The New Blue Essay

This essay has a total of 1042 words and 5 pages.

The New Blue

About IBM: The Big Blue
IBM's history dates back decades before the development of electronic computers - Big Blue
was officially born in 1911 as the Computing-Tabulating-Recording Company, a
conglomeration of other companies that started in the 1880s. Since then, the company has
been instrumental in the development of mainframes, calculators, personal computers,
networking, software, and several scientific breakthroughs. Four IBM researchers have won
Nobel prizes. In 1990, IBM had its most profitable year ever. By 1993, the computer
industry had changed so rapidly the company was on its way to losing $16 billion and IBM
was on a watch list for extinction - victimized by its own lumbering size, an insular
corporate culture, and the PC era IBM had itself helped invent.

Since that time, IBM has made major changes in its business activities, shifting its focus
significantly away from components and hardware and towards software and services. In
1993, Lou Gerstner was brought in to run IBM. He moved the company's focus to services,
and re-established IBM as the biggest computer consulting and services company in the
world. However, nearly after a decade, Big Blue was still losing money on PCs, a market it
helped launch. Gerstner was succeeded by Samuel J. Palmisano in 2002.

The New Blue under the Leadership of Palmisano
The style of Sam Palmisano may be understated compared to his predecessor, Louis Gerstner.
But the strategy moves the 52 year old has made since he became the chairman and chief
executive of IBM less than two years ago have been bold, even risky.

If successful, his strategy promises to redefine not only IBM, but also what it means to
be a computer company. IBM is no longer content to be merely a supplier of hardware and
software, and seeks to become more a side-by-side partner with businesses - helping them
improve their marketing, planning, procurement and customer service.

The aim is to create a very deep connection between IBM and its customers, and at that
level it is a very powerful strategy. But it's making IBM more like a service business
with technology thrown in than a technology business.

To pursue this strategy, Palmisano needed to add expertise in business consulting and
software. In 2002 the largest purchases came when he acquired PricewaterhouseCoopers
Consulting for $3.5 billion and Rational Software for $2.1 billion.

More fundamental changes have come in 2003, and some are just now falling into place. In
particular, IBM has shaken up its software, services, and research divisions. With the
addition of PwC Consulting, the big IBM services unit is more focused on executive-level
business consulting instead of traditional technology services.

If Palmisano's overhaul of IBM proves successful, the company could gain a long-term
competitive advantage, as it did from big bets of the past - such as its pioneering
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