In 2017, IBM spent $5.4 billion dollars on R&D (sources vary on the number). That’s a lot of money. Not as much as Amazon ($23 billion) or Alphabet ($16 billion), but still a pretty good chunk of money. Instead of saying billion, let’s say thousand-million, so IBM spent five-thousand-four-hundred million dollars on R&D.

It’s roughly the same as what they spent in 2005, and their revenue is roughly the same as back then ($88 billion in 2006, $80 billion in 2017)

They’re doing a bunch of things to stay relevant, but while most people have heard about AWS or Azure, I don’t often bump into people who know or use IBM Bluemix (now “IBM Cloud”). Is it any good? I guess it must be; the revenue was at the time of writing (Jan 2019) about the same as AWS and Azure (between $7 billion and 9 billion), but AWS and Azure is growing very, very fast (~50% growth per year). As a developer, trying out AWS or Azure, for real, can be accomplished in a few hours. I tried Bluemix years ago. I gave up. I’m sure that I could have gotten it off the ground, but why should I spend days on something that I can do in hours with the other vendors?

Most have heard about IBM’s Watson project. Watson is a project to make a computer that knows everything; it can play Jeopardy, diagnose patients and judge your wardrobe. Reading about the intended purposes of Watson, it seems as if they’re constantly trying new (random) things, only to get beat by Amazon, Apple, Microsoft or Google in the areas that matter. Morgan-Stanley asked ~100 CIO’s about their interest in AI, and 43 of them were considering using AI. Of those, 10 preferred IBM Watson. I don’t know what “preferred” means, and I don’t know what they plan to do, but just because IBM has plowed a lot of money into building something that runs on their mainframes, doesn’t mean it’s valuable. As a side note, the survey (in the link) converted the numbers to percentages to make them seem more significant, but really, it was just 10 dudes out of 100 who said they “preferred Watson”. SO FAKE NEWS!!! (or at least, take it with a grain of salt).

IBM’s revenue did grow recently, but the growth was driven largely by mainframes (cloud business also saw an uptick, about 20% growth), but most people are wondering if this is sustainable. Aren’t we all moving towards serverless (a’la Amazon Lambda), which basically means “sell me cycles as cheap as possible”. It smells like commoditization, narrow margins and huge volume – running on the cheapest possible hardware. A game in which IBM’s expensive mainframes probably will struggle. It seems as if IBM is anticipating this, and just took a major step in that direction by paying $34 billion for Red Hat.

IBM basically went from being front and center of the PC revolution to being a a large, but mostly invisible company. I used to be that “PC software” def. would work on an IBM PC, but then things got bad. For example, 20 years ago there was just one person at the dorm with an actual IBM computer, and it was not compatible with any of the clones the rest of us had. The world had taken the parts that were useful (common platform), and moved on. IBM thought they were still in control of the platform, and could deviate from it. Turned out they were wrong.

Is there a need for IBM any longer?

Sure, banks, government and insurance companies with huge legacy systems, that can’t be moved, will keep buying mainframes forever. So there’s certainly a need. But it’s the same sort of need a drug addict has when they’re coming off their drugs. It’s not a “good” need. Does IBM have anything unique and valuable they can offer to the “cheap reliable cycles” world of the cloud? Do they have anything in the AI space that isn’t being beat by the usual suspects, or at least will be beat, as soon as it becomes commercially viable?

We need competition. If we’re left with Azure and AWS, the world will be a boring place. IBM could maybe compete with AWS. I don’t see why they wouldn’t be able to. But perhaps they aren’t willing or capable.