IBM's Failing Strategy to Control the PC Industry

Strategic Insights -

As the world's largest computer company, IBM is determined to regain control of the PC industry, but its strategy of replacing Microsoft as the dominant supplier of operating systems and Intel as the main source of microprocessors has been an expensive flop so far. IBM's stated vision is to create a unified platform for all software, including OS/2, SSP, OS/400, AIX, Mac OS, and Microsoft Windows NT, running on PowerPC-based systems. However, the execution has been shambolic, with IBM unable to deliver PowerPC-based PCs and lack of software to make them usable.

Key Takeaways:

  • IBM's attempt to take back control of the PC industry in 1987 with the PS/2 range and OS/2 operating system was a disaster, with sensible customers declining to buy PS/2 systems that were slower than AT-compatible PCs.
  • The result was a plunge in IBM's share of the PC market, and the company's failure to invest in Microsoft when it was small and largely dependent on IBM is still a costly mistake.
  • IBM's latest strategy, which involves replacing Intel as the main source of microprocessors with the PowerPC, has been postponed due to lack of software, which will require Microsoft Windows NT to be used.
  • The Power Personal Systems should have been launched running Portable OS/2, a microkernel-based version of OS/2, but this may not be ready until mid-next year.
  • Hermann Lamberti, boss of IBM's Personal Software Marketing division in Europe, is confident that IBM can break Microsoft, but the company's execution so far suggests otherwise.
  • The Power architecture itself appeared in multi-chip form in the RS/6000 range in February 1990, before IBM, Apple, and Motorola combined to produce a single-chip version, the PowerPC.
  • PReP (PowerPC Reference Platform) uses Intel's PCI bus, allowing both IBM and Apple to join up with mainstream PC architecture, but it provides no support for the rest of the Macintosh design, so Mac software won't run on it.
  • Apple's PowerMacs still use NuBus and are not PReP-compliant, making it difficult for them to join the PowerPC platform.

Statistics:

  • IBM employed 405,000 employees in 1985, with a turnover of $50bn and profits of $6.5bn.
  • Microsoft's employment in 1985 was 40 staff.
  • The PowerPC microprocessor is ultimately derived from the Risc chip used in the ill-fated IBM PC/RT in 1985.
  • The Power architecture itself appeared in multi-chip form in the RS/6000 range in February 1990.
  • The PowerPC is expected to be as ubiquitous as Intel chips, which is an essential part of IBM's attack on the Microsoft/Intel hegemony.

Sources:

  • "IBM wants control of the PC industry, and plans to get it" by Jack Schofield (no publication date provided)
  • PC Week (no publication date provided)
  • Interview with Hermann Lamberti, boss of IBM's Personal Software Marketing division in Europe (no publication date provided)
  • "The PowerPC: A New Era in Computing" by Intel (no publication date provided)