IBM: The Epic Saga of Computer Industries

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    IBM Story- featured image

    Prologue

    Before the name IBM came into existence, the organization was known as CTR Co. A new subsidiary of the 4 existing companies, CTR had a wide assortment of products designed to increase business growth. Soon after that, Thomas J. Watson Sr. took in charge of the driver’s seat in the company and within a few years, the company’s profits doubled. He also engineered many of the groundbreaking policies of the time, such as the inclusion of disabled people, of racial minorities and of women in the workforce, along with a 40-hour work duration in a week.

    On Valentine’s day in 1924, the CTR and Co. officially changed its name to International Business Machines Corporation. The company quickly perfected itself in many innovative technologies including the Punchcard technologies. During the great depression, IBM continued to believe and invest in its people and increased benefits for them. This gamble paid off at the end of the depression. With the passing of the Social Security Act by the Congress, IBM performed excellently in what is popularly called as the “Biggest accounting operation of all times”. The company continued to grow through the 1940s and by the 1950s and began producing some of the most amazing computer technologies. With the passing of Thomas J Watson Sr. and his son taking over the business, IBM thrives on its typewriters that dominated a lot of the American firms in the 1960s. By the end of the decade, IBM was instrumental in collaborating with NASA in putting an American on the moon.

    In 1969, the company introduced the magnetic strip on credit cards which we use to this date. In 1982, Time Magazine named IBM’s personal computer, the Person Of The Year. Even though the company didn’t do great during the 80s and into the late 90s, its resurrection occurred when its baby, the Deep Blue (the supercomputer infused with AI technology) defeated the world’s leading chess player. In 2005, IBM Sold its PC division to Lenovo. In 2011, another supercomputer of IBM (Watson) competed and won on the American game show Jeopardy and won against two mortals. This was impressive because Watson was able to process natural language. This caused the supercomputer to be part of many experiments for medical trials and able to answer questions on medicines and doctors. The company continues to grow speedily and promises to accelerate the computer industry by contributing a number of valuable discoveries that will benefit people.

    Now, let us go further and read the IBM story which is laid out in 9 grand epochs!

    First Epoch: Beginnings

    beginnings

    The story starts with the Tabular Machine Company which had its genesis in 1986 in the US Capital. The second company was the Bundy Manufacturing Company that began in Auburn, NY in 1988. The next key name in the story is of International Time Recording Company with its roots in Endicott, NY in 1900. And the last was the Computer Scale Company, founded in Dayton, Ohio in 1901.

    The 4 came together on June 16th, 1911, and started its 5th company; Computer Tabulating Recording Company or CTR Co. in the state of New York. CTR was now the holding company. The founder of the new company was Charles Flint who was a noted financier and later with the creation of CTR, became the person to handle all the finances. Many believe that the creation of the 5th company was engineered by him.

    Charles Flint found it hard to handle the four companies which now had over 1300 employees with offices and plants in different cities across the States. That was the time when Thomas J Watson who was a man convicted of many anti-trust violations. However, on May 1, 1914, he was hired as the general manager of CTR. That was the same year when CTR hired its first disabled employee which was in its own right, a momentous event. Shortly after that, he was exonerated of his charges and within eleven months of him becoming a part of CTR, he was made the president of the company. Under his leadership, the company invested a lot in creating management training and volunteer study groups.

    In 1917, CTR makes its debut appearance in Brazil. The company opened its first office there and the Brazilian Government invited them to conduct a census. This was when the company truly started to become global.

    Second Epoch: IBM and Skyrocketing Success

    skyrockets

    With the perpetual expansion of the business overseas, Watson decides to change the name of CTR to something that glimpses into its global position. The company’s name was formally changed on February 14th, 1924 to ‘International Business Machines’. However, it was only CTR that changed its name and not the other four companies. By 1933, products labeled as IBM started to come out, when the 4 subsidiaries merged into IBM.

    In 1925, IBM sold its first Hollerith Tabulator in Japan. Nippon Pottery was the first Japanese customer of IBM. The company has since changed its name to Noritake.

    Around that time, the newly christened IBM launched its newspaper for its employees which entailed all the innovations of the organization under one publication. It also introduced honoring employees who have spent 25 years in the company and also give extravagant compensation for people who met their sales targets.

    In 1927, IBM starts its office in Milan and operating and selling with National banks and insurances. This was the first time IBM came to Italy. A tradition of giving cash benefits to its employees who contributed to giving extraordinary ideas to the future sustainability of the company also came out in 1928. It was called the Suggestion Plan program. This was also the time when Hollerith 80-column punch card came into being which had patented rectangular holes.

    Third Epoch: Great Depression and Alleged Holocaust Involvement

    holocaust

    One of the darker chapters of American history, when many businesses had to shut down and it was hard to put food on the table for ordinary working Americans. People were being thrown out of work as the situation worsened. However, IBM was inclined towards a diametrically opposite methodology to drive the employees towards more training and giving more benefits. This was a dangerous gamble as the consequences of the economic depression was everywhere around them.

    In 1931, IBM produced some tremendous products that showed the drive for innovation at IBM. IBM 400 was the world’s first machine to print alphabets and IBM 600 was the first machine of IBM to perform multiplication and division were released in the same year. Also, the League of Nations in Switzerland became a customer of IBM after the first installation of the IBM translating machine was placed there permanently. IBM established the education system for many educational activities for both customers and employees in the following year. The IBM Schoolhouse and Engineering Laboratory Building proved to be a massive incentive for employees. It was used as a training ground to manage the many educational activities that were being hosted by IBM. It was established in Endicott, NY. IBM also entered the typewriting business by acquiring Electromatic Typewriters Inc. which was located in Rochester, NY. This was the same year when the other companies associated with IBM became a single organization in 1933.

    1933 is also seen by many as the most ominous year for IBM. Edwin Black, a Jewish American columnist, and Journalist published a book titled ‘IBM and the Holocaust: The Strategic Alliance between Nazi Germany and America’s Most Powerful Corporation’ in 2001. The book presents some haunting facts against IBM and claims that the company was responsible for the mass atrocities in concentration camps. Black claims that after Hitler came into Power in 1933, he immediately opened a concentration camp in Dachau, a small town in Bavaria, in March. By April, around 60,000 political prisoners called it their residence. Still, business relations between the regime and IBM remained uninterpreted. The German subsidiary, Dehomag, was reported to share a high fervor for Hitler’s regime.

    The book claims that during the same month, Hitler announced his plans for a nation-wide census. This census was important to the Nazi regime to identify the ethnic groups that the Nazis held as inferior such as Jews, Gypsies, Poles, etc. Dehomag stepped up to offer its assistance during this time to identify more than 40 million Prussian residents. Black argues that Watson didn’t just approbate the whole affair but actively supported it financially by increasing investments. Germany quickly became a large market for IBM during that time. The tabulation services provided by IBM was pivotal in identifying, secluding and destroying large masses of the Jewish community in Nazi-occupied Europe.

    IBM hasn’t denied any of the evidence given in the book, yet the conclusory statements made by Black were deeply criticized. The company claims that much of the documents during the second world war were either lost or destroyed. After the book was launched, IBM stated that there was no evidence to make such conclusive connections between the Holocaust and the German Branch of IBM. Though the book has been praised by many for its in-depth research, still others aren’t sure that the remarks against IBM in the book is very accurate.

    In 1934, the Dayton Scale Division was sold to Hobart Manufacturing Company. This was one of the original Business lines of IBM that it exited from. The organization introduces group life insurance which added to the safety and employees benefits program pioneered by IBM. In 1935, with the passing of the Social Security Act, the ‘biggest accounting operation of all time’ was undertaken by IBM. IBM announced its plans to pay its employees for 6 annual holidays and the tradition of paid vacations also began. In 1938, the company opened its new headquarters in New York City. The company at this point has gone fully global with the company’s operations being performed in over 70 nations.

    Fourth Epoch: Second World War

    war

    With the company functioning in more than 70 nations, it seemed IBM was destined to be entangled in the war. The branch in Germany was one of its greatest assets but also being in the enemy country, it was forced to ‘heil’ to Hitler’s regime. It also had its functions going in Poland and Switzerland. The IBM subsidiaries in those nations were quickly annexed by their Axis leaders while the headquarters in New York aided the American war effort against the Axis powers.

    Before the war began, Watson put much of the products and services of IBM at the disposal of the US government. Allied forces used IBM’s tabulating technologies for war-related purposes such as logistics, ballistics, and accounting. The punch card machines of IBM was used for calculations during the Manhattan protect which detonated the first nuclear device on earth. IBM also built the first electro-mechanical calculators for the US Navy. During the wartime, IBM in the US started to employ and train disabled people in Topeka, Kansas. IBM appointed its first female vice president in 1943. Thomas J. Watson Sr. also being a key supporter of equal opportunities, funded the UNCF or the United Fund which aimed to help African-Americans by funding scholarships for them. By the end of the war, IBM opens its first research lab at Columbia University in New York. It was opened in a renovated fraternity house near the institute.

    Fifth Epoch: Aftermath of the War

    aftermath

    In 1946, IBM introduces the first commercial product to incorporate electronic arithmetic circuits. The device was called the IBM 603 Electronic Multiplier. An electric Chinese ideographic character typewriter also came out the same year which allowed an experienced user to type at a speed of 35-45 words per minute. In IBM’s quest to be an exemplary face on social rights, the same year IBM hired its first Black salesman. In the 1950s, IBM wanted to divert his focus from weapons in war to space exploration. In 1952, the Langley Research Center in Virginia started experimenting with solid fuel rockets. Langley uses one of the Card Programmed Calculators of IBM for its calculations. IBM also produced the IBM 701, a computer made with vacuum tubes, which helped it in executing up to 17,000 instructions per second. It was mainly used for government and research work. In 1953, IBM signs its Equal opportunity policy that employs people regardless of “race, color or creed”. This was done 11 years before the Supreme Court of the US signed the Civil Rights Act of 1964.

    In 1956, IBM creates the first magnetic hard drive. The IBM 305 RAMAC could store 2000 bits of data per square inch and the price was at a staggering $10,000 per megabyte. Within the next 40 years, the price for one megabyte would drop down to almost 10 cents. IBM also opens its first Research lab outside America. The lab was started in Zurich in Switzerland. That year also witnessed the passing away of Thomas J. Watson Sr. His Son, Thomas J. Watson Jr. took over the company. The emergence of the second generation of IBM was identified with the first major meeting of IBM without the former Chairman presiding over it. The Williamsburg Conference gathered close to a 100 senior member of the IBM family and changes were made to the existing organizational structure.

    The first ever attempt made at Artificial Intelligence was done by Arthur L Samuel, during this time, when he programmed an IBM 704 (First mass-produced computer to make its first appearance in 1954) to play checkers. It was programmed to learn from its own experiences. It’s largely accepted as the first self-learning machine, a real-life example of Artificial Intelligence.

    In 1958, the SAGE AN/FSQ-7 was built in MIT’s Lincolns’ Laboratories to assist the North American Defense Systems. The next year IBM’s ‘Speak up!’ program was created to analyze the employee feedback. In the previous year, the Open Door policy was implemented in IBM where an employee can request an audience with even the most senior management and express their issues or grievances.

    Sixth Epoch: Systems/360 And Space Launch

    manon moon

    The number of employees began tripling during this time and by 1965, the annual revenue was more than 3 billion USD. Watson Jr made an estimate of the future obsession with computers and he never underestimated this titanic potential. He helped in IBM’s quest to become a computer industry leader. Innovations accelerated under the leadership of Watson Jr. In 1961, IBM 7030 is created. The product pioneered many key elements that were later adopted by the computer industry. It also began the Selectric typewriter product line. Its later models gave rise to the concepts of word processing and desktop publishing.

    In the following year, two IBM 7090 formed the essence of the SABRE reservation system for American Airlines. Being the first airline reservation system, It made handling seat inventory and keeping passenger records easier. In 1964, IBM Magnetic Tape Selectric Typewriters were launched which is the backbone of today’s desktop word processing. It was called power typing then, it introduced the concept of revising stored text helped typists by allowing them to type at “rough draft” speed without the constant worry to type in mistakes. The same year, IBM shifts its headquarters from New York City to Armonk in New York State. But what made this year most significant was the introduction of IBM System/360. It is even called the most important announcement to date. They were a family of large to small computers embedded with the IBM Solid Logic Technology microelectronics and used the same programming instructions. This concept of a compatible family of computers was the largest changes in the computing world.

    By 1965, IBM was heavily involved with space technology. IBM scientists completed the most precise computation of the moon’s orbit. In 1966, IBM creates its one transistor DRAM Cells which permits a major boost in memory capacity.
    1969 proved to be a year for many monumental events in IBM’s history. That year, the US government launched a 13-year long anti-trust suit against IBM. Though the suit was dropped eventually in 1982, IBM’s share of the mainframe market suffered a decline. The credit card industry took up as the magnetic strip pioneered by IBM becomes a national standard. Two years later after that, the International Organization for Standardization makes it the world’s standard as well. Also, that year the infamous phrase “One small step for man, one giant leap for mankind” echoed throughout the world when IBM and NASA were successful in putting the first men on the moon. This laid the foundation for further exploration of the infinite universe, which has become much easier with the involvement of Artificial Intelligence in recent decades. You can read more about it in ‘Artificial Intelligence in Space Exploration‘.

    These are what made the 60s, the golden age of IBM that flourished for years.

    Seventh Epoch: Hindrances for Success

    In 1971, the world’s first floppy disk was generated by IBM and it gained massive popularity for being portable and convenient to carry.

    After the retirement of Thomas J. Watson Jr in 1971, shortly after he suffered a heart attack, trouble built for the company. Since 1914, the company wouldn’t have a Watson at the driver’s seat. T. Vincent Learson became Watson’s replacement for CEO but he quickly retired and the company was back to being without a leader. In 1973, soon after Learson’s departure, Frank T. Cary took the helm of IBM and began steering it in the hardware sector.

    This was also the year when an IBM member, Dr. Leo Esaki, won the Nobel Prize in Physics for his discovery of electron tunneling. The following year, IBM launches Systems Network Architecture. It is a uniform set of regulations and protocols for computer communications to liberate people from complexities of communicating through various local, national or global networks.

    Eighth Epoch: Growth of Personal Computers and Software Industries

    software

    John R. Opel becomes the CEO of IBM in 1981. His company was one of the largest organizations in the world. The following year, the anti-trust suit against IBM was finally dismissed once and for all. But not before the company suffered massive losses. In 1980, the overall share in the computer market was 60% in 1970 while in 1980 it declined to 32%. The New York Times reported, the government “recognized what computer experts and securities analysts had long since concluded: IBM no longer dominates the computer business” in 1982.

    The first IBM Personal Computer was launched on August 12, 1981. It was popularized heavily due to the Little Tramp Campaign. Though not the best machine by our standards, still it had all the desired qualities one would want for their needs at the time. It had 128 kilobytes of memory and could be expandable till 256 kilobytes, an optional color monitor, two floppy drives and the reassuring logo of IBM. The price at the time didn’t allow individuals to purchase it much but was more inclined to businesses. The base price could be as high as $1565. Purchases were mainly done by the middle managers and senior staff who could foresee the future possibilities of Computerization. The company’s success by 1985 was so high that many competitors thought that IBM could be sued again for anti-trust. Datamation, a technology magazine in the US criticized IBM for its continuous growth by stating that it is hurting the US by preventing startups with new technologies to survive and customers too were becoming worried of their over-dependence on IBM products.

    But their success didn’t last long. The major reason for their downfall is usually credited to their imports computer parts from outside companies such as Intel and Microsoft. This crushed the monopoly IBM had over the computer industry and saw the rise of PC compatibles and the generations of billions of dollars of market value outside the IBM.
    By the end of the 80s, IBM was in some serious trouble. IBM technologies such as hard drives, PC, DRAM, etc started to erode, and it was seen by many as a bloated organization that was heavily immersed in low margins and commodity business.

    John Akers became the CEO in 1985. He along with the board of directors decided to split IBM into more autonomous units such as processors, services, printers, etc. It also started to shed off businesses that were no longer essential for running the company. These included typewriters, keyboards, and printers. Even with such measures, the company continued its decline and between 1991 and 1993, the losses accumulated to a whopping $16 billion. The computer industry now was seeing IBM as an archaic remnant of the glorious computer past. The golden age started by Watson Jr ended in such a fashion. Many employees as IBM lost their jobs including Akers.

    Ninth Epoch: Near Death and Resurrection

    rebirth

    In April of 1993, IBM hired a new CEO. His name was Louis V. Gerstner, and he was the first leader since 1914 selected outside IBM ranks. He sought to introduce measures to sustain the company by shrinking the workforce, implement significant cost reductions within IBM, recommitting to the mainframe and reverse the previous disastrous decision to break IBM businesses into separate units. He knew that the key strength of IBM was to provide integrated solutions to its customers and splitting the company would be devastating to that aspect.

    Over the next decade, Gerstner worked on and developed a business model which shed commodity businesses and focused on high margin options. IBM invested heavily in softwares that proved really good for the company. The company got a world-class research organization to have a closer look at the company’s existing product lines and development processes. IBM re-energized its mainframe with CMOS technologies, which helped it become one of the most cost efficient and powerful in the market. On October 1992, IBM announced its first ever ThinkPad laptops. Though with improved facilities such as 10.4-inch screen and 120 MB, the price was still an astounding $4350.

    The resurrection of IBM became infamous when its supercomputer called the Deep Blue won a chess match against the world champion Garry Kasparov in 1996. The victory was the first for a computer over human intelligence. This helped IBM establish itself as a leader in the supercomputer market and the revival of the IBM brand seemed imminent. Gradually IBM recovered its financial foothold and is now aggressively displaying its new avatar to the world, after all the near-death experiences. Now, it seeks to redefine the internet age where traditional IBM strengths could be utilized.

    In 2011, the supercomputer Watson played on a TV game show on PBS called Jeopardy and won with ease. In 2018, The company announced its plans to acquire Red hat for $34 billion.

    Epilogue

    Conclusion

    IBM managed not only to defy the odds of success during the Great Depression, World War 2 and the 80s but it is the best example of a company that molded and shaped the computation markets for more than a century. It has also been at the forefront of Social changes as well. IBM hired an African American as a salesperson, a decade before the Supreme Court of the US signed off on equality. It also signed a non-discrimination policy against the LGBT members in 1984 (two decades before Supreme Court signed off legalizing same-sex relations) and was among the few companies to hire a female vice president that early in IBM’s history. Many still believe in the potential of IBM after its rebirth in the 21st century and its no doubt that the company will it will continue its venture on innovations that will transform the future for all mankind.

    AI is one of the growing segments in the digital era which is being seen by IBM as a terrific opportunity to delve into. The practical examples of Artificial Intelligence are immense and if you think you would like to try it out as well, you can opt for an amazing tutorial ‘Learn Artificial Intelligence Fundamentals for beginners’ which will help you understand AI from scratch.

    We hope you liked this article. If you have any feedback, feel free to share it with us in the comments section.

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