IBM: A Recovered Giant

Written Case #1

BA 550 – Management Theory

February 25, 2003

BA 550

Written Case #1

February 25, 2003

Assess the pro and con arguments for the 1982 decision to offer Microsoft and Intel a foothold in the software and operating systems. (Keep your perspective to that of the early 1980’s; don’t be biased with the benefit of hindsight.)


o Able to outsource aspects of the business
o Save on costs (R&D, Production, Inventory)
o Allows IBM to concentrate strictly on PC’s & finding/meeting consumer wants/needs
o Makes them more flexible in a very fast paced environment
o Enabled them to bring their product to market quickly
o Allows them to offer better technology/products/services

o Gave two upstart companies a great opportunity in a growing market
o Were not able to develop their own software/hardware which could later hinder them
o Free exposure for Microsoft and Intel
o Potential for IBM market share to fall
o Gave Microsoft and Intel control over standards for the future of technology/software
Do you see any way that IBM could have maintained its nimbleness and technological edge as it grew to a $60 billion company? Reflect on this, and be as creative as you can.

The biggest thing would have been for them to consider more aspects of their business being outsourced. By this I mean smaller aspects, not software & technology as they did in the 1990’s. One other idea I could think of would be to make the different entities of IBM more independent. I do not mean agree with the decision by Aker’s to break IBM into 13 different divisions. I am implying the IBM should have given those 13 divisions more decision-making power. Granted, major decisions would still need to be reviewed by top executives, but smaller decisions could be made by lower level management. This would in turn make the company more nimble by allowing decisions to be made without top executives required to perform extensive research.

“Tradition has no place in corporate thinking today.” Discuss this statement.

I agree with this statement for the most part. There are certain instances when the tradition of a company must be considered, but the majority of the time, the company must move ahead with trends in the industry. They must be aware of changes to market wants/needs and cater to their customers. What worked twenty years will most likely not work today. Industries change yearly, and companies must be liberal enough in their thinking to adapt to these changes.

Playing devil’s advocate, can you defend the position the problems besetting IBM were not its fault, that they were beyond its control?

I think that Microsoft and Intel took advantage of the opportunity they were given and exploited it to their advantage. If IBM had known that these companies would have used this opportunity to leapfrog them I can guarantee they would have never gotten the chance. That is the only aspect I can play devil’s advocate on. I truly believe that all the other problems IBM encountered were no one’s fault but their own. There is no other way to look at it.

Giant organizations are often plagued with cumbersome bureaucracies. Discuss how this tendency could be prevented as an organization grows to large size over many years.

One easy solution to this problem would be to give different segments/divisions of a company more responsibility and more decision making power. Upper level management does not need to be involved in every decision within the company. Also a clear description of roles and responsibilities of each division should be given. This will leave less room for error and also people being involved where they need not be

Which of the three C’s do you think was most to blame for IBM’s problems? Why do you conclude this?

I believe that it is a combination of both complacency and conservatism. I think that IBM became comfortable with their place in the market and were not eager to grow and expand their business. This allowed younger upstart companies to catch them and eventually overtake them in market share. Conservatism also played a role in their problems. IBM was not really concerned with moving forward with the industry as new products/technology were introduced. They continued to concentrate on mainframe computers which had been