As IBM Faltered, `the Slide Shows Grew Slicker'

COMPUTER WARS By Charles H. Ferguson and Charles R. Morris, Times Books: New York, 272 pp., $23.

WHAT ever happened to IBM?

International Business Machines Corporation epitomized America's global technological dominance from World War II through the 1980s. But the 1990s brought huge losses and tarnished its sterling image. The company recently tapped Louis Gerstner, former chief executive of RJR Nabisco, to chart a fresh course. Some think it's too late, however.

What went wrong? More to the point, where is the industry headed?

Joining the ranks of "Big Blue" post-game analyses books is "Computer Wars: How the West Can Win in a Post-IBM World" by two computer industry consultants, Charles Ferguson and Charles Morris.

The authors big contribution is putting IBM's decline in a larger context, showing where the industry is headed and how smaller, nimbler United States companies can keep ahead of larger counterparts in Japan and Europe. To begin with, though, the book explores the IBM of yore, which aggressively courted change to keep ahead of competitors and meet customer needs.

IBM virtually created the market for mainframe computing, taking a huge risk that paid off handsomely. Gradually, however, the company began pursuing profits more than change. And in the 1980s it began to simply ignore fundamental changes in the market.

Personal computing was the agent that turned over the apple cart of IBM's mainframe business. Like a greek tragedy, IBM was instrumental in popularizing personal computers in the 1980s workplace, but failed utterly to capitalize on early success. As IBM's PC business struggles, smaller competitors soar. Meanwhile profitable mainframe sales are fading fast.

Even after IBM faltered in the PC arena, its ability to catch up in other areas - more-powerful workstations, for example - was stymied by in-house mainframe advocates, who hated to see profits from the sales of "big iron" eroded by less-expensive machines.

Company politics evolved into a "cult of personality" style of leadership that resisted new computing ideas that might upset the profitable status quo, the authors argue. "Making presentations became the critical skill; the slide shows grew slicker and ever more professional." Top managers, mostly former salesmen, "were constantly faced with technical judgments they could not have understood."

The meat of the book explains how successful companies such as Microsoft, Intel, Novell evolved into fast-moving miniature versions of the aggressive, risk-taking IBM of old. Yet what has been spawned, the book argues, is an entirely new style of business management - the "Silicon Valley" model - that uses wits, alliances, lean manufacturing, and strategic awareness to keep ahead.

"There is a serious possibility that IBM is finished as a force in the industry," the authors contend. They say the global computer industry battle between the US and Japan will be won or lost by the Silicon Valley model of business management. Victories by such US "third force" companies are crucial to US prosperity, the authors argue. Since profits flow from being on the cutting edge, the trick for US companies is to push themselves to develop new computer architectures every few years so that the Japa nese can't get a single product architecture completely in their sights before another is developed.

A small disclaimer: `Computer Wars' reads like a "business" book - its tone and phrasing stiff and starched like an IBM salesman's shirt. Rife with computer jargon and numbers, the book is intelligible if you can stick with it for 50 pages or so. But it might send a general-interest reader scurrying for a mystery novel.

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