IBM Pulls Late April Fool’s Prank?

“Enterprise-Class Second Life”

Some days the jokes write themselves.

Did they mean “Second-Class Enterprise Life”?

It’s like Second Life, only more expensive, with even fewer people, and minus the interesting bits?

Can “Enterprise-Class World of Warcraft” be far behind?  “Enterprise-Class Grand Theft Auto”?

Imagine the resplendently rendered virtual bus that drives up to your virtual headquarters full of virtual consultants…

Coming soon no doubt: a push for the mainframe to run your enterprise-class Second Life.  (IBM’s mainframe site is a barrel of laughs all by itself.  Slogan: “The Future Runs on System z”.  And don’t miss Destination Z, “A vibrant community to help you make the most of your mainframe”  featuring stock photography of cool kids at least three decades younger than the average mainframe operator.  But I digress.)

It is a clever financial move.  Once you’ve realized the cost savings from off-shoring your consultants, the next obvious step is to replace them with software agents that can be infinitely replicated and don’t need salaries.  A people business like consulting scales profitably when you get rid of the people.  Who will know in a virtual world?  Suggestion: start giving any consultants bidding for your business a Turing Test.  Prepare now for the inevitable.

Meanwhile, on a more serious note, timesharing is back with a vengeance yet there is no sign IBM has ambitions to be a major player in the cloud computing era.  Instead they’re fiddling with avatars while the on-premise business starts a long, slow burn.  Where is the “one billion dollar” data center capex announcement that signals their ambition to play with the Amazons, Googles and Microsofts?  Perhaps it is harder to make a “billion dollar” commitment when it requires real dollars as opposed to “soft” and/or exaggerated dollars?  Or has IBM committed all its free cash flow to financial engineering, forcing them to watch the next generation of computing from the sidelines?  Selling servers and consultants by the hour is a far cry from offering (anything)-as-a-service.  In the cloud world, if you build it as a vendor, you also have to be willing to operate it at scale.  And enterprise-scale is dwarfed by Internet-scale, so enterprise chops are not enough.  Outsourcing “your mess for less” isn’t a service.  One can only speculate that virtual conference rooms in Second Life are inhibiting IBM’s ability to define their strategy.  I am still hoping they do OnDemand 2.0 and kill two birds with one slogan.

Blue Haze

IBM announced something today they called the “Blue Cloud” initiative that is a “game-changing model for Internet-scale computing”.  Some thoughts and questions:

  1. This is a seriously half-baked announcement.  The press release rambles on and on yet says very little.  This “next major advance in computing” merits a single page on IBM’s web site with two paragraphs of text and a stock photo.  IBM is the ultimate in top-down companies and tends to broadly execute against a single marketing theme.  Their current Innovation campaign seems to be ramping down and the replacement will no doubt start up in the spring heralding “the next major advance in computing”.  So why this rushed announcement?  Why allude to the broad theme if you’re not ready to execute against it?  Who needs to know today that “IBM’s first Blue Cloud offerings” will ship next year even if it isn’t clear what those offerings are?
  2. What is Blue Cloud exactly?  What makes it “game-changing”?  IBM repackaging some relatively obscure open source software?  IBM trying as usual to position the mainframe as the answer to whatever the question is?  Another offering delivered via a few busloads of consultants?
  3. Why do the announce in Shanghai when the only customer was the Vietnamese Ministry of Science and Technology?
  4. What ever happened to OnDemand?  They’re revisiting the same themes.  They could have even called it OnDemand 2.0…
  5. Where is the statement about spending “$1 billion” or more on this initiative?  IBM doesn’t do anything without promising to spend at least <Dr. Evil voice> $1 billion </Dr. Evil voice>. 
  6. Shouldn’t there have been a press conference in Second Life?  Or is this a sign that IBM’s previous game-changing, next major advance for computing is officially over?
  7. Is IBM just going to package up some open source software or are they going to put their money where their mouth is and make the capital expenditures to build out serious data center capacity to support cloud computing by their customers?  Microsoft spent about $2.3 billion on datacenter capex last year and will likely spend even more this year.  Google was around $2 billion.  Yahoo came in a distant third with only about $600 million.  Given all their financial engineering needs to support their private LBO strategy, does IBM have the money to play in this game for real or will they settle for hazy press releases?

Still More IBM Patent Tomfoolery

Some august commentator recently wrote:

Evidently IBM decided in September of 2006 they would stress filing patents with “significant technical content”.  They are going to “sharply reduce” the filling of bogus, aka business method patents.  The company had no comment on their tens of thousands of patents filed and awarded before that date.

Further questions are emerging about whether this memo was ever actually circulated inside IBM.  This latest patent was filed after IBM’s sanctimonious change in policy and drips with irony as it is a business method for extracting more revenue out of a patent portfolio.  The company had no comment on how they reconcile a billion dollars of annual patent licensing revenue with their corporate embrace of the GPL.

IBM Beats Hasty Retreat

The ridiculous IBM “Outsourcing of Services” patent has been withdrawn and magnanimously returned to “the public domain”.

Evidently IBM decided in September of 2006 they would stress filing patents with “significant technical content”.  They are going to “sharply reduce” the filling of bogus, aka business method patents.  The company had no comment on their tens of thousands of patents filed and awarded before that date.

Patently Nonsense

IBM, whose position atop of the ranks of companies with the most patents awarded each year never quite holds up upon inspection of their actual patents, is offering up another gem.

While still not a match for their all-time title holder of absurd patents, the infamous “restroom scheduling” patent (see the story and great headline from CNET), IBM continues to push the envelope with dubious business process patents.

Spotted not by the Onion but by Eric Savitz at Barron’s Tech Trader Daily (proposed slogan: We Read the Westchester County News Journal So You Don’t Have To), IBM has filed an application for the “Outsourcing of Services” to help determine which jobs to keep in-house and which to outsource.  The application itself is largely gibberish but the “invention” does appear to require a mouse and a “diskette drive” is optional:

The world has become a global economy. As a result, more and more domestic based companies are taking advantage of cheaper resources, such as labor and materials, available in other countries. In recent years, corporations have looked increasingly to outsourcing of services, development, and manufacturing work as a strategy to reduce labor, administration, development, and manufacturing expense.


The present invention provides a system and method for identifying at least a portion of a human-resource within an organization for outsourcing. In an embodiment of the present inventions, the method includes receiving a list of a plurality of tasks being performed by a plurality of individual human resources within a given portion of an organization and grouping each of the tasks into a plurality of functional groups so that each of the functional groups represent an end result for the plurality of tasks associated therewith. The method also includes receiving an amount of the individual human resources spent on each of the tasks within the functional groups and aggregating the amount of the individual human resource spent on each of the tasks to provide a total aggregate time for each of the tasks within the functional groups across the organization. In an additional step, tasks are identified based upon the total aggregate time for outsourcing to a lower cost supplier.

Maybe they’re patenting Frederick Winslow Taylor’s prior work, figuring whatever crazy business process patents he had will have long since expired.

No comment from the company on whether this patent will be freely licensed to the open source community or not (i.e. is it a useful patent or not).

Welcome to the new IBM.  Between the self-induced LBO and the consulting services center of gravity, this is not your father’s IBM. Some rebranding may be in order as business machines are just a sideshow these days.  A few ideas:

  • IBM = I’ve Been Moved (Offshore)
  • IBM = It Beats Manufacturing
  • IBM = International Business_Process Mania
  • IBM = Indian Business Model
  • IBM = IPR Boosting Megalomania
  • IBM = IPR + Buses = Method (consultants are counted by the busload)
  • IBM = IBM Bites Mankind (to be coupled with adding Richard Stallman to the board…)

Got any others?

The IBM LBO Continues…

[From last week’s IBM earnings announcement]

Revenue up $1.8 billion for the quarter.  Hard to tell what organic growth was but probably very low single digits.

Repurchased $14.6 billion in stock  and the number of outstanding shares down over 6% in the quarter.

Debt to fund the buyback up $12 billion in the last six months (up 53%).

Most of the earnings release is adjustments and caveats about various acquisitions and divestitures.  Lots of churn that muddies the view of the underlying business.

I won’t pretend to know whether this is prudent financial engineering or not, but no doubt they are leveraging up.

Put IBM on the list of companies to watch when the private equity frenzy starts to unwind.  That may have started in earnest today…

This is a Healthy Business?

IBM is out touting their profit growth prospects (perhaps in response to having been eclipsed by HP in both performance and absolute size?). 

They are outlining their potential earnings growth by 2010 on moderate expected revenue growth.  Today’s WSJ reports:

“Of the roughly $5 increase in earnings per share that IBM says is possible by 2010, 75 cents comes from the assumption that IBM’s recent growth rates will continue. IBM sees another $1 coming from wide-ranging efforts already underway to cut costs and boost profit margins; $1.10 from more than $40 billion worth of stock buybacks; $1.20 from acquisitions and other future growth initiatives; and 90 cents from retirement-related savings. IBM is freezing accruals in its pension plan after this year.”

So organic growth is predicted to be about 12.5% in total over three years and is exceeded by the savings from cutting employee pensions, which in turn is smaller than the contribution of “wide-ranging” cost cutting.  Organic profit growth is roughly 15% of the overall forecasted growth.  What does that say about IBM’s business?  Their engineering capabilities have evidently migrated to the financial realm.

There may be something to Cringely’s reporting (and here) on how they plan to achieve the cost cutting.

UPDATE: I missed the fact they are taking on debt to do this.  IBM is doing the private equity thing without getting the private equity firms involved…