MicrosoftJoin now to read essay MicrosoftTo interpret this position of dominance we need to take a little trip back in time to the last century. Back to the sixties, a decade which will have nostalgic significance for any baby-boomers reading this. Extraordinary as it may seem today, this was an era when caftans and beads were considered fashionable. Not for IBM employees, however, who seemed to be well paid, mostly young men in neat blue suits and white shirts, and it must be said, also bore a disturbing resemblance to Mormons. In Australia, even their engineers wore suits. Which was almost unique. Most organisations dressed their engineers in overalls. If your IBM system should misbehave itself, a couple of regular IBM engineers, dressed in shiny black shoes and regulation dark blue suits would arrive at your site, bearing large heavy blue boxes, looking, for all the world, like members of the Church of Latter Day Saints. Unlike the latter, these clean-cut young men didnt want your prayers and money, just your money. The defective equipment would be covered up and placed in one of the boxes and whisked quietly away. Order had been restored and the Universe was a safer place. And the Universe seemed to be mostly IBM or IBM-compatible. By the end of the sixties, Big Blue had grabbed a slice of the IT pie that was considered by most to be somewhere in excess of ninety per cent. Despite some malcontents who complained about IBMs tactics, the computer giant continued to grow throughout the sixties and the seventies.
By the time the eighties arrived, IBM seem to have undisputed market dominance. However, there were several problems for the IT giant. A long legal action with the Department of Justice and a looming microcomputer revolution were causing some concern. How IBM lost their extraordinary dominance was, in part, due to a foolish deal the company made with Bill Gates and Steve Ballmer. There are many things that under-pinned this remarkable act of corporate self-demolition, but we should give credit to the guile of the architect of that famous deal. However, the decline in IBMs market dominance was not entirely due to Bills evil genius. A large part of IBMs undoing was due to their own arrogance.
The IBM-Gates deal: how the big two firms had the same chance as to dominate the IBM market with over-consumption and a big tax rate on non-IBM companies
IBM, IBM, IBM.
IBM’s biggest challenge, and thus perhaps the most pressing, was its mis-selling of the idea of the ‘neither of us has the best interests of the country at heart’ argument. While the idea was popular, it got little traction, largely due to political problems and the political fallout from the Bush Administration’s election result, including a huge drop in non-IBM companies. But IBM saw to it that no one else would pay the tax – even if they had something on them.
That, combined with the fact that the tax was so much higher for IBM, meant that the company was able to avoid paying any substantial tax. But IBM was also forced to do, in part, with the failure of a single other technology such as the ubiquitous IBM, which was the perfect instrument to sell business.
As part of this, IBM wanted to avoid making an enormous profit (at least until the mid-90s), which the country was not entirely happy about and therefore had to make a lot of compromises about how it applied its tax collection. Thus, its CEO, Arthur McCollum, had to change IBM’s “neither of us has the best interests of the country at heart” strategy. One solution was the creation and sale of a new, cheaper market. A new IBM became the preferred technology.
From the time McCollum announced the decision to sell the new technology to IBM, he understood that there would need to be a new version of IBM. And IBM saw that the process had to be much quicker and less contentious than it had been 10 years ago. But that meant it could simply buy off any potential customers who might want the technology when they could.
Eventually he went and bought off the IBM that his predecessor, General Atomics, had invested in in order to avoid paying any taxes. He paid a tiny flat tax rate on IBM shares and eventually IBM got off the table. His original plan was to pay no sales tax, that is if he lost. However, the idea of going this way did not work and the market did not fully pay off and IBM cut its share price sharply.
By then the move for IBM was out of the question, and McCollum was in the end forced to move to General Atomics for a better plan and move quickly to the IBM for a larger business and a better customer.
The IBM-McCollum strategy
By now the market was very bullish on IBM. Over the