100 years of IBM, 100 years of Think

Google, Apple and Facebook get all the attention. But the forgettable everyday tasks of technology - saving a file on your laptop, swiping your ATM card to get 40 bucks, scanning a gallon of milk at the checkout line - that's all IBM.

International Business Machines turned 100 on Thursday without much fanfare. But its much younger competitors owe a lot to Big Blue.

After all, where would Groupon be without the supermarket bar code? Or Google without the mainframe computer?

IBM dates to June 16, 1911, when three companies that made scales, punch-clocks for work and other machines merged to form the Computing Tabulating Recording Co. The modern-day name followed in 1924.

With a plant in Endicott, N.Y., the new business also made cheese slicers and - significantly for its future - machines that read data stored on punch cards. By the 1930s, IBM's cards were keeping track of 26 million Americans for the newly launched Social Security program.

These old, sprawling machines might seem quaint in the iPod era, but they had design elements similar to modern computers. They had places for data storage, math processing areas and output, says David A. Mindell, professor of the history of technology at the Massachusetts Institute of Technology.

Punch cards carted from station to station represented what business today might call "data flow." "It was very sophisticated," Mindell says.

The force behind IBM's early growth was Thomas J. Watson Sr., a demanding boss with exacting standards for everything from office wear (white shirts, ties) to creativity (his slogan: "Think").

Watson, and later his son, Thomas Watson Jr., guided IBM into the computer age. Its machines were used to calculate everything from banking transactions to space shots. As the company swelled after World War II, IBM threw its considerable resources at research to maintain its dominance in the market for mainframes, the hulking computers that power whole offices.

"When we did semiconductors, we had thousands and thousands of people," says Donald Seraphim, who worked at IBM from 1957 until 1986 and was named a fellow, the company's highest honor for technical achievement. "They just know how to put the force behind the entrepreneurial things."

By the late '60s, IBM was consistently the only high-tech company in the Fortune 500's top 10. IBM famously spent $5 billion during the decade to develop a family of computers designed so growing businesses could easily upgrade.

It introduced the magnetic hard drive in 1956 and the floppy disk in 1971. In the 1960s, IBM developed the first bar code, paving the way for automated supermarket checkouts. IBM introduced a high-speed processing system that allowed ATM transactions. It created magnetic strip technology for credit cards.

For much of the 20th century, IBM was the model of a dominant, paternalistic corporation. It was among the first to give workers paid holidays and life insurance. It ran country clubs for employees generations before Google offered subsidized massages and free meals.

"The model really was you joined IBM and you built your career for life there," says David Finegold, dean of the School of Management and Labor Relations at Rutgers University. Transfers to other cities were still common enough that employees joked IBM really stood for "I've Been Moved."

The origins of the company's nickname, Big Blue, are something of a mystery. It may simply derive from IBM's global size and the color of its logo.

IBM's gold-plated reputation was based in part on ubiquity and reliability, as well as a relentless sales force. But its fortunes began to change as bureaucracy stifled innovation. Information-technology managers used to joke that nobody ever got fired for buying IBM. But by the 1980s, Big Blue found itself adrift in a changing technology environment.

IBM had slipped with the rise of cheap microprocessors and rapid changes in the industry. In an infamous blunder, IBM introduced its influential personal computer in 1981, but it passed on buying the rights to the software that ran it - made by a startup called Microsoft.

IBM helped make the PC a mainstream product, but it quickly found itself outmatched in a market it helped create. It relied on Intel for chips and Microsoft for software, leaving it vulnerable when the PC industry took off and rivals began using the same technology.

The PC's casing wasn't as important as the technology inside it, and IBM didn't own the intellectual property inside its own machines. In addition, the rise of smaller computers that performed some of the same functions as mainframes threw IBM's main moneymaking business into disarray.

With its legacy and very survival at stake, the company was forced to embark on a wrenching restructuring.

One of its major achievements turned out to be re-engineering itself during the upheavals of the 1990s. Viewed as too bureaucratic to compete in fast-changing times, IBM tapped an outsider as CEO in 1993 to help with a turnaround.

Louis Gerstner, a former executive with American Express and RJR Nabisco, had little knowledge of technology or IBM culture. In his first meeting with top IBM executives, he was the only one in the room with a blue shirt.

But he broke up old fiefdoms, slashed prices and eliminated jobs. IBM, which had peaked at 406,000 employees in 1985, shed more than 150,000 in the 1990s as the company lost nearly $16 billion over five years.

Gerstner resisted pressure to break up the company and instead focused on services, such as data storage and technical support. Services could be sold as an add-on to companies that had already bought IBM computers. Even barely profitable pieces of hardware were used to open the door to more profitable deals.

The shift allowed IBM to ride out two recessions: When times are tough, businesses pay IBM to help them find ways to cut costs and handle technology chores that would be more expensive to perform in-house.

The change in strategy was risky for a company that helped create the PC industry, yet IBM rose to become the world's biggest technology services provider.

With around $100 billion in annual revenue today, IBM is ranked 18th in the Fortune 500. It's three times the size of Google and almost twice as big as Apple. Its market capitalization of around $200 billion beats Google and allowed IBM last month to briefly surpass its old nemesis, Microsoft.

Though transformed, IBM remains a pioneer, the envy of the technology industry. Hewlett-Packard Co.'s new CEO, Leo Apotheker, says one of his primary goals is to strengthen the company's software and services businesses to compete better with IBM.

Some things haven't changed. The company still spends heavily on research, about $6 billion a year. It still comes up with flashy feats of computing prowess, most recently when its Watson computer system handily defeated the world's best "Jeopardy!" players.

And, just as in 1911, it's still in the business of finding data solutions.

While IBM's Watson attracted buzz by beating two human "Jeopardy!" champions, the company wants to put it to real-world use as a medical diagnostic tool that can understand plain language and analyze mountains of information. That's in line with IBM's focus on other big data projects, such as analyzing traffic patterns citywide to predict and stave off traffic jams.

The company that built its success making sense of millions of punch card records sees future innovations in the analysis of the billions and billions of bits of data being transmitted in the 21st century.

"The scale of that enables you to do discovery, whether it's in the case of drugs, medicine, crime - you name it," says Bernard Meyerson, IBM's vice president for innovation.

IBM tailors BPM Software for Small Business

IBM has customized its new BPM (business process management) software to help small and midsized organizations set up their own automated workflows just like big businesses do.

Most BPM tools "are built for thousands of users and to run across multiple servers, and so they can get complex and expensive. This software addresses the BPM need in the mid-market," said Ron Kline, an IBM director for marketing to small and midsized businesses. "It fits the need for a midsized company, without it being too lightweight."

The software is based on the recently revamped enterprise BPM software IBM launched earlier this month, called Business Process Manager.

The standard edition of Business Process Manager combined two of IBM's previous BPM offerings, the WebSphere Process Server and IBM WebSphere Lombardi Edition. IBM obtained the latter when it purchased Lombardi last year.

This Express edition offers the same capabilities, though its usage is limited to four CPUs, 200 users and three "authors," or administrators who build the processes, Kline said.

BPM software is designed to automate routine business processes, such as hiring help or tracking shipments.

The new software is "departmentally oriented," Kline said. "You wouldn't use this software like a large enterprise would to track multiple processes across your entire business process."

Instead, this software could accommodate a handful of processes. Organizations can upgrade to the standard edition should they require larger deployments. The standard edition has no user limit and can be clustered across multiple servers.

Express is different from IBM's Blueworks Live, another lightweight IBM BPM offering, in that its processes can be coupled with back-office systems, such as CRM (customer relationship management) software.

This software could be used to automate simple processes such as filing and submitting expense reports, Kline said. Instead of having employees fill out spreadsheets and e-mail them to their supervisors to be approved, an organization could use this software to automatically shuttle the employee's expense data, once filled out, to the supervisor for approval, and then submit the approved data to the appropriate financial system.

BPM Express is available directly from IBM and through its partners. The price for the software itself starts at US$600 per author and $120 per user. An average deployment for about 200 users would cost around $25,000, Kline said.

IBM to buy Netezza for $1.7 billion

IBM Corp has agreed to pay $1.7 billion for Netezza Corp, a company that helps businesses sort through data on corporate servers.

The deal would help IBM expand in an area known as "analytics," where the company sees a major source of growth over the next few years. IBM expects to grow annual revenue from analytics services, software and hardware sales to $16 billion by 2015, up from $9 billion last year. It estimates the total annual market now amounts to roughly $100 billion.

IBM has been pushing into the analytics business through acquisitions. The company says it has spent $12 billion on 23 separate analytics companies over the past four years. Its biggest takeover in 2009 was a $1.2 billion deal for SPSS Inc., a company that makes analytics software for predicting future trends.

Netezza's software and hardware systems are designed to help companies use data about their businesses to make strategic decisions. The British TV, Internet and phone service provider Virgin Media Inc. uses the technology to quickly assess how price changes or tariffs are affecting sales.

Netezza, which is based in Marlborough, Mass., with about 500 employees, also lists Neiman Marcus, Time Warner Inc. and NYSE Euronext Inc. among its customers.

Big tech manufacturers have been snapping up smaller companies as they compete with one another to broaden the types of products and services they offer corporate clients.

Earlier this month computer maker Hewlett-Packard Co. topped Dell Inc. in a bidding war for data storage company 3Par Inc.

IBM to acquire Unica Corp

IBM Corp has announced that it has agreed to buy the marketing services company Unica Corp in a $480 million deal that would give IBM more tools to meet its customers' growing demand for targeted advertising.

The all-cash acquisition brings IBM deeper into the advertising business, a relatively new area for the company.

It also expands IBM's software business, its most profitable division and the main focus of a $20 billion acquisition spree for IBM over the past few years.

Unica, based in Waltham, Mass., offers software that automates the process of predicting customer preferences, designing advertising campaigns based on that information and measuring how effective they are.

“The rise of the Web as an advertising platform has heightened demand for marketing that has a measurable impact. And IBM wants to provide the tools for doing that kind of targeting” says IBM's general manager for Industry Solutions, Craig Hayman.

Unica generates annual revenue of more than $100 million and has more than 1,500 clients, including Best Buy Co. and eBay Inc.

IBM launches LotusLive iNotes to compete with Gmail and Microsoft Exchange

IBM has launched LotusLive iNotes, an on-demand e-mail, calendaring and contact management system meant to compete with the likes of Gmail and Microsoft Exchange.

Pricing starts at US$3 per user per month, undercutting Google Apps Premier Edition, which costs $50 per user per year.

IBM is aiming the software at large enterprises that want to migrate an on-premise e-mail system to SaaS (software as a service), particularly for users who aren't tied to a desk, such as retail workers. It is also hoping to win business from smaller companies interested in on-demand software but with concerns about security and service outages, such as those suffered by Gmail in recent months.

LotusLive iNotes is based on technology IBM purchased from the Hong Kong company Outblaze.

"What we brought to Outblaze and to the marketplace is what you'd expect from IBM in terms of security, reliability and privacy," said Sean Poulley, vice president of online collaboration.

While alluding to Google's service outages, Poulley acknowledged that no company can guarantee 100 percent uptime for on-demand applications. But IBM has a long-standing track record of running "the world's mission-critical systems," he said.

IBM will also have an opportunity to win customers from Microsoft who aren't ready to migrate to the upcoming Exchange 2010 release, given the headaches and investments involved, Poulley said.

Overall, the main point of interest in IBM's announcement is price, said Gartner analyst Matt Cain.

"Outblaze always sold low-cost mailboxes and that's what this is," he said. "Google's long been in it, Microsoft's long been in it. Now IBM's in it."

However, that's not to say IBM's brand on the software isn't of some value, Cain added. "From an enterprise perspective, you'd rather buy e-mail from IBM than a company called Outblaze."

It's unlikely that IBM's pricing strategy will cause competitors to lower fees for their offerings, according to Cain. For one thing, Microsoft already has a $2 per month Exchange Online option called "Deskless Worker”.

IBM Scientists Build DNA Computer Chips

Scientists at IBM are experimenting with using DNA molecules as a way to create tiny circuits that could form the basis of smaller, more powerful computer chips.

The company is researching ways in which DNA can arrange itself into patterns on the surface of a chip, and then act as a kind of scaffolding on to which millions of tiny carbon nanotubes and nanoparticles are deposited. That network of nanotubes and nanoparticles could act as the wires and transistors on future computer chips, the IBM scientists said.

For decades chip makers have been etching smaller and smaller patterns onto the surface of chips to speed performance and reduce power consumption. The fastest PC chips today are manufactured using a 45 nanometer process, but as the process dips below 22 nanometers in a few years, the assembly and fabrication of chips becomes far more difficult and expensive, said Bob Allen senior manager of chemistry and materials at IBM Research.

The new technique builds on work done several years ago by Paul Rothmund, a scientist at the California Institute of Technology, who figured out that DNA molecules can be made to "self-assemble" into tiny forms such as triangles, squares and stars. The approach takes advantage of DNA's natural ability to incorporate large amounts of complex information that can be applied to different types of activities.

To make a chip, the scientists first create lithographic templates - the patterns from which circuits are made - using traditional chip making techniques. After, they pour a DNA solution over the surface of the silicon and the tiny triangles and squares - what the scientists call DNA origami - line themselves up to the patterns etched out using lithography.

The IBM scientists, working with Rothmund, then figured out how to layer millions of nanotubes or nanoparticles over the DNA scaffold, where they adhere to form tiny integrated circuits.
The ability for the DNA structures to self-assemble is a key element needed for achieving greater precision in the design and manufacture of chips, said Greg Wallraff, an IBM research scientist and co-author of a paper about their achievements.

"The degree of difficulty of nanofabrication is going up rapidly," Wallraff said.

While the technology shows promise, it is years away from practical use, the scientists warned. "It's too early to say whether this will be a game changer," Allen said. "But we're pretty enthusiastic about the potential of this technique."

If it works as planned, it could lead to a new way of fabricating features on the surface of chips that allows semiconductors to be made even smaller, faster and more power-efficient than they are today.

IBM to deliver Cloud Software thru Amazon

IBM has tapped Amazon's Elastic Compute Cloud (EC2) to deliver software to clients and developers under a new pay-as-you-go model. The agreement will let Big Blue's clients access IBM DB2, Informix Dynamic Server, WebSphere Portal, Lotus Web Content Management, WebSphere sMash, and Novell's SUSE Linux operating system in the cloud.

With immediate effect, IBM will provide software developers with Amazon Machine Images (AMIs) without charge for development and test purposes. In the coming months, IBM intends to launch full production software images in beta, and eventually extend its cloud-computing portfolio to include service-management capabilities from IBM Tivoli software.

According to Dave Mitchell, director of strategy and emerging business at the IBM Software Group, “This relationship with Amazon Web Services provides our customers with a new way to use IBM software and broadens our distribution channels”.