Image by Chee Meng Au Yong
IBM had total revenues of 103.6 billion dollars in 2008, so I was a little surprised when a friend who works there told me that his division was trying very hard to establish their presence in a segment that had a total market of about a billion dollars.
I asked him – isn’t this small change for IBM and even if they managed 100% market share, wouldn’t it still be tiny and totally not worth their time to focus on this market?
He used that famous hockey quote on me:
“I skate to where the puck is going to be, not where it has been.”
He told me that IBM dominated the Mainframe era, which ruled the first wave of the computing world.
But, when the world moved on from Mainframes to PCs – IBM was not able to dominate the market in a way Microsoft did. And remember, Microsoft doesn’t even make PCs. IBM had more muscle than Microsoft, but it couldn’t take much advantage of that.
Then they missed another wave that came with unknown companies like Google and Amazon reshaping the industry and dominating the Internet.
IBM is a giant, which is quite innovative for its size and has taken bold decisions in the past. A few years ago, it sold its PC business to Lenovo and exited out of the low – margin hardware business.
More than anything else, it was a strategic move that showed that IBM didn’t believe that personal computers were going to be the heart of the next wave or will even be able to avoid commoditization.
So, it exited the business while it still made money for them, but still focuses on businesses that are quite small today, but may grow in leaps and bounds in the future.
The trouble is that they don’t know which area is going to grow (nor does anyone else with certainty). So, they have to try and spread across various segments and hope that they are not left behind.
The recent launch of Bing and the 100 million dollars or so Microsoft has spent promoting it, has raised quite a lot of criticism.
I think the underlying thinking behind Bing’s big ticket spending and IBMs focus on small markets are the same.
Establishing presence in technologies that might shape the future of the industry they are in. 100 million might sound like a lot of money, but for these companies it is small change and if it works out – it could mean a big bing for their buck.
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