every year, that were a must attend event if you were an Executive or and up and coming Executive in your corporation.  IBM Executive briefing centers were multiplying like rabbits.  Sales Force training all sought to emulate the Blue Suites from Armonk.  From the development labs at IBM various layers of software were being piled upon each other to provide incremental functional and connectivity improvements.  The glass house, a term used to describe the showcase implementations of computer systems to support the business were seen as a mark that a corporation had arrived.  Additionally, there was a whole industry wrapped around IBM that delivered training, add-on products, and contingency labor. Consultants that specialized in unique applications were aplenty, so were seminars on how to deal with IBM.  Life for IBM, up to this point, appeared good and manageable.   However, the market changes and internal competition between IBM divisions was about to take its toll.                

While building and capitalizing on this ecosystem it had built IBM lost track of how the environment and industry was changing.  It, some may argue got arrogant, failed to see and react to these changes.  The industry was ripe for a change and IBM unwittingly enabled it.  Many MIS directors at the time where getting hammered by their CEOs and CFOs then called Finance VPs for an ever expanding budget and cost overruns for projects that over promise and under deliver as well as from the operational groups that saw the inability of MIS to deliver needed capability as a serious impediment to their success.  This situation had gotten so bad IBM had started training MIS directors how to “manage” the user community as well as attempt to develop relationships within the functional areas.   Experience professionals from industry were being hired by the busloads to make contact and drive functional applications to the mainframe.  The transistor was being replaced by integrated circuits which lowered the cost of hardware production, system size while increasing capability.

A few small companies were starting to produce kits to enable hobbyists to build and use their own computers; IMSA, ALTAIR, APPLE and even Radio Shack.  Small companies were seeing value and utility out of these pumped up calculators.  Enough that an Executive at IBM saw enough market potential for a product line.  He had not envisioned the size it has become or the radical change it would do to his company then.  Other executives in the corporation saw it as either a threat to their product line or a toy not worth wasting resources that could be applied to their line of business, none saw it as IBM validating the market which took off running or creating their eventual successor to the I.T. throne.

The P.C. as it has become known today was very simple when compared to its older brothers the mainframe and minicomputer.  There was not a lot of overhead with regard to how and what to do with it.  Plug it in, Load your application, Print it out or save your data file to disk.   This economy of effort made it ripe for small businesses, corporate departments, and professionals that manipulated numbers and data on a regular basis.

Fast forward to 1995, Microsoft is now at the top of its game.  Windows has all but beaten the Mainframe back into the closet and will soon challenge it for Enterprise Application rights with a full court press with NT and SQL Server.  However, like IBM, have the seeds of its success started to come back to bite it.  The once scrappy little company is now a global enterprise.  The behavior and antics of its workforce once seeming quaint when it was a David to IBM’s goliath now appear aggressive, predatory, anticompetitive and arrogant.  A small but growing contingent of competitors is raising the case with the Justice Department as are some Business Partners.

During this time the ecosystem of Microsoft continued to grow.  Volumes of books on how to use Office products, Tune or Troubleshoot Windows, Establish a network infrastructure, etc. were published.  Microsoft itself got into the publishing business beyond the technical manuals for its products.  An industry was growing up around it similar to the industry that had grown around IBM.  Likewise in an effort to expand its market from the desktop to the corporate systems Microsoft started its campaign to establish itself as “Enterprise Ready” and propose alternative development strategies and lifecycles.  The Microsoft Solutions Framework was born, later to be augmented with Enterprise Architecture Planning, Microsoft Operations Framework, Rapid Economic Justification, and Active Directory –Microsoft’s answer to IBM’s SNA.  Additionally as Microsoft started to duplicate mainframe functionality using a network and graphical user interface more layers of complexity were added to the programming task, so today the once simple C++, Visual Basic or MS Access application development as even more complex than the environment IBM had created.  I have counted no less than twelve layers of programming constructs that are needed to develop enterprise applications, however, even developing simple applications are now requires much more programming construct knowledge; .NET, Workflow, Application Script, ADO, COM, etc..    

Microsoft, like IBM, had put in place an internal system of competition.  However, instead of competition between workgroups and divisions, the “Stack Ranking” system drove down to individual employees.   The results of which when the company was small made it super competitive, however, as it grew made intergroup cooperation challenging to the point Office Products eventually had to be managed under an uber-GM in order to foster cooperation.   This inter-group and worker competition now creates a situation which almost looses Microsoft’s dominance overnight.  The internet as a new model of operation, a potential threat or opportunity is being missed to sub optimization created by internal competition.  Bill Gates has to personally intervene to change the technical direction of the company.  However, the seeds are already being sown for new players to challenge and possibly dominate the market.

The internet and Software as a Service (SaaS) model is threatening Microsoft’s core line of business.  As Microsoft scrambles to develop strategies to capitalize on this market change and protect its revenue stream it appears to be following the history of IBM, in that it has lost connection to its original constituency the small developer/small through its marketing and product evolution.  While it continues to sell is core product line MSOffice and Windows, resistance is growing as increased functionality has not been related to the interests of this constituency which seeks ease of use, flexibility and simplicity.

Whether Microsoft survives as the dominate force in the information technology industry the next decade or not is still up for grab or does it transition itself like IBM into a service corporation which there are early indications of if you look at its current portfolio.  It is clear that Microsoft is repeating IBM’s history.