IBM by James W. Cortada

IBM by James W. Cortada


Author:James W. Cortada
Language: eng
Format: epub
Tags: Herman Hollerith; punch cards; tabulators; Watson; business strategy; DEHOMAG; IBM 604; personal computer; IBM System 360; corporate culture; mainframes; minicomputers; antitrust; PC
Publisher: The MIT Press


In effect, the government complaint against IBM was that because it was so big it must be an antitrust violator even though no illegal behavior could be shown. In other words, the company was guilty of making a good product and pricing it right. Horrors.


FRANK CARY SPENT much of the 1970s in court. There were many days when his driver showed up at his house early in the morning to take IBM’s CEO either to an office filled with lawyers and IBMers working on lawsuits at 1133 Westchester Avenue—DPD HQ—in White Plains, New York, or to the federal courthouse at Foley Square in Manhattan, where he was grilled by hostile Department of Justice (DoJ) attorneys or by IBM’s own. Some court sessions lasted many hours. Either way, Cary had to be attentive, careful in how he spoke, and always stick to a rehearsed approach. He then attended post-testifying debriefings back at Armonk before his driver took him home, pouring out the exhausted Cary at his front door. The CEO had attended thousands of meetings sprinkled around the world, often dealing with contentious issues, so he understood how to behave in front of the government’s lawyers. In this instance, if he and his company failed to defend their behavior, IBM could be split into multiple companies or pay a frightfully large financial penalty. There were days and weeks when he spent up to 80 percent of his time focused on U.S. v. IBM (1969–1982), the longest antitrust case in U.S. history.

Besides the disruption to IBM’s affairs, Cary must have been irritated by the fact that the lawsuit concerned the company’s activities with the S/360. In the 1960s, both he and John Opel had expressed skepticism about the strategy of building systems in modular fashion that could be tailored to a customer’s needs. Their experience with the S/360 led him to join a generation of senior executives who never again wanted to engage in such a massive project. IBM created new classes of competitors, notably plug-compatible mainframe and peripheral vendors, as well as 250 rival leasing companies, so despite the enormous increase in revenue and the placement of over 18,000 S/360s by the end of the 1960s in the United States alone, generating $16 billion in revenue and $6 billion in profits,2 he occasionally wondered if it was worth it. Now he had to deal with a raft of lawsuits. For most of his tenure as the head of IBM, the DoJ was hot on IBM’s heels.

IBM’s experience was not unique in American industry. As new technology firms emerged in the late nineteenth century, early entrants such as AT&T, DuPont, and US Steel gained great market dominance, which was protested by regulators and then government lawyers, who wanted them to scale back to encourage competition and innovation. While Americans loved their litigation, other nations had other methods of dealing with such issues: the Japanese used MITI to govern industrial rivalries, innovation, and imports, while European regulators altered or prohibited specific practices.


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