A Holistic Analysis of IBM's "On Demand" Strategy
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Table of Contents Page 1 Table of Contents Table of Contents............................................................................................... 1 1 Introduction .................................................................................................... 3 1.1 Questions Discussed in this Master Thesis ............................................. 4 1.2 Areas Not within the Scope of this Master Thesis ................................... 6 1.3 Structure of this Master Thesis................................................................ 7 2 IBM’s “e-business on demand” and the “New Era” ........................................ 8 2.1 Evolution of “e-business on demand” ...................................................... 9 2.1.1 IBM System/360............................................................................ 9 2.1.2 IBM Personal Computer.............................................................. 11 2.1.3 IBM Midrange Systems: AS/400 & RS/6000............................... 13 2.1.4 SAA - Systems Application Architecture ..................................... 16 2.1.5 Change of Commercial Model..................................................... 18 2.1.6 Building on Services.................................................................... 21 2.1.7 e-business................................................................................... 24 2.1.8 Focusing on Middleware ............................................................. 26 2.1.9 Java ............................................................................................ 28 2.1.10 Linux ........................................................................................... 29 2.1.11 Developer Relations and Open Source....................................... 31 2.1.12 Grid Computing........................................................................... 32 2.1.13 Autonomic Computing................................................................. 34 2.1.14 Industry Insight & Business Consulting....................................... 37 2.2 Concepts and Technologies of IBM’s “e-business on demand” ............ 39 2.2.1 The era of e-business ................................................................. 39 2.2.2 The “on demand business” ......................................................... 41 2.2.3 The “on demand infrastructure”................................................... 49 Table of Contents Page 2 3 IBM’s transformation to “e-business on demand” ........................................ 54 3.1 IBM’s Product & Service Portfolio.......................................................... 55 3.1.1 Introduction ................................................................................. 55 3.1.2 Hardware Portfolio ...................................................................... 63 3.1.3 Software Portfolio........................................................................ 66 3.1.4 Services Portfolio ........................................................................ 69 3.1.5 Financing..................................................................................... 78 3.1.6 Conclusion .................................................................................. 79 3.2 Transformation to an “on demand” business......................................... 83 3.2.1 IBM’s e-business transformation................................................. 83 3.2.2 IBM’s “on demand” transformation strategy ................................ 90 4 “on demand” in Practice............................................................................... 93 4.1 IBM’s “on demand” today....................................................................... 93 4.1.1 IBM’s 300 mm Semiconductor Facility ........................................ 93 4.1.2 IBM’s Personal Computer Business............................................ 94 4.2 Automotive Industry............................................................................... 95 4.3 Retail Industry........................................................................................ 98 4.4 Banking Industry.................................................................................. 102 5 IBM’s Major Competitors............................................................................ 106 5.1 Hewlett-Packard .................................................................................. 106 5.2 Sun Microsystems ............................................................................... 110 5.3 Microsoft .............................................................................................. 114 5.4 EDS ..................................................................................................... 117 5.5 IBM and its Competitors – Overview Table.......................................... 120 6 Summary & Conclusion ............................................................................. 121 Attachment A - Acronyms .............................................................................. 125 Attachment B - Bibliography........................................................................... 130 Introduction Page 3 1 Introduction On October 30, 2002, the Chairman of the Board and Chief Executive Officer of IBM, Samuel J. Palmisano, announced the beginning of a “new era” for information technology called “on demand”1. Samuel J. Palmisano outlined the principles of “on demand” and how this new business model and strategy for running businesses would help businesses to become more competitive. He also explained the role of information technology in this “on demand business” and the necessary paradigm change that will take place in the IT industry to make this happen. IBM is calling this new era of computing “e-business on demand”.2 In the business world IBM has always been known and has always been respected for its effective marketing and sales organizations in the past3 and at present4. As a result of that, from the 1950s until the late 1980s IBM had been criticized for being less innovative and re-active to market activities when it should have been creative and pro-active. Critics reasoned that the only factor why “Big Blue”5 was able to dominate the IT industry until the mid 1980s was because of its strength in marketing and sales6. This Master thesis will take a closer look at IBM’s “e-business on demand” and analyze it, taking IBM’s history and the current market environment into consideration. It will also analyze whether or not this enterprise strategy is primarily a public relation campaign and sales initiative, or an integrated corporate strategy that might even enable IBM to return the market-dominating position it once had.7 1 Announcement at the Annual Customer Meeting in New York’s American Museum of Natural History. 2 Cf. [IBM2] Presentation used at the “e-business on demand” announcement on October, 30th 2002. 3 Cf. [McKenna, 2]. 4 In April 2003 IBM receives following ratings from Gartner “VendorRatings”: In the category “Overall” the rating “Positive” and “Strong Positive” in the category “Enterprise Sales & Distribution” [Gartner2]. 5 IBM is often referred to as “Big Blue” based on its size and the colors used for their mainframes until mid 1980’s [McKenna, 2], but also because IBM employees were typically dressed in dark-blue suits and white shirts [Rodgers, 91-93]. 6 McKenna describes how IBM regularly picked up ideas of successful new technologies and products and translated them into IBM products which then dominated the market [McKenna]. 7 Cf. [Fisher, 98-124]. Introduction Page 4 1.1 Questions Discussed in this Master Thesis This Master thesis will discuss and provide answers to the following five research questions: Question 1. In the computer industry, what is the difference between the “old eras” and this “new era” called “e-business on demand”? The modern computer industry is defined by three eras: the centralized era, which revolutionized business by automating the back office; the distributed era, which marked the beginning of departmental automation; and the current stage, the network era.8 In the year 1996 IBM named the network era “e-business”9. IBM has defined three stages of “e-business” of which IBM believes the last will mark the next era in the computer industry: “e-business on demand”.10 This research question will analyze these three stages. Question 2. What constitutes IBM’s “e-business on demand” and how did it originate? IBM has built a business and a technology framework around “e-business on demand”. This research question will take a closer look at the principles of this framework and its components. It will also put them into context with current business models on the one side and with IBM’s key products, services, strategic decisions and initiatives on the other side, retracing the last forty years which eventually led to this “e-business on demand” framework.11 8 Cf. [CSCRS]. 9 Cf. [Gerstner, 165 f.]. 10 Cf. [IBM4, 1]. 11 Cf. [ZDNet1] In his article Dan Farber criticizes that e-business on demand “is a natural evolution of the current initiatives rather than the introduction of a disruptive technology or theme”. Introduction Page 5 Question 3. How does one describe an “on demand” industry? While Question 2 discusses “e-business on demand” and its principles on a theoretical level, this question will describe and assess the implementation of these principles by discussing and outlining the “new era”, using examples in selected industries. Question 4. Is IBM aligning and transforming