Google becomes Microsoft as Microsoft becomes IBM

There was a good article in the NY Times business section today about Google.  Mostly about how Google is growing up.  It reminded me of talk around Microsoft at the peak of its ride.  At that time, the last thing Microsoft wanted to do was to become IBM.  But they have.  IBM has done an amazing job of reinventing itself as a consulting company, and Microsoft has taken over as the legacy systems company.

Google meanwhile, is under increasing pressure from governments about its monopoly power, and use of customer information.  All of the sudden, Google is spending just as much time and energy dealing with the government as Microsoft did with the Justice Department in its day.  Actually, IBM had that same problem too.  

So the pattern is:

1. Old monopolist gets pounded by the government
2. New entrant uses the opening to build a new monopoly
3. New company is the darling of everyone (and stock goes to $600)
4. New company becomes old monopolist
5. Go to step 1

Also, today I started a new page where I am tracking the new tech bubble.  Check it out here.

All New Horsemen

Erik Schmidt got some attention at the All Things Digital conference naming new horsemen in the tech industry.  The old horsemen were commonly listed as Microsoft, Intel, Cisco, Dell.  Schmidt rather self congratulatorily named Google,  Amazon, Facebook and Apple as the new four.  Sure things are changing, but a completely new field of horsemen, really? 

What is it with the horsemen anyway?  One must wonder how we got onto the horsemen thing in tech, it seems like we would want to stay as far away as possible from an allegory rooted in conquest, war, famine and death.  If you have some time to kill, check out the Wikipedia entry for the Four Horsemen of the Apocalypse, for a not so brief introduction to the idea of horsemen.

Is there a new reality in tech and if so is this it?

With the possible exception of Dell, which specialized in advanced supply chain management, the old four developed technology and sold it to individuals and businesses and those customers employed the technology to achieve their ends.  The old horsemen are in fact still in business, and will be for some time.  IBM may not have liked being left off of the old list, but they have done pretty well for themselves in the last decade with their stock up 50% in the last decade compared to losses for the others.

With the possible exception of Apple, the new four don’t sell technology at all.  I suspect they are often thought of as technology companies because of their use of the Internet in their business models.  The wholesale switch is notable, and mostly for Microsoft.  Indeed, Microsoft has not been performing well on the stock market over the last decade with a drop of over 50% while all of the others are up and Apple is up a whole bunch.

These new horsemen are going to drive the delivery of a new kind of computing services. Even if this shift only turns out to be half as big as Mr. Schmidt predicts, it is going to have a profound impact on how technology is sold.  This is commonly referred to today as the migration to the cloud, and is so overhyped that often we forget to stop and think about what that actually means. 

First a review, technology resellers used to make money marking up hardware and shrink wrapped software.  Then they made money adding integration and support services to the sale of hardware and software, and next they will make money delivering innovation.  Here are some examples of this phenomenon:

• DropBox (www.dropbox.com) is a file system in the cloud.  You can get to your files from any device.  It is Amazon’s infrastructure on the back end, but no one has to know that.
• WordPress or SquareSpace (www.wordpress.com; www.squarespace.com ) are content management systems in the cloud.  Anyone can publish a website or blog on these sites and all of the hosing is handled.  Although one step removed, these companies rely on Google for indexing and discovery.  Google is also seeding the next wave of these companies with Picasa and Google voice. These may seem like birds of a different feather, but before you say so think about searching images or audio files.  Google’s partners make money by helping their clients manage content and show up online in the right places.
• Security is making sure content does not show up in the wrong places like when credit card information is stolen, or weapons system blueprints land in Peking.  Facebook has designs on knowing who you are and where you are and (soon) what you buy and what you have access to.  Making sure the keys to the kingdom, your keys that is, remain in your own control is important and will be big business.  Emerging in this field are upstarts like Reputation.com and Klout.com, and established firms like Symantec.

Before you think that this blog post has gone off of the rails, let me state plainly that I am not proposing DropBox, WordPress, SquareSpace, Reputation.com, and Klout.com as services that partners can mark up and resell.  I am proposing that these are the new channel partners and that they exist in a sympathetic ecosystem with the new horsemen.

These forward thinking channel partners do not think of themselves as channel partners.  They think of themselves as the inventors of a new wave of services.  Nevertheless, they are channel partners because they make money packaging new technology into services that add value to consumers and business.

Matchmakers You Can Trust

Just about any 17 year old American male will tell you that finding a date to the prom is a difficult and humbling experience.  Similarly, employers will tell you that finding a good employee is nearly impossible.  Buyers of IT products and services will echo the sentiment:  It is much harder than one would think to find and procure the technology a business needs to remain competitive.  Ironically, if you talk to the other half of each of these matches you will find quite a different perspective.  The Difference is enough to make you wonder if your grasp on reality is starting to slip away. 

Girls start planning on being asked to the prom 6 months before it even enters the consciousness of boys.  Even in this down economy, four million jobs change hand in the US – every month.  And companies spend millions of dollars trying to find their next customer.  For the past fifteen years the most successful companies on the web have aimed to do the matchmaking in these examples.  Online dating sites like match.com, eharmony.com, and some would say the entire porn industry have set out to capitalize on the first matching challenge.  Monster.com was one of the first Internet companies to buy a Superbowl ad, and Google, Bing, eBay, Amazon.com and now Groupon get paid quite well to connect would be buyers with would be sellers right at the very time the buyer wants to buy.

So successful internet business equals:  find an area where matchmaking needs to be done and have at it.  If you think you are late to the game, think again.  This internet thing is just getting started and there are many more untapped opportunities than tapped ones.  Yes indeed, Classmates.com, Facebook, and Yelp have all been invented already.  However, no one has even started to work to match enterprise technology buyers to enterprise technology sellers.  We all have lists of markets we would like to see better matchmaking tools on the internet.  Doctors to patients, kids to educational tools, scientists to research subjects, and even people to movies as the million dollar Netflix challenge demonstrated are all up for grabs.  For now, let’s focus on enterprise IT match making.

There are many things that stand in the way of solving this problem, but none as big as the lack of trust.  Trust has been eroded between the buyers and sellers of enterprise technology through repeated over promising and under delivering of products and services to the point that even the historically accepted measure of ten times better is no longer sufficient to get a business buyer to make a change and buy something new.  In the technology industry this phenomenon is sometimes labeled vaporware – software that has been promised to customers that does not even exist.  The risks for the buyer are quite large and even larger without vendor trust – and this slows down the adoption of new technology significantly.

Adoption of new technology is the key to increases in productivity and increases in productivity drive our economy and increase our standard of living.  Therefore one of the things standing in the way of our economic recovery is trust.

Successful matchmakers employ three simple tactics to get right at the trust issue:

1. Make money on the success of the match:  A business model built on making the match between technology vendor and technology user, instead of making the sale of technology, aligns the interests of the parties and turns the matchmaker into a trusted advisor.
2. Be transparent about how money is made:  A matchmaker advocating for a particular solution will always be suspected of doing so selfishly.  Full disclosure of how the matchmaker gets paid will drain away this suspicion.
3. Demonstrate deep and wide knowledge:  It is natural to sell what you know and stay away from what you do not know.  Demonstrating a detailed understanding of all of the products in the category will validate the trusted advisor status.

The two most trusted matchmakers in business IT are Accenture and Deloitte.   IBM is a giant in the IT matchmaking business, but is also pushing its own technology.  At one time EDS, Perot Systems, and ACS were on this list -- until they were acquired by HP, Dell, and Xerox -- which changed their motivation from matchmaking to selling their own technology solutions. 

This will be a very interesting area to watch in the years ahead as new companies flood in to fill the trusted matchmaker void created by this consolidation.

Who Is Driving Technology Sales: The Consumer or the Enterprise?

Even though a significant majority of technology purchases are made by businesses, the consumer is rapidly gaining a meaningful position in the market.  According to Gartner, in 2010 businesses will drive 72% of technology purchases.  The iPhone/iPad revolution is largely driven by consumer purchases.  As these devices are introduced into the enterprise computing environment, IT professionals are developing strategies for managing them.  Forward thinking technology marketing people are presently working to understand how these changes will impact IT purchasing decisions in the enterprise.

Here we examine the arc of this revolution and make an attempt to help marketers position themselves for the evolved technology marketplace.

The Cost of Selling is High for the Enterprise and Low for the Consumer

Maybe it is cheap to sell to the consumer because consumer products are cheap, or maybe consumer products can be offered cheaply because it is cheap to sell them.  Either way, it costs much less to sell to the consumer than the enterprise, and in some cases the cost of customer acquisition is approaching zero.   Alternatively, over on the enterprise end of the spectrum, we find companies like Salesforce.com – whose largest expense is for customer acquisition.  For 10 years SFDC has spent over 50% of their gross margin on sales and marketing – and this year they will spend over $700 million.  Ten times as much as it will cost them to deliver their services.  Right behind Salesforce.com are Oracle, IBM, HP and Microsoft each spending over 20% of their gross margin on Sales and Marketing. 

When it comes to selling the approaches cannot be more different, consumer companies like Google sell by getting their customers to act as their own salespeople (filling out a form on the web), quite a contrast to Salesforce.com and the others who are seeking business customers by blanketing the earth with salespeople and partners.

Getting to Market:  To Advertise or Not To Advertise

Even companies with buckets of money must select a go to market strategy and concentrate their resources in what they believe are high value activities.  There are as many opinions about which strategy works best as there are CMOs – but just about all CMOS will agree that resources must be concentrated in high value activities consistent with their strategy.  Anyone spreading their resources thinly over too many activities is doomed.  The decision tree starts with advertising.  There are companies like Apple and Dell that go big on advertising and PR and companies like Microsoft and HP that invest their resources in building partner ecosystems.  A completely different third approach is lowering prices so far that solutions sell themselves.  Google and Craigslist price their services at 1/10^th of their offline competitors.  Prices this low promote themselves – a $3,000 car or a $1 movie ticket would not require advertising or salespeople – the newspapers would write about it and the message would spread virally.

Let Someone Else to Pay

There is no charge for using a search engine or web service like Twitter or Facebook.  Using a free product does not make you a customer however.  The customers of these companies are the advertisers, and their payments for advertisements make it possible for companies like Google, Twitter and Facebook to offer valuable services for no charge to those benefiting from them.  No monetary charge would be a little more accurate.  The truth is:  those not paying for a service are not the customer, they (or their data) are the product being sold to someone else.  This is where the gulf between consumer and enterprise gets interesting.  Individuals are much more willing to give up their data in exchange for a free service.  Enterprise data is almost always a strategic asset and therefore most businesses are reluctant to trade their data for services.  Salesforce.com’s clients are businesses and they pay for the service because giving up their data to be sold to a third party would undermine their viability.  Google gets right up to the line on this one because they are selling the data they have about their customers to third parties – and many of their customers are businesses.  Admittedly Google is not going to one client and saying they will sell the content of another client’s searches or emails.  They will however allow one client to present advertisements to a targeted audience that is likely to include its competitor’s customers or employees.  This is evidence that the gap between consumer and enterprise buying habits is closing.

Mixing it up:  Put the Blender on Whip

Twenty years ago, with the exception of a few intrepid door to door salespeople, the consumer went to the store and salespeople called on businesses.  Then Amazon.com brought the store to the consumer’s home, and Dell cut out the salesperson by giving businesses the ability to serve as their own salespeople over the phone and web.  The consumer and business buyers including those in the technology market had been oil and water, and they were about to get poured into the blender.  When the first killer app for the consumer oriented Mac turned out to be the business oriented use case of desktop publishing – it was like hitting the chop button on the blender.  Employees connecting their home computers to corporate networks, enabled largely by broadband deployment, was the equivalent of the stir button. Social media tools like MySpace, Friendster, LinkedIn, Facebook, and Twitter turned the blender up to puree.  And as we are learning in our one question survey this month, the iPhone and iPad have cranked the margarita making machine up to whip and the water and oil have emerged as thick as chocolate mousse.  With consumer tech and enterprise tech all whipped up together, selling technology now takes on a combination of enterprise selling and consumer selling tactics. 

Enterprise Marketing Must Change

Right now there is a great deal of energy being invested by enterprise marketing people in social media.  This is important, but not the only area where the enterprise / consumer collision is impacting the market.  We will never know if the big brains at Apple developed their iPhone/iPad strategy with an eye on the enterprise market.  Intentional or not, their shiny new devices are changing the marketplace and buying patterns significantly.  Starbucks is moving to HTML 5 and away from dot net as a result.  Flash is being marginalized.  And products like those from Parallels that tie the new environment together, are ramping fast.  Enterprise marketers need to free their minds from a focus on making the things they have always done more efficient and start experimenting to develop new strategies that are effective in this new marketplace.

On the Horizon

As participants in technology marketing for the enterprise, these are the trends we expect to see accelerate as a result of the blending of the consumer and enterprise markets:

Social Media:  Clearly social media will be central to these changes, both driving and being driven by the marketplace evolution.  The key to social media is authenticity.  They key to authenticity is flexibility and IQ.  Companies with intelligent and autonomous actors on social media platforms will win.  It does not hurt that the highest value customers are the early adopters of social media.  100 years ago, when telephones had been deployed in 10% of the households, companies realized that the early adopters of the telephone were on the high end of the socio-economic ladder and should be treated as such.  Once telephones achieved 98% penetration, and the overwhelming majority of phone calls came from average customers, companies shifted their approach from high investment in high value customers to cost containment.  This is why a Comcast customer can get a high quality response from @comcastcares, and not from the Comcast call center.  Comcast knows the demographics of their social media savvy customers.  It will be some time before social media is democratized.  To Do:  Get smart people into the social media game.

Computer Operators:  Before the computerization of the telco central office, switching was done by telephone operators.  An operator could manage approximately 200 telephone lines.  We now have 180 million land lines and over 200 million mobile lines in the US.  If we had to rely on manual switching – we would now require 1.9 million telephone operators.  Thanks to automation we only have 22,000 telephone operators now and none of them are switching calls.  In the early days of the computer an operator with significant training was required to run the device.  This continued during the early days of the PC.  The devices were complicated enough that every user was essentially a trained computer operator.  It has only been in the last 10 years that computers could be operated without the barrier of significant training.  The iPhone and the iPad are revolutionary in that they require no specific training at all.  A child can pick one up and figure out how to use it.  Many businesses now operate without a single IT resource on staff.  Computer operators are not dead however, they have shifted to managed IT service providers, web service operators, and application developers.  This trend will continue to accelerate.  Business will be less technically aware and will purchase services from specialized service providers.  The service providers will have all of the computer operators and accordingly will increase in sophistication and technical capabilities.  This will split the marketplace into the sellers of the services and the sellers of the underlying technology.  The services will be purchased by people with business needs and a low level of technical sophistication.  The underlying technology will be purchased by people with an extremely high level of technical sophistication.  To Do: Market services by business use case and technology by engineering merit.

Partners Migrate to Service Sales:  The bifurcation of technology into unsophisticated (technically that is) buyers of services and very sophisticated buyers of the underlying technology will force a split in sales and marketing strategy.  The big technical deals will get bigger and will be increasingly sold using internal salespeople.  This will shrink the high end of enterprise technology sales and marketing done through partnerships. Who is going to sell servers to Amazon.com?  IBM, Dell, HP, and others will be competing for that deal directly.  Who is going to sell desktops to the law firm?  Channel partners.  Historically those partners have been companies.  Of course because partnerships are relationships, and relationships are between actual people, the reality has always been that the success of these partnerships depend heavily on the relationships between the people inside the companies.  For fifty years, people have been getting more and more mobile, a trend that has been accelerated by the latest economic challenges, and facilitated by social media tools.  Technology companies that are able to shift their thinking from partnering with companies to partnering with people will jump well ahead during this transition.   To Do:  Orient partner programs to individual people that sell services.

In the years ahead businesses will remain the most significant source of revenue in the technology industry. Businesses will however increasingly behave like consumers when purchasing service offerings. They will be looking for cost effective solutions to their most pressing needs, and they will be buying those solutions on short lead times and with relatively low technical sophistication. Vendors and solution providers that position themselves for this change will win in the transition.

Facebook is the Paris Hilton of Tech

Smart phones, tablets, TVs, app stores, Twitter, and Facebook (and the movie) sure seem to get the bulk of media attention.  HP now has over $114 billion in revenues, the largest part generated selling to the enterprise, but their consumer products get all of the coverage.  IBM has 400,000 employees and also generates nearly $100 billion in revenues – rarely ever mentioned – because it is focused on the enterprise.  Microsoft, well Microsoft just never gets mentioned.  See my post the other day on the Pew Study.  If Larry Ellison wasn’t pulling stunts with the Americas Cup or Mark Hurd, no one would ever cover Oracle in the media.

Real work is being done hardening networks against cyber terrorism, lowering total cost of computing, developing and enforcing enterprise standards, safeguarding large amounts of sensitive data, and developing industry specific solutions.  This work is done with rarely a mention in the press.  My explanation:  enterprise computing is complicated, hard to understand or explain, and most of all it is boring.  To Journalists, Facebook is Paris Hilton.  Write about either of them and your web site gets hits.  Write about lowering energy consumption in data centers and you might as well be covering anything having to do with sub Saharan Africa’s problems.

We really have not had big coverage of business tech issues since Y2K – over a decade ago.  Could it be that we are due for a surge in enterprise coverage?  It may make sense to think for a minute about events that could cause this to happen and how it might impact the technology industry.

Here are three things that could bring enterprise computing closer to the center of technology media coverage:

1. A Big Security Event:  Let’s hope it never happens, but if a big section of the power grid goes down, or all of the credit cards become inoperable, or a cyber attack crashes the stock market, the media will start to pay attention.
2. Follow the Jobs:  If big tech starts hiring again and makes a dent in the unemployment rate it will be a big story.  Unfortunately, this probably is a result of the changes we would like to see instead of the cause. 
3. Someone Connects the Dots: Google and Facebook are largely considered consumer businesses.  They are however, big enterprise operations in their own right however.  The media could latch onto the fact that Google’s network of data centers, gigantic databases, and all of the infrastructure required to run its business is cool and worth paying attention to.

What would change and why should we care?

1. The Money Follows the Media:  A lot has been written lately about how the VC business is changing.  The story is that the investment exits are not there and new tech start ups don’t need as much money to start.  It is true that someone building for the Apple App store does not need to raise much if any venture capital, and may never go public.  Venture capital is needed just as much now as ever before.  The VCs do seem to follow the media, so if the media goes enterprise, maybe the VCs will too.  Thomas Friedman would sure be happy if we started funding green tech instead of another Twitter clone.
2. Exports Up:  Technology innovation is something we can do well and we can export.  Enterprise computing is harder to knock off than a movie or an iPhone. If we build more capacity in our big business computing services – we could export it.  Companies like IBM, HP, Microsoft, Oracle, and others are already doing this in a big way – so we know how to do it.  And the balance of trade needs attention.
3. Do Our Part:  If this were to happen, all of us could be proud of our contribution to the worldwide economic recovery.  Instead of presenting a military face to the world, or fancy financial engineering – which deploys just as much of a scorched earth approach as the military, we could be helping companies and governments around the world increase their productivity.  And they would pay us for it!  Good for us and for them. 

I hope someone figures out how to make enterprise computing interesting enough to get some media attention.  Could do us all some good.

Labor Arbitrage, Automation and Customer Service

The feature article in the NY Times Magazine yesterday told the story of IBM's AI team creating a credible Jeopardy contestant.  Clearly the IBM team has made some progress since Deep Blue beat Garry Kasparov in May of 1997.  The computer may not win, but IBM will win a great deal of attention during the event next fall.  Probably both great technology and great marketing.

While reading the article, some roads converged in my technology imagination, mostly in the areas of labor arbitrage, automation, and customer service.  The effects of these changes are going to be felt slowly over some time -- but they will be significant.

Labor Arbitrage

We are a decade into the Internet enabled off-shoring movement fueled mostly by low cost labor.  Technology innovations only happen when the innovation is ten times better.  Offshore labor does not have to be 1/10th the onshore cost, but it needs to be at about a third in order to work.  If we are paying $9 per hour onshore for something that can be done for $3 per hour offshore -- the inefficiency of distance and the added cost of travel and/or transport can be overcome.  If onshore and offshore labor rates converge, off-shoring will become less compelling.  This convergence can happen by offshore labor rates rising as competition for workers and living standards are raised in offshore markets, or as onshore labor rates fall.  Wait, how can onshore labor rates fall?  Through automation.

Automation

Everywhere we look we see automation.  Cars are still being built in this country because robots do most of the work.  We see the combination of automation and self service every time we go to the bank machine or the grocery store.  Google signs up customers without any salespeople -- which is automation displacing labor in yet another way.  The IBM Watson project may seem too theoretical to start displacing humans, but as the NY Times piece points out, the first application may be in the call center.  Giving the computer the job of answering customers complex questions.  Just like on the manufacturing line, the bank machine, or the grocery store, the computer does not have to answer all of the questions, just a good percentage.  When the human's job becomes handling the extreme exception and managing the machine -- the skills required and the associated pay are each increased significantly.  At the end of this road lies a customer service capability for companies who have never operated in that mode.

Customer Service

Search for "Google Lack Customer Service" and you can read for days about how Google just does not do it.  This is a cause for relief by some of Google's more customer centric competitors.  When IBM delivers to Google an engineering driven answer to this deficiency it will be as big as any significant change in an ecosystem.  Kill all of the wolves and the elk population goes through the roof.  Google is not the only engineering driven company that will benefit.  HTC and many of the other sophisticated OEMs, will be able to accelerate their evolution from manufacturer for others to full competitor.  The ecosystem will never be the same.

Earlier this year I heard a presentation by Jaron Lanier where he gave the low cost labor countries like India, China, and the Philippines 20 years to get up the education ladder far enough to be safe from the flood caused by automation.  Could be 20, I would guess 10.

IBM's Path to the Future

Yesterday I proposed that IBM leads the world in delivering technology related services to businesses and therefore we may be able to get a sense for future winners by looking at what IBM is doing. 

Here are a few clues from IBM’s 2009 Annual Report:  

From: Samuel J. Palmisano, CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER

1. Building Analytics Capability:  “… the knowledge of the world, the flow of markets, the pulse of societies — can now be turned into insight through sophisticated mathematical models, also known as analytics. Where once we inferred, now we know. Where once we interpolated and extrapolated, now we can determine. The historical is giving way to the real-time, and even the predictive.  IBM is moving quickly to capitalize on this promise. We have built the industry’s premier analytics practice, with 4,000 consultants, mathematicians and researchers, as well as leading-edge software capabilities — bolstered by key acquisitions such as Cognos and SPSS. Our new Business Analytics and Optimization service line targets the highest-growth opportunities by delivering integrated analytics solutions based on the needs of specific industries.”
2. Changes in the Cloud:  “Thus, the data center is shifting from being a single physical place to something more like the Internet, a diverse set of services fueled by IT.”
3. Customers Want:  “So the questions we are hearing are no longer about whether a smarter planet is a real possibility. Now, there is an enormous hunger to learn how. CEOs, CIOs, governors and mayors are asking questions like: How do I infuse intelligence into a system for which no one enterprise or agency is responsible?”

From the Financials: 2009 total revenue: 

$95 Billion Global Technology Services Group: $37 Billion 

• Strategic Outsourcing Services
• Business Transformation Outsourcing
• Integrated Technology Services
• Maintenance
• Integrated Technology Delivery
• Business Process Delivery   

 Global Business Services Group: $17 Billion

• Consulting and Systems Integration
• Application Management Services

 As I read through the report some recurring themes indicated what IBM thinks will be big in the future: 

1. Cross Platform: No one vendor can solve all problems so there is significant value in being able to work across platoforms
2. New Ideas: Clients will pay for ideas they cannot think of themselves (new processes, new technologies, ideas that span systems or departments)
3. Outside the Company:  Security, compliance, and standards are among the functions that can be done better by outsiders

 So if you want to pick the winners of the future, pick companies that deliver technology related services that tie together different technology manufacturers and add some intelligence along the way.

Later:  IBM beats Wall Street expectations for Q1 performance.

Picking the Winners

I am not smart enough to pick the big winners in advance.  So I don't play the stock market, and at CSG we sell shovels to the gold miners instead of prospecting for gold ourselves.  Sure striking it rich would be a thrill, but the world is littered with hundreds or even thousands of would be Googles.  I was going to say would be Twitters, but they have not made any money yet!

This strategy has provided us with a very interesting vantage point from which to watch the show.  And it is quite a show these days.  I sure am glad I am not a telecom equipment vendor or a distributor -- it is easy to see what is going to happen to them.  It is much easier to pick the descending parts of our industry than the ascending.  Who in tech is going to do well?  

There has been so much talk about services over the past ten years that we have both lost interest, and lost track of the definition of services.  There are hosting services, IT services, software as a services, software + services -- and each time the word services means a different thing.  IBM, Dell, HP, Microsoft, and Oracle all have significant services organizations.  IBM generates more revenues from services than all of Microsoft's revenue.  What is IBM doing when they deliver services to their clients?

Business pay IBM 50 billion dollars a year for services.  And everyone in tech wants to get into services.  I propose that we could learn a bunch about the future winners by digging into the question -- what are people paying IBM 50 billion dollars a year for?

Stay tuned, in tomorrow's post I will dig through IBM's annual reports.

Lessons from IBM

I pointed out the other day that IBM's stock outperformed Google's over the past 4 year period.  There are many things we can learn from the granddaddy of all technology companies.  In its 130 year history, IBM has had more "eras" than most tech companies have had years.  In fact, IBM tangled with the Justice Department before Bill Gates was even born.

The one thing that has always impressed me about IBM is how they seem to be playing on an entirely different level than anyone else.  Real companies count on IBM to give them real solutions to real business problems.  Every time I find myself in a conversation with a senior exec at IBM I am reminded that they have managed to continue to operate at this level regardless of the headlines of the day.  

Somehow I just don't see IBM burning R and D budget on a Twitter clone.

Curiously, IBM also does a great job with its ads.  They come up with fun and memorable ways to make the point that they are serious about business.  Here is my favorite one: which is probably 10 years old now but it still resonates.

4 Years, 4 Stocks, 1 Surprise

Take a look at this chart showing percentage increase in stock price over the last four years for Microsoft, Apple, Google, and IBM.  These are the top four companies in terms of market cap in the technology sector.  Apple is blowing it out -- which is no surprise -- at 275% over four years.  Microsoft is in the back of the bus -- also no surprise.  Google and IBM are in the middle and IBM has performed better that Google over the past 4 years -- that was a surprise to me.

So the question is:  Which stock would you buy right now?