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IBM's Lost Decade
- berbec 7y agoHugged http://web.archive.org/web/20200203151544/https://www.platformonomics.com/2020/02/ibms-lost-decade/ http://web.archive.org/web/20200203151544/https://www.platfo...
- chrisseaton 7y ago> Revenue - Down and to the right How could a revenue curve move in any other direction than to the right? A revenue curve that loops back on itself and starts moving to the left, back in time?
- TsomArp 7y agoThey key there is the down part.
- chrisseaton 7y agoYeah so why specify 'to the right'?
- jwegan 7y ago"Up and to the right" is a relatively common business saying to indicate things are going well and that the chart for a metric (ex: revenue, users, etc) is going "up and to the right". The author made a play on this common business phrase by saying IBM's charts are going "down and to the right"
- ajb92 7y agoWell, conceivably, if the total value were to drop to 0 in a very short amount of time, it would be simply “down” (and the inverse, for the far more unlikely event that it increased a few orders of magnitude all at once and then flatlined, appearing to simply go “up”).
- fullshark 7y agoThe phrase "up and to the right" is common in business discussions to indicate "good metrics." It's a play on that, which similarly has "to the right" superfluously in your opinion.
- sputknick 7y agoI've heard this term for 20+ years and never questioned it until just now. I think the "to the right" part is meant to convey that profits going up is not just a one time thing, but something that has, or will be happening continually over a period of time.
- Dirlewanger 7y agoBecause we perceive "to the right" as making progress/happening over time with respect to a cartesian coordinate-based graph.
- dilaudibble 7y agoYou are correct, it's redundant. Down and to the right sounds like the sort of thing a sell side analyst or salesperson would say. It could be that you are assuming your audience are unfamiliar with stock graphs, but more likely you are using redundancy for rhetorical effect. In another section the author describes the performance of IBM against a benchmark as 18,736 basis points, which he calculates by taking the arithmetic difference of a positive return and a negative return (ugh). This just means underperformance of 187.36%. I suspect though once again the use of a 5 digit basis points figure is a rhetorical flourish. These are just rhetorical nits though. I did enjoy the article, and the numbers and their sources are very clear.
- awinter-py 7y agoalso known as 'up and to the left'
- chrisseaton 7y ago> up and to the left The x axis is time. How can you move to the left, back in time?
- babkayaga 7y agoYou can move back in time using this device we call "memory". Up and to the left - value grows as you consider earlier values. Up and to the right - value grows as you consider newer values. Yes considering newer values after older ones is a reasonable default but it's not completely redundant to specify that's what's meant.
- RookyNumbas 7y agoHint: it's a joke.
- astrea 7y agoHave you ever done one of those DNA kits? I feel as though you might have some Vulcan in you.
- marcosdumay 7y agoYou are free to read a graph on any direction you want.
- burkaman 7y agoI think it's just a throwaway reference to "back and to the left", a frequently parodied line from the movie JFK.
- soneca 7y agoIf that's it, you just answered my (same as GP's) permanent confusion for people describing the "hockey stick" chart as "up and to the right". Why not just "up"?? Thanks for that!
- draw_down 7y agoCome on
- robocat 7y agoDown could be a single quarter. Down and to the right implies many quarters or a line angled down.
- jngreenlee 7y agoIn context, this explains a big of the reason why they need changes, which are now in place: https://www.forbes.com/sites/jonobacon/2020/01/31/jim-whitehurst-becomes-president-of-ibm-why-he-gets-culture/#67633ca26394 https://www.forbes.com/sites/jonobacon/2020/01/31/jim-whiteh...
- derefr 7y agoIt's interesting to talk about what "IBM" has been doing, because after all the A&M IBM has done this last decade, they've actually got plenty of "activity" to their name. Just, activity that was previously known under the names of Softlayer, Cognos, Redhat... Go to https://en.wikipedia.org/wiki/List_of_mergers_and_acquisitions_by_IBM#Acquisitions_since_2000 https://en.wikipedia.org/wiki/List_of_mergers_and_acquisitio... and sort the table there by value, descending. "IBM" is a shorthand for more (un-dissolved!) subsidiaries at this point than GE or Samsung. IBM itself is just a consulting "solution provider" company that provides "solutions" in terms of the products and services of its subsidiaries. They're never going to look like they're on the cutting edge of some space, unless that's what one of their (equally-stodgy) enterprise clients wants to pay them to do. (And even then, why build when you can buy? IMHO IBM would only ever build a new technology at this point if there was no existing company out there in the market, with that tech IP, that they could just acquire.) Certainly, there's the Watson AI lab, though I don't think anyone's expecting much of it at this point; nor, importantly, was anyone inside IBM ever expecting much of it. Watson (the lab specifically, not the brand strategy of calling all their cloud OLAP SaaS products "Watson") is more a nod to their clients to say "of course we're looking into AI", and a pool of people competent enough that they could clone the existing ML approach of one of their competitors if one of their clients demanded it. IBM could be a really innovative company if they rearranged their talent pool, certainly. But innovation—getting ahead of the market and so needing to educate the market on the problem their products solve—hasn't been IBM's business model since the 1950s. IBM makes money by listening to clients' "unique" needs, and then meeting them with "custom" solutions at low CapEx cost, by using an ever-larger flywheel of existing solutions pre-tuned to almost fit every possible business use-case.
- vbhavsar 7y agoI don't know why people overlook the progress IBM seems to have made in the quantum computing world. Perhaps not as impressive as Google's progress but impressive none the less.
- derefr 7y agoFor me personally, it was because even from the inside at IBM, you wouldn't hear much about what the quantum folks are doing if you were doing general tech. They really are in their own little world. I don't think they were even in the whole-IBM Slack team, though they might just have been security-compartmentalized with ACLs.
- marcosdumay 7y agoWhat does IBM sell nowadays?
- Pandabob 7y agoServices
- rhexs 7y agoOutsourcing, or as another comment called it, “services”.
- wstrange 7y agoOtherwise known as "Your mess for less"
- deleted 7y ago[deleted]
- kevin_thibedeau 7y agoWho buys this other than their legacy customers?
- senderista 7y agoSoftlayer was great. IBM Cloud is terrible. I tried provisioning a bare metal server a few months ago and gave up a couple hours in. Packet had me up and running in minutes.
- deleted 7y ago[deleted]
- lotsofpulp 7y agoCover your ass. If you're in a position to spend a lot of money, and you hire IBM, and they mess it up, you get to say "Hey, I did my due diligence by hiring IBM".
- 2sk21 7y ago> And the big bet on a ridiculously over-hyped Watson could make sense if you saw incomplete and underperfoming products as merely the top of a consulting sales funnel I worked on Watson Assistant for a few years and it’s not a bad product at all compared to the competitors but, sadly, I have to agree with the above assessment. It was completely overhyped.
- jimbokun 7y agoIs there even a significant market for such a product?
- 2sk21 7y agoNot really until language understanding improves substantially. All of the chatbot kits that I’m familiar with discard the bulk of the information in the user’s first utterance.
- DebtDeflation 7y agoYes. Chatbots (or "Virtual Assistants") for handling routine customer care inquiries. IBM Watson Assistant is the leader in this increasingly crowded (Microsoft, Google, Amazon, and dozens of startups are competing with them) space. The tech-savvy may look down at the current state of "AI chatbots" but large enterprises in all industries currently spend a fortune on staffing call centers that predominantly handle questions like "I forgot my password can you reset it?", "I lost my bill, can you send me another copy?", and "I'd like to sign up/cancel/modify a service". Chatbots work well enough to handle 30-40% of these types of inquiries at a far lower cost than a human (who is mainly just reading a script anyway).
- sgt101 7y agoAll of those 30-40% problems you cite are actually arguements for spending a bit on improved FAQ's, website processes and IVR's. Businesses are likely to react to a successful pitch for a solution in that space with a bit of cash to do it tactically. For chatbots to become a thing they will have to jointly solve problems with customers, and they can't just now...
- cryptoz 7y agoNo mention of their acquisition of the Weather Channel's digital properties, or any other M&A for that matter. Hard to see how this decade was lost for them, rather than a significant investment into the future.
- wmf 7y agoIBM has had a continuous pipeline of acquisitions over decades, but where is the money? At some point the profit from the older acquisitions has to cancel out the cost of the newer ones and that isn't apparent for IBM.
- throwaway55554 7y ago> IBM has had a continuous pipeline of acquisitions over decades, but where is the money? They used it for stock buybacks.
- pscz 7y agoIBM should give IBM Cloud to the Red Hat people and rebrand it as Red Hat Cloud. Red Hat is the only subsidiary of IBM that is respected by the developer community. The rest of IBM has a very MBAsque reputation.
- rilindo 7y agoRebranding won't help, unless IBM actually put in the CapEx behind their cloud: https://www.platformonomics.com/2018/05/follow-the-capex-separating-the-clowns-from-the-clouds/ https://www.platformonomics.com/2018/05/follow-the-capex-sep...
- wmf 7y agoIBM should not rebrand bad products as Red Hat (redwashing? hatwashing?). Maybe Red Hat could come up with a better public cloud than IBM but that would be a long-term project.
- zapita 7y agoRed Hat already has a public cloud offering, it's called OpenShift Online: https://www.openshift.com/products/online/ https://www.openshift.com/products/online/ It doesn't seem to be very successful, which is understandable since Red Hat is historically an on-premise software company, and a very successful one too. Internally they probably view Online as a sales enablement tool. Since Openshift is already Red Hat's big bet to keep growing, presumably if they were willing and able to make OpenShift Online a major success, they would have done it by now.
- rbanffy 7y agoI'm really surprised IBM doesn't offer a cloud product based on LinuxONE machines. These are ridiculously fast machines that are probably cheaper to build and run that the equivalent capacity in OCP x86 "boxes". And only IBM can have them.
- wmf 7y agoMaybe because none of that is true? z/Architecture hasn't been (accurately) benchmarked in public for decades if ever.
- british_india 7y agoIBM went on the cheap and made their shop virtually all Indians.
- tabtab 7y agoAfter getting behind, why should it be assumed automatic to "just catch up" in cloud? Microsoft fell behind mobile and never caught up despite pouring billions on it. Same with Google and social networks. Oracle also got behind in the cloud race and will probably also lose it all. The early bird gets the worm, stop blaming the CEO. Although "Watson" seems a PHB toy to trick investors or job seekers into thinking it had magic AI.
- geodel 7y ago> The early bird gets the worm, stop blaming the CEO. Indeed. But oversized financial rewards and credits to CEO is to compensate the blame.
- DebtDeflation 7y ago> Oracle Another perfect example, along with SAP. In the 1990s and 2000s, Oracle and SAP used to win on the basis of their "fully integrated suite of business applications" that they contrasted with the "best of breed" approach that (they claimed) would cost more to integrate than they delivered in additional value. However, over the last 10 years, Oracle and SAP went on a buying spree scooping up all those best of breed enterprise applications and then failed to integrate them with their core offerings, creating the same problem they claimed to be addressing. At the same time, R&D spend on organic product innovation slumped. Buying up the competition isn't the panacea many tech companies seem to think it is.
- tabtab 7y agoIt sounds like it "worked" from their financial standpoint, at least for a while. You don't have to compete if you buy up competitors. Remember when MS bought FoxPro? Customer choice and prices may be a different story.
- rossdavidh 7y agoMicrosoft was not "early" on cloud, and came back into relevance (perhaps more than Google, really, in this one case). The early bird (Friendster, Commodore Computing, VisiCalc) does not always get the worm.
- kediz 7y agoNow the site get's error 500
- femto113 7y agoI worry that addiction to stock buybacks is a terminal disease for companies like IBM. Imagine what $65B invested in R&D over the last eight years could have yielded in the future instead of being poured down a financial sewer.
- throwaway55554 7y agoThey used to be illegal. They should be illegal again. If they were, then that $65B would have been invested in R&D (and in their employees!).
- robocat 7y agoThe money would have been returned as dividends instead. For-profit companies are not intended to exist just to spend all profits on themselves (although Amazon is one obvious counter example amongst many).
- cpwright 7y agoOr paid as dividends? Stock buybacks are in part a way to financial engineer around dividends and capital gains being realized and taxed differently.
- robocat 7y agoStock buybacks are yields for shareholders the same as dividends (just with different tax implications) - definitely not “down the sewer”. Most companies have a limit to the amount of R&D they can do before running into a wall where the payback becomes unprofitable (for complicated reasons).
- PopePompus 7y agoIsn’t a stock buyback a way of telling their shareholders “we think you would be better off investing your money elsewhere”?
- redis_mlc 7y agoNo, it's a way for execs to get the EPS up, and thus their options up, without, you know, increasing revenue or inventing anything. Seriously.
- aphextim 7y agoOne thing IBM has been working on is trying to solve the issue of worldwide remittances and global payments by using Stellar (XLM) and their block-chain solution to bridge various assets and fiat currencies. https://www.ibm.com/blockchain/solutions/world-wire https://www.ibm.com/blockchain/solutions/world-wire https://www.stellar.org/papers/stellar-consensus-protocol.pdf https://www.stellar.org/papers/stellar-consensus-protocol.pd...
- notwrong 7y agoI have a portfolio where I long term short companies headed by diversity female CEOs. I made a lot on PCG and some in IBM. There's a convenient Gender Diversity ETF SHE https://www.etf.com/SHE https://www.etf.com/SHE that can be used for reference. Hopefully before this post gets flagged by the Komsomol members here some readers will benefit.
- q_eng_anon 7y agowaitttt so you're shorting companies based purely on 'diversity'? and you claim it's worked..?
- jsty 7y agoWhilst I harbour significant doubt that simply shorting companies with newly appointed female CEOs would be an effective way of exploiting it, the glass cliff effect [0] is a known phenomena whereby female leaders are more likely to be appointed in times of crisis. [0] https://en.wikipedia.org/wiki/Glass_cliff https://en.wikipedia.org/wiki/Glass_cliff
- MrBeansForReal 7y agoyeah, because they stand away from risk. Looks like a good idea in 2008-2010 (that's why Ginnie). Not as much when you have had bull market for over a decade.
- pnako 7y agoYou can see that over 5 years (not more data available) that gender diversity fund has significantly under-performed its reference index. But that's not enough time to make a definitive judgment.
- TedDoesntTalk 7y agoLOL. This is hysterical and brilliant but not aggressive enough: "The fund evaluates the 1000 largest US firms for the ratio of women on the board of directors and in executive positions (defined as Sr. VP or higher). Companies ranking in the top 10% in each sector are included in the portfolio, with the caveat that each firm must have at least one woman on its board or as CEO." It should be top 5% or so. Also having a single woman on a board of directors is not aggressive enough. Hopefully the 10% or 5% limit throws out such companies. I see you're doing the shorting yourself. Too bad that's note a purchasable fund.
- why_only_15 7y agoIn the first-approximation analysis of stock buybacks, they keep the share price the same but reduce the market cap of the company by however much was bought. This is known and intended. If $55B of their $95B drop in market cap is simply by returning cash to the investors, that isn't such a bad thing.
- villahousut 7y agoThat's incorrect. A company's market cap includes any cash the company has. Buying stock means spending that cash but increasing the value of the stock by an equal amount. Stock buybacks don't affect market cap.
- twic 7y agoI don't think this is correct either. A company's cash, or other assets, are not included in its market cap. It's just share price times number of shares outstanding. Where why_only_15 is incorrect is in saying that buybacks don't affect share price. The whole point of a buyback is to increase the share price.
- why_only_15 7y agoI don't think that's true. Consider a company with 1T shares that's valued at $1T with $100B of cash. Presumably, $100B of that valuation is for the cash, because investors know they could give that money back through dividends or the like. Let's say the company buys back 100B shares for its $100B. Because the company no longer has the cash, the overall value decreases (to $900B) to the same degree that there are less shares on the market (100B less).
- sk5t 7y agoYou should think of a stock buyback as another way of paying a dividend without triggering a taxable event for stockholders. The value transitions into a greater price of the now-fewer-outstanding shares.
- 7y ago
- closeparen 7y agoPaying an infrastructure provider and a managed k8s / other "cloud" API vendor separately is actually very reasonable. There is no good reason those two things should be tightly coupled. Amazon should not get to charge a markup on hardware because of the software that runs on it. That's a regression not only from open source, but from shrink-wrapped proprietary software too. Putting the cloud back in shrink-wrap world could add a lot of value: buy commodity capacity, still write "cloud" applications for it, split the hardware savings with IBM. To compete, Amazon will have to either lower its markup or innovate in proprietary hardware (as it's starting to do with Graviton2) to provide value-added services that software on commodity hardware can't effectively replicate. And IBM basically invented that game, so good luck. Not to say IBM is capable of executing it, but it’s an interesting strategy.
- wmf 7y agoSpeaking of k8s markup, AWS only charges for the masters and they recently cut those prices by 50%. This problem doesn't exist.
- ablekh 7y agoWhy do you think AWS charges for K8s master nodes (control plane), when both of their major competitors do not?
- wmf 7y agoBecause they can, of course. But it's still hard to imagine a third-party product (e.g. OpenShift) being cheaper than $0.10 per hour.
- ablekh 7y agoThey surely can. But so is true for Azure and GCP as well. Thus, I'm curious about whether it is a feasible pricing strategy for AWS, considering the fact that EKS is not much different from their competition's managed K8s offerings.
- zzzeek 7y agothe ratio of super-trolly-know-it-all (Red Hat is just a "proprietary Kubernetes distribution", really? do you even know what Red Hat does?) to "no 500 server error on my blog" is pretty high here
- deleted 7y ago[deleted]
- tomjohnneill 7y agoI remember reading an article back in 2011, a puff piece about IBM in the Economist for the company's 100th birthday: https://www.economist.com/briefing/2011/06/09/1100100-and-counting https://www.economist.com/briefing/2011/06/09/1100100-and-co... It's pretty interesting to look at some of the quotes from that article now: - "As IBM enters its second century in good health, far younger IT giants, such as Cisco Systems, Intel, Microsoft and Nokia, are grappling with market shifts that threaten to make them much less relevant." - "By 2015 the firm wants its earnings per share almost to double, to “at least” $20." (It was actually $11, and kept falling from there) - "given the complexity of the world and how much of it is still to be digitised, IBM's human platform looks unlikely to reach its limits soon. Perhaps not for another 100 years."
- jhallenworld 7y agoIBM is trapped by their very wealthy legacy customers [banks, insurance companies, governments and a few fortune 100 stores]. IBM certainly has the talent to create new products, but unless they appeal to those customers, the effort is pointless. The existing customers are so wealthy that it's not worth the effort of the IBM sales machine to target anyone else. When IBM buys a company, it's not to get new customers. It's only to get products that their legacy customers have been buying from someone else.
- pm90 7y agoTo be fair, it is quite OK for them to do just that. To cater exclusively to large businesses that require multi decade support and who demand specialized features. The reason those wealthy clients are still with IBM is precisely because they can trust IBM (it’s possibly the only tech company they do trust). IBM marketing is all smoke and mirrors to convince everyone that they’re cutting edge in areas they’re not. They don’t need to be; their important customers are fine. The customers just want to feel like they’re working with an “innovative” company, and that feeling is delivered by IBM marketing and M&A.
- jhallenworld 7y ago>The customers just want to feel like they’re working with an “innovative” company Actually this fully explains their foray into "blockchain". It's the hottest thing to happen to banking since the web, even though it may be pointless.
- girvo 7y agoAs someone who's built "production" software on top of IBM's "private blockchain" tech... it isn't quite pointless, but it's not far off; though that was a few years ago at this point lol
- jhallenworld 7y agoWell I have to ask.. What problem did the private block tech solve for you?
- ineedasername 7y agoI was curious a out some of their early sort-of cloud offerings around 2013/2014, partly under the Watson brand. They had some interesting services for text analysis similar to services like AlchemyAPI (which IBM actually purchased not much later) that I wanted to check out. But they were also starting to try and offer more general purpose cloud services, albeit it beta forms, and I poked around a bit. My recollection is that nearly all of them were attempts to back-door users into their traditional enterprise software, not to actually offer true cloud platforms. For example I remember an "analytics" offering that promised on demand instant analytics environments for exploring data and generating insights. I was interested! In reality, it was a thinly veiled portal into a hosted cognos environment. And if you're not familiar with cognos, let me tell you, while still entrenched in some Enterprise environments, it is an object case study in crufty klunky product design that has accreted disparate layers of functionality over decades. The Advent of Cognos 8 in 2005 simply smashed together a bunch of prior products like report net, power play,metric manager, and others that worked together poorly, if at all. I won't bore you further with the details except to say this, along with similar non-strategic product design by Business Objects, is why products like Tableau grew so fast in popularity. So, yeah, as the cloud hit its stride in the 2012-2015 era, IBM was just trying to slap "cloud" labels on something they could use to sell the same old stagnant products.
- williamDafoe 7y agoIt's really hard to decline so consistently with the same rotten management at the helm year after year. Did they hire management from Qualcomm to achieve this?
- peter303 7y agoMicroSoft went to sh*t under its 2nd CEO, but recovered under its successor. Hopefully IBM can revive under future leadership.
- deleted 7y ago[deleted]