The Decline of IBM

and when I think about all the years of what I've learned you know I think of a quote that I often hear from Sam and what he always says is nothing is inevitable when Jeanne Rome Eddie became CEO on January 1 2012 International Business Machines or IBM was America's fourth largest company trailing only Microsoft Apple and Exxon but at the end of 2019 it was the 54th largest company and in crisis IBM used to be known for its technological wizardry but today's cool kids are Google Amazon Facebook and basically every tech company except IBM younger people today just assume everything IBM does is wrong for example Chamath Paulie Hypatia a venture capital investor called IBM's Watson technology a joke in a 20-17 interview companies that are advancing machine learning and AI don't brand it with some nominally specious name that's named after a Sherlock Holmes character Paulie Hypatia appears pre-loaded to insult IBM yet his argument is weak for many reasons especially considering IBM's robot Watson name actually comes from Thomas Watson IBM's first CEO but Paulie Hypatia is initial reaction to big blue speaks volumes to how people view it today the big blue nickname actually comes from its dominance and because it's computers supposedly had a blue 10 stanley kubrick honored IBM in his 1968 visual masterpiece 2001 a Space Odyssey by showing a murderous computer named Howell who wouldn't follow orders from humans open the doors but what is how despite its rich history IBM stock under Roma D struggled and it was routinely one of the Dow's worst performing stocks the Dow is an index comprising what is supposed to be America's 30 most influential companies on January 30th 2020 Rometty announced that she was stepping down as IBM CEO and many are wondering is the decline all her fault could it really be this video will go through the decline of IBM hey guys if you like this type of video please hit the like button and subscribe we run this channel where we have company documentary and educational videos we also have a website where you can post articles and view stock quotes to understand IBM's decline let's travel back in time to January 1993 where its future in the tech industry was being questioned after it reported a 5 billion dollar loss IBM had frequently been the world's largest company throughout the 1980s and despite making popular the personal computer or PC in 1981 IBM's management in the 1970s thought mainframes for the future a mainframe is just a large central computer capable of handling transactions from other computers or punch cards IBM was caught off guard with the success of the Apple 1 which was released in 1976 to protect its mainframe from risk of the PC in 1981 IBM tried to quickly introduce its own computer the save time it hired Bill Gates from Microsoft for an operating system and it used Intel's microprocessor as it had not yet developed its own a microprocessor is a small chip that allowed computers to shrink in size and IBM even invested 643 million in Intel or 20% of the company to ensure it had enough money to make a chips required by IBM many people attribute these partnerships with Intel and Microsoft as its biggest mistakes but if it didn't partner with these two companies it risks losing the entire PC market in 1981 IBM was five years behind Apple and it may not have had time to develop everything in-house in addition it would still have many chances to win in these markets though partnering with Intel was a strategically worst decision than Microsoft since software hardware must be ridden to work for a certain processor by using Intel's chip it allowed Intel to have the dominant processor in 1983 IBM's partnering strategy was apparently working and it was the dominant player in the enterprise computer market but by 1986 its PC sales were slowed by many competitors this is because IBM was using Intel's chips and Microsoft's operating system and young kids like Michael Dell figured out how to get IBM's disks to run on their computers by 21 Dell was selling 60 million dollars of computers and now you hopefully understand IBM's situation the market was turning to the PC and not IBM's mainframe and this would be an era of tremendous competition because IBM's competitors had copied its PC and now we were back in 1993 where IBM was in a somewhat desperate situation while many people today including Warren Buffett the legendary investor repeat a myth that IBM was close to bankruptcy for example Buffett said in his 2011 annual report after he bought IBM stock CEO Lou Gerstner and Sam Palmisano did a superb job in moving IBM from near bankruptcy 20 years ago to its prominence today but at the start of 1993 IBM was actually not close to bankruptcy it was actually still the largest tech company in the world and its corporate debt rating was extremely high IBM was still the champ but it was now being challenged by many tech companies including Microsoft and Intel who are now almost as large as it John Akers IBM CEO had initiated a plan to split IBM into 13 companies called the baby blues but before this plan could be completed IBM reported this 5 billion dollar loss and Akers was forced to step down in early 1993 IBM commenced its search for a new CEO IBM's Board considered merging with General Electric to get the late Jack Welch a CEO John Sculley the CEO of Apple was also considered and even Bill Gates got a courtesy call eventually IBM settled on Lewis V Gerstner who is currently running RJR nabisco a merged tobacco and food company that had a massive amount of debt due to a leveraged buyout in 1988 with all this debt Gerstner may have been looking for a way out or he may have seen IBM as a unique opportunity on March 26 1993 Gerstner officially became IBM CEO while IBM was behind in the PC market it was still large and powerful in 1992 its research budget was 6.5 billion compared to Microsoft's 352 million in Intel's 970 million its financial situation was not as desperate as it looked because most of its losses were from restructuring which often does not affect cash for example if IBM built a manufacturing plant for 1 billion let's say this plant was now worth $0 for whatever reason then it would report a 1 billion dollar loss but this loss would not affect cash since the plant was bought in a prior year and despite large accounting losses IBM was cashflow positive in 1992 and 1993 in addition articles at the time indicated that IBM could still restore profitability much faster than people expected still IBM needed a new captain to steer it ship and how would Gerstner do to see how he did we need to evaluate Lewis Gerstner in the products IBM was a leader in when he started as CEO let's start with its networking division at one time cisco currently a giant in networking technology was miniscule compared to big blue IBM invented networking protocols in 1974 with SMA or system network architecture a method for allowing computers to talk to each other in 1984 IBM advanced this technology with token rings a new protocol that more easily allowed machines to pass information to each other through information tokens by 1991 IBM was the dominant player in networking with 5.2 billion of revenue compared to Cisco's 500 million unfortunately for IBM throughout the 90s it focused on its own proprietary token ring technology while Cisco focused on connecting computers through either token rings or Ethernet Ethernet is a technology similar to token rings which allows data to pass between computers IBM made the token rings five to six times the price of Ethernet token rings eventually became like beta tapes compared to VHS tapes so while ibm's technology may have been better its successive costs led consumers who adopt ether technology and IBM's networking revenue cratered as we exited the 90s in 1999 it humiliatingly sold all its patents the Cisco for 300 million how would I be M do in its microprocessor division Lewis Gerstner and company must have done a better job right IBM had the PowerPC processor which was viewed as technologically superior to Intel's technology for example in the 1990s the PowerPC was used in the most advanced computers such as the Pathfinder a robotic spacecraft that landed on Mars in 1997 IBM created the PowerPC alliance with Apple and Motorola in 1991 to combat Intel's 98 percent market share however Gerstner did not capitalize on IBM's advanced technology in 2003 Steve Jobs proudly announced that IBM's power chip was on its new Mac g5 showing its importance jobs even announced this as part of his iconic one more thing and we are thrilled with his partnership with IBM it's producing dramatic results however IBM was not able to supply Apple with a sufficient quantity of chips by 2005 a job said IBM's processor development was too slow and that Intel was the right company to choose for the future IBM just lost his biggest customer because it lacked adequate investment and IBM's power processor was relegated to custom hardware such as the Nintendo GameCube released in 2001 however later generations of videogame consoles such as the Nintendo Wii or Xbox one no longer used the power chip as of 2019 anyone can license IBM's power technology for free the mainframe environment was difficult in the 90s and many analysts were predicting the death of the mainframe because they believe smaller computers often called servers could do the tasks of a mainframe sufficiently in 1991 IBM had 14 billion of mainframe revenue despite a slower market IBM kept its lead with 14 point eight billion of revenue in 2003 and a 40% market share IBM did fine transitioning to a server market under Gerstner but Gerstner would not have the same success in his PC division IBM did not have a cohesive PC strategy when it entered the 1990s and eight lost market share what many people do not know today his IBM was also competing with Microsoft for operating system supremacy in 1990 Microsoft and IBM were working together on a new system but IBM split the partnership when it saw Microsoft had its own ambitions based on this development Microsoft eventually released Windows NT 3.1 in July 1993 IBM's operating system called os/2 had a low market share selling only 300,000 copies compared to Microsoft's dos of 25 million in 1990 but it was described as being superior and even Bill Gates admitted to being terrified with what IBM would do next unfortunately for IBM Gerstner saw os/2 as a money loser and he did not give it sufficient support he cut investments in software each year in 1994 he gave os/2 one more chance with a version called warp a name inspired from a popular show at the time Star Trek The Next Generation however Gerstner then made a horrific decision you released IBM's PC with a humiliating dual boot option meaning Microsoft DOS and os/2 were both installed on the same machine a journal article said from the time os/2 lets you gradually ease into the use of your new operating system by installing a dual boot feature that enables you to restart your PC with DOS if you find os/2 is taking too long to get used to by putting windows on the same computer he doomed os/2 for three reasons one at the time computers had limited space in this wasted space - why would customers support an operating system that IBM didn't even have confidence in 3 in enraged IBM's programmers and admitted defeat to Microsoft os/2 did not get proper funding and users complained that it took too long to turn on by 1997 even IBM installed Windows on its internal machines and by 2006 IBM discontinued all support os/2 could have done better if IBM picked either a licensing model like Microsoft where other PC makers bought its OS for a fee or a model that Apple uses where IBM machines had only os/2 on it Kershner picked something in the middle which completely discredited his PC and operating system Gerstner had one more software failure in 1995 IBM purchase flow to software who was famous for its Lotus 1-2-3 spreadsheet software but by 1995 it was rapidly losing market share to Microsoft Excel Lotus had an ace up its sleeve called Lotus Notes which was a collaborative program allowing people to work together through email and innovative features such as group work where two or more people could work on a file together but IBM made some mistakes it initiated a hostile takeover which was eventually completed for 3.5 billion in July 1995 to soothe tensions IBM vested everyone's stock options but by doing this there was a little financial incentive for lotuses key employees to stay and in October many key executives left including its CEO in addition at the time of the acquisition Gerstner had not heard of ray Ossie who Bill Gates labelled as one of the top five programmers in the universe therefore after the acquisition he risked losing Lotus's key employee fortunately Ozzy wanted to finish the Lotus Notes project and he stayed with IBM until 1997 unfortunately by 1998 Microsoft had developed a cheaper and better email client that was outselling Lotus Notes IBM announced the sale of Lotus in December 2018 for one point a billion to HCL Technologies half the price it originally paid for it Gerstner was more successful in building IBM's middleware software portfolio middleware is itself a software that helps different software and hardware linked together to complete a task its db2 database software became a market leader databases are important and are used in many crucial applications for example when you log in to see your banking information a bank is retrieving your information from a database IBM maintained its leadership with Kerzner in the database market with approximately 2.4 billion of Revenue and Kirchner's final year or 35 percent market share compared to 32 percent of Oracle databases are just one type of middleware software we are showing here astute viewers may notice db2 s decline on the right we will get to that by 1997 where was 40% of IBM software revenue and IBM marketed itself as a middleware company so I cloned you you did what lifted a DNA sample from your keyboard we're migrating to IBM middleware everything's integrated efficient flexible secure people can be productive again what do I do with all I use IBM has continued to be a leader in middleware software in 2015 it was ranked as having the largest middleware share for the 14th year in a row with approximately 7 billion of revenue Gerstner also made an excellent decision to invest 1 billion in Linux in 2000 Clinic's is an open source operating system and its investment helped Linux improve increasing its popularity this investment in 2000 would become important in 2018 which will soon be discussed IBM also continued to develop cool technologies such as deep blue which was the first computer to beat a chess grandmaster Garry Kasparov in 1997 an IBM continued its artificial intelligence wheat with Gerstner while Gerstner deserves blame for lacking focus in many software and hardware areas he deserves credit for growing IBM services business IBM Services team ensures your technology works in some cases a company would actually outsource its whole IT department and even computers to IBM who handles everything inside the company related to its technology pre Gerstner services were already large at 20% of revenue when he left services were 45 percent while Gerstner deserves a lot of credit for quickly and profitably growing revenues the idea to increase services was not innovative from a strategic perspective an article in 1993 said IBM will never dominate computers again but it can become the biggest supplier of computer services in addition another 1993 article said IBM still has a great opportunity as a service provider Gerstner who had a consulting background from working at McKinsey was the right man for the job to grow IBM services but was he the right man well in 1992 IBM was spending nearly 20 times as much as Microsoft and oversee times more than Intel on Rd but when he retired all the companies spent similar amounts in his second last year Gerstner bragged that IBM's expenses had decreased from forty four point five percent of revenues to twenty three point six percent but was this really a good thing on Rd alone Microsoft was spending sixteen point four percent of revenue in 2001 which neared all of IBM's expenses Gerstner lacked a clear technological vision and made strange comments like in his 1998 annual report where he said technology changes much too quickly now for any company to build a sustainable competitive advantage on that basis alone clearly Gerstner was changing IBM's trajectory from a technological giant into a company that would make most of its money from services we should point out that historians view Gerstner kindly because IBM stock increased substantially while he was CEO the stock increased twenty six point five percent on average per year compared to the S&P 500's ten percent the S&P 500 is often referred to as the market and represents what is supposed to be America's 500 largest companies his stock performance is extremely impressive but while his large spending cuts would help profitability in the 90s it would later hurt IBM another reason Gerstner is viewed as a success is he controlled the narrative by writing a book soon after he retired discussing how he got the IBM elephant to dance business sites like CNN Money forgot its own 1993 article that the situation was not as dire as a booked when it wrote in 2002 Lou Gerstner seems to have pulled off a miracle but Gerstner would make one last mistake choosing Sam Palmisano to be the next CEO Palmisano simply continued Kirchner's trajectory after he succeeded him on March 1st 2002 four months later IBM purchased PwC's consulting arm for 3.5 billion which added to its services division from a financial perspective this acquisition was highly attractive as PwC consulting and nearly 7 billion of revenue in 2001 and HP actually had tried to buy it in 2004 18 billion the division would add prestige to IBM services as PwC's team added management consulting options by 2005 IBM passed the threshold of 50 percent of revenue coming from services but a problem emerged as IT matured meaning more people were already connected the industry would have more stable revenue growth and IBM couldn't expect the double-digit growth that had had under many years with Gerstner to grow earnings Palmisano focused on reducing costs in only 2004 memo IBM said they could save money hiring Chinese programmers for 12.5 dollars an hour compared to 56 or a u.s. programmer IBM was embarrassed by this release and said it lowered the number of planned offshore workers mysteriously offshore workers continued to grow in 2002 IBM had only 2400 employees in India in 2006 41,000 2017 over 130,000 no the AI in IBM doesn't stand for India in comparison US employees were a hundred and forty thousand in 1999 a hundred and thirty thousand in 2007 and an estimated 70,000 as of 2020 the issue with outsourcing is the company could lose quality it could also affect the morale of the US workforce and lower IBM's reputation the full effects of pom Asano's outsourcing would soon be seen under ro many just like Gerstner in order to evaluate Palmisano we have to see how IBM's key product categories did under him let's look at software when Palmisano became CEO IBM had the largest database product just ahead of Oracle and it had dominated the database market since the 1990s but by 2004 IBM moved into second place - Oracle the total database market was estimated at 15 billion at the time articles were predicting a fierce battle for database supremacy but someone forgot to tell Sam DV to lack marketing spend and many CEOs and customers thought it was old-fashioned likely because of its old-fashioned user interface IBM also neglected the product and it didn't make a major upgrade for 4 years today the market is over 50 billion and projected to increase the 60 billion by 2022 and Larry Ellison the colorful founder of Oracle is dominating the market and he explains why IBM lost this market but again it's now no longer that it's the tail and the services business is the dog so we are bigger than IBM was bigger than us and software we're now our bigger software company than IBM we beat them in database by 2018 virtually no large company ran db2 well maybe one did what percentage of the top hundred SHP customers in in europe how many of them run the Oracle database only ninety-nine one actually ran deep IBM db2 while Lotus was neglected under Gerstner it collapsed under Palmisano an article published in 2006 called survival of the unfit --is essentially explained that everyone hated lotus in 2007 IBM gave away lotuses products for free as mentioned Lotus was sold in 2018 Palmas annos biggest mistake was initially missing the cloud computing market in 2006 Jeff Bezos of Amazon recognized that he could make money allowing people to use Amazon servers when Amazon itself was not using it at this time Palmisano was Tseng enterprise implying big business will have his own unique model you can't do what we're doing in the cloud AWS was a big threat that was virtually ignored until Netflix moved off IBM's mainframes to Amazon's Cloud in 2010 suddenly the word cloud which appeared only once in IBM's 2008 annual report was mentioned 39 times in its 2010 report today Amazon dominates the cloud market on the positive side IBM continued to invest in artificial intelligence Palmisano showed off IBM's improved Watson which won in the popular show Jeopardy in 2011 Jeopardy questions are often difficult to understand for the average person making this an impressive feat while Watson has yet to be a resounding commercial success IBM continues to have a leadership position in artificial intelligence Sam sold off the ailing PC business to Lenovo in 2004 the PC division had nine billion of revenue but lost a small amount of money at this time the sale of the PC business was right given Gerstner Smith's management IBM also continued to dominate the server market under Palmisano in 2005 IBM had server sales of 17 billion or 32 point nine percent of the market by 2011 IBM still had the number one market share with 38% while Palmisano was congratulating himself for IBM being a leader in the number of patents it obtained this was a tradition actually started by Gerstner who discussed IBM's patent lead in its 1995 annual report however despite leading in patents IBM's research and development lag compared to other tech giants when Palmisano started Microsoft had essentially the same R&D expense at the end of his tenure Microsoft's was 50% larger Palmisano has been heavily criticized by the media for setting two roadmaps for IBM's earnings per share forecast IBM met his 2010 roadmap where he said IBM would earn $10 in earnings per share by earning 1167 Palmisano was congratulated at the time for making this target however the media currently blames him for setting a 2015 roadmap for $20 a share in earnings and then retiring 16 months later Palmisano should not be blamed for setting ambitious targets and many companies issue long-term guidance where he can be blamed is if the roadmap led to bad decisions for example after the roadmap was announced IBM drastically increased share buybacks buybacks helped a company raise earnings per share by lowering the number of shares outstanding buybacks are good but sometimes investing in the future is more important Palmisano chose buybacks over investing in its future he capped his final year in 2011 with record revenues and historic operating profit of 21 billion in addition he had very respectable stock performance gaining 6% on average per year compared to only 1% of the S&P 500 yes it's hard to remember there was a time that the market returned only 1% over so many years however while Palmisano was CEO the tech industry was rapidly changing all the tech giant's we know and love today were drastically increasing their R&D and IBM wasn't when Palmisano retired at the end of 2011 IBM needed a technological visionary to turn around the ship what it got was genie remedy to the untrained eye IBM was doing well when Sam Palmisano retired IBM was the fourth biggest company in the world and genie was the logical choice for CEO as she orchestrated the deal in 2002 for PwC consulting she also had worked with IBM services since 1991 but Jeannie's tenure was marked with controversy and IBM was frequently the worst performing stock on the Dow Jones to evaluate genie let's see how she did in some key products IBM services growth load once Ramadi took over one thing that could have led to this decline was Palmas a nose relentless pursuit to improve margins but it appears Rometty also shared this belief as margins increase further in a 2014 conference call an analyst asked why IBM was performing so poorly relative to Accenture IBM CFO at the time Martin Schroeder said we didn't have the signings performance we wanted essentially meaning he has no idea but perhaps the success of cost-cutting eventually led to this revenue decline with a lack of investment IBM's share of the database market collapse this business was hurt by both Palmisano and Romani in cloud software Rome Eddy didn't invest quickly enough and in 2013 the CIA accepted Amazon's bid for 600 million for cloud computing services despite IBM bidding 25% less Romania also deserves a lot of blame for the lack of cloud investment because it's not as if she started so late when she started Microsoft still had this guy as CEO [Music] [Music] [Applause] [Applause] yet despite room Eddie starting while steve ballmer was in charge its microsoft that is an erase with amazon today for cloud supremacy not IBM Rometty has recently increased IBM's investment in the cloud but IBM still ranks as a niche player compared to the leaders while Microsoft dramatically increased its capital spend in 2014 IBM did not do so in fact it decreased capital spending Amazon was also spending a lot which has helped its lead as of 2020 it has two times more regions than the next largest cloud provider more availability is important as it increases computing capacity and users can be more confident there will be less outages we will soon discuss IBM's cloud future role many continued IBM's investment in Watson however it over-promised what Watson could do in terms of diagnosing cancer and in 2017 many of its partners were upset including MD Anderson a Cancer Center whose president resigned after unsuccessfully spending 62 million on Watson technologies in addition doctors report that Watson was giving them unsafe recommendations we will soon discuss Watson's future IBM server market share declined this decline is tough to tell if it's anyone's fault because the market has gone in commoditized and has become less important to IBM over time because of this in 2014 IBM sold its lower end server business to Lenovo for two billion IBM still does make some hardware though and it's number one in mainframes with a staggering 90 percent market share however today's market size is not as big as it was when we started our journey in the 90s today's size is only 2 billion compared to 14 billion in 1991 we will give Palmisano and Roma D a pass when it comes to the decline in this division so how did she do well a myth was created that Palmisano sandbag dramedy by making a 2015 road map of $20 of earnings sure that she couldn't possibly hit the fact is this is her job to set her own vision and targets for IBM and she deserves a hundred percent of the blame for trying to follow Palmas a nose road bomb in addition from all her statements she fully supported this road map and she bought back high amounts of stock to achieve these targets Jeanne deserves even more criticism for her relentless earnings focus for example she sold the last remnants of IBM's physical semiconductor business on July 1st 2015 though IBM still does a lot of research on microprocessors but the mistake was that IBM actually paid Global Foundries 1.5 billion to buy its business in addition IBM said it would spend 3 billion on microprocessor research over five years and it would share this research with Global Foundries we can speculate that Roma D may have been motivated to pay cloven trees because of the way IBM reports operating earnings per share which is a non-gaap method GAAP is an acronym that stands for generally accepted accounting principles companies have to report GAAP but they can also shown on GAAP which is essentially customized accounting despite non-gaap seeming flawed it is often superior to GAAP as it is less rigid but it can also lead to manipulation by management which Romo D appears to have done let's show a quick example of what she did if IBM's processor plant lost 500 million then it tells shareholders it lost 500 million in both gap and non gap however if IBM sells this business and pays Global Foundries 500 million a year then it tells shareholders at lost 500 million for GAAP but his non-gaap earnings are zero or 500 million higher because this loss would now be under this middle column called acquisition related adjustments IBM did not spend enough on R&D under Roma D as its spending declined most years and it's spending by the end of 2019 was far lower than when she started in addition Roma did not invest enough in cloud infrastructure as IBM's capital spending shrunk under her under her the stock dropped 28% compared to a hundred and fifty seven percent gained by the market Roma D doesn't deserve all the blame for IBM's decline she simply wasn't the visionary that IBM needed to turn around the company and she didn't fix any of the mistakes made by her predecessors right now IBM needs a visionary well they get one on January 30th 2020 Rometty stepped down as CEO and she will be succeeded by Arvind Krishna Arvind is an interesting choice because he has worked for IBM since 1990 in technology roles and not in the services division he appears to be this visionary while its last three CEOs focused on services they fortunately still invested some money in artificial intelligence and eventually Rometty invested in cloud computing in addition IBM still has strong cash flows and its businesses are not necessarily in decline while revenue was negative in 2019 IBM's decline was in its services division which we will explain may soon rebound IBM's other revenues actually grew in 2019 such as transaction processing where IBM ensures a large volume of transaction for banks or Airlines are successfully recorded in addition it is still a leading middleware provider and 85 percent of Fortune 100 companies use IBM's MQ software which allows data to be passed between programs Arvind was chosen to be CEO because he was the architect behind IBM's 2018 acquisition of Red Hat which was completed in July 2019 I like the Lotus deal that failed Red Hat employees have significantly bought in to IBM including its former CEO Jim Whitehurst who is now president of IBM this deal has the potential to be a large success if you remember near the start of the video we credited Lewis Gerstner for investing 1 billion in Linux to improve its operating system this investment helped Linux become the most popular operating system for servers today Linux is even the most used operating system on Microsoft's cloud platform called a jar of the total server market Linux has a 68% share and Red Hat has nearly 50% of clinic's users with 32.7% despite Linux being free Red Hat has its own version of Linux and clients often choose to work with Red Hat as a I'd software updates security and other services such as OpenShift which helps developers more easily scale and deliver their code this investment in Red Hat also makes IBM the leader in hybrid cloud computing hybrid cloud will likely be the future because companies will want to store data on their own internal server and on the cloud in addition many companies may want to use various cloud providers meaning an open system like Red Hat's would be desired on Amazon Web service it is difficult to share information between your local server and the cloud this is why antonio Neri the CEO of hewlett-packard enterprises calls AWS the Hotel California of clouds because once you join you can't leave Wow it may seem counterintuitive IBM believes a customer would more likely use its cloud services if it was easy to leave similarly you are more likely to buy product if you can return it which is why an open cloud world will likely be the future IBM may finally be helped by its large services team as it can now recommend to its clients a hybrid cloud option and then install its own products creating synergies other tech companies do not have these synergies because they do not have services teams though Microsoft is trying to build its own IBM can also pounce on Amazon's disadvantages most of amazon's cloud revenue is from infrastructure as a service or I AAAS a brief description of the cloud shows why this may be a weakness cloud revenue can be put into three categories IAS or essentially using someone else's computer to process your information platform as a service or paas which is databases and operating systems like Red Hat's Linux or SAS SaaS software as a service like office 365 Amazon currently dominates infrastructure but this is the easiest to commoditize while IaaS revenue is expected to grow quickly until 2022 it may soon become a low margin business this isn't to say building data centers is unimportant having more data centers gives Amazon an advantage because if you use their infrastructure they can sell you their platforms and software Arvind Krishna there needs to increase IBM's investment in data centers IBM also has exciting prospects in AI while Watson was over-promised it is still a leading AI platform with a 9.2 percent market share or 2.6 billion of Revenue what should also be encouraging is AI usage is still small but is expected to go rapidly from 2.1 billion to 36 point 1 billion by 2025 an incredible 50.2% compound annual growth rate in only one market the healthcare AI market iBM has other advanced technologies and is a leader in quantum computing which may also prove to be exciting in the future following its RedHat acquisition in 2019 IBM suspended its much criticized share buyback program distancing itself from the legacy of being so financially minded and with Arvind IBM seems once again focused on technology this may allow it to live out Stanley Kubrick's prediction that IBM will produce the robot of the future while how allowed humans to die in space we hope Watson lives up to his promise of doing more harm than good for Humanity the crowd also posted 511 arguments opposing the claim that AI will bring more harm than good here is a summary there are 5 issues that will be elaborated on now the first will demonstrate how a I will automate repetitive tasks the next issue will show how a I will create new jobs then we will hear about how AI is a technology of the future designed by humans in addition we will hear about quality of life and human error

Channel: The Market is Open

Views: 681,624

Keywords: Tags: International Business Machines, IBM, Gerstner, Palmisano, Rometty, Ginni Rometty, Microsoft, Bill Gates, Gates, Steve Jobs, Jobs, Intel, Andy Grove, Arvind Krishna, Blockchain, Watson, Artificial Intelligence, Cloud Computing, AWS, Amazon Web Service, Microsoft Azure, Azure, Amazon, Google, Tech, Business, Stock Market, Rise and Fall, Warren Buffett, Buffett, Business Documentary

Id: l4b1D1vWRnc

Length: 38min 25sec (2305 seconds)

Published: Tue Mar 10 2020

Reddit Comments

[u/EtiennedeWilde]

I can't imagine working for a less exciting company

[u/[deleted]]

It's worth 90 billion, not quite dead yet.

[u/Keruuh]

IBM and it's history is interesting. This series of clips and roughly edited voiceover is not.

[u/gargamel_1982]

Their tech truly is quite bad...last good thing that I can recall coming out of them was the IBM ThinkPad but they sadly sold it to a Chinese firm - such a disgrace

[u/eddyparkinson]

cool documentary. surprised that innovators dilemma did not get included, it explains so much of tech history.

[u/cheese_wizard]

That' just false about HAL being inspired by IBM. Arthur C Clarke cleared that up decades ago.