IBM: The Dilbert of companies

We all BM

HARLIE (the computer), from When HARLIE was One, by David Gerrold

I grew up in an IBM town. IBM pretty much owned Endicott, New York when I lived in the area. The exception was the Endicott-Johnson shoe factories, which were in serious decline in the 1960s. In fact, IBM was founded in Endicott, New York in 1911.

Big IBM-white boxy concrete buildings line McKinley Avenue and other Endicott streets. If you didn’t work for IBM, you prospered from mooching off of IBM. IBM guys were cool if white guys in white shirts, black pants, narrow ties and short hair could be cool in the 1960s. In any event they lived well, worked hard and gave their all to the company Thomas J. Watson founded. It sure looked like a cool company to me back then. Not only did they rake in all these billions in revenue, but also their employees were happy with terrific pensions, great salaries (because IBM hired top talent only) and had pretty much a guarantee of lifetime employment. Management actually listened to their employees and encouraged them to be creative and innovative. The guys (and they were almost all guys, except in the clerical or punch card pool) wore THINK buttons on their suits and shirts. It was embedded in their logo — so much so that it was hard not to associate IBM with THINK (in capital letters).

That was then, but it bears no resemblance to the IBM of today. At least that’s my conclusion having finished Robert X. Cringley’s eBook on IBM, The Decline and Fall of IBM: End of an American Icon? Cringley has been a tech journalist since the 1980s, and made a name for himself (under a pseudonym I am pretty sure) writing for InfoWorld, the tech publication that focuses on information technology in the enterprise. I credit InfoWorld for much of my career success, since it was always topical and ahead of current trends, plus it told me stuff I needed to know to succeed in the workplace of the moment.

InfoWorld is still around, but its print publication is long gone. So, in fact, is Robert X. Cringely. Well, not quite. You see, there are two Robert X. Cringleys. There’s the guy that wrote the original columns over many years, and then there’s the trademark “Robert X. Cringley”, which InfoWorld claims to own. So there is still a reputed tech spy named Cringley on, but not the real Cringley, the tech guy that amused us with likely fictitious anecdotes about his relationship with “Pammy”, a curvy younger woman that ran hot/cold. Reading his column was half neat behind the scenes tech news, and half soap opera. It was fun and addictive. Anyhow, the first and legitimate Cringley, now 60+, is still one of the few people doing honest information technology journalism, and can be read on his website. And I assume the model in the picture is “Pammy”.

Cringley has been studying IBM for a long time, having grown up in an IBM town like me. He believes the company is ready to implode. This is because, very sadly, the company has morphed into the Dilbert of companies. It is overrun by pointy-haired bosses that are busy working their employees into early graves, if they are not being summarily fired to hire greatly discounted and frequently incompetent employees from India who largely have no idea what they are doing, or who have mastered the idioms of American English.

From the perspective of Wall Street, IBM is doing great. The managers are doing a great job of increasing their earnings per share quarter after quarter. It’s a metric they are focused on like a laser beam. You know what the problem is when you focus: it distracts you from the rest of the world. As Cringley’s analysis points out, the things that should matter about IBM are simply being ignored. It’s crazy what its managers are doing to its core assets, not to mention its employees. They are burning the seed corn, to use an analogy from the Civil War. For many years they have been relentlessly firing their best employees, mainly because they cost too much. They cut pensions and eventually did away with them altogether. They outsourced a lot of their work overseas, adding huge communications barriers and dispensable employees, who were often just cheap contractors, to handle technical interactions with their global services customers. These are very profitable customers that need a long-term relationship with a tech firm to manage their complex systems. To do this right, it requires a deep understanding of their technical needs, their business and a rigorous, engineered approach to managing their complex technical infrastructure. Done right these are hugely profitable customers for life. They used to do this right, and now it’s hard to find an example of a company that does it worse, or charges more for the privilege.

Sadly, the more you read of this relatively short eBook, the more appalling the whole thing becomes. (It’s a quick read and at $3.99, this self-published book that no publisher would otherwise touch is also a bargain. About half of it is an appendix of comments he has received over the years.) It doesn’t take much reading though to discover what the real problem is: managers come exclusively from the sales ranks, not the technical ranks. Consequently overall they have little clue what their customers want, and lack the creativity to direct their employees to give them what they want, or even bother to ask them. Moreover, it has more bureaucracy than the federal government, so many incredible layers of hierarchical management, despite implementing a flawed version of the Lean efficiency program.

Managers and employees often widely geographically separated, causing stilted communication that adds cost and delay. Not that employees have the time to give feedback. They are kept working like slaves: sixty or more hours a week, for now below par industry wages and they are massively overcommitted, with the grim reaper of outsourcing always at their heels. Their customers are being pick pocketed too: they pay highly inflated prices for crappy services, made worse by contracts based on billable hours that are often inflated. The smarter customers have moved on, which is fine with IBM. They then lay off more employees, which helps increase earnings per share, and Wall Street applauds because they equate this with good management.

Cringley has solutions but IBM’s leadership has proven both tone deaf and hostile to creating growth again in the company. As for listening to their employees, they simply can’t be bothered. Which means that IBM is a shadow of its former self. And this has been going on for a decade or so. I know people who have been laid off from IBM. As I read Cringley, I wonder why they didn’t bail long ago. In many cases, it’s because they are in their late 40s and 50s, and it’s hard to find a job that pays as well or even at all.

IBM is also buying back tons of its own stock, often with borrowed money, simply to prop up its earnings per share. No one seems to be looking at its sales and how they have been dropping, and how many of their largest customers have gone elsewhere. No one, least of all its management, is looking at the quality, innovativeness, or value of its product lines. Management simply isn’t interested.

What is IBM management good at? It’s good at creating Potemkin Villages: shells that look good to outsiders, but with hollow or non-existent insides. Its major advantage is a huge legacy of accumulated cash from its glory years that lets it hide its inefficiencies and which they apparently won’t invest in innovative products and services. Touring Endicott, New York, where only a couple hundred of the thousands that it employed in its glory days remain, easily demonstrates its hollowness as a corporation.

Cringley’s analysis, and it’s voluminous as well as filled with insider dope, is unfortunately right. I don’t invest in individual stocks, but if the price of increasing earnings per share is to piss off its customers and stop creating products that lead the market or offer greatest value, then it’s only a matter of time before its house of cards collapses. From the looks of things, it shouldn’t be too much longer. It won’t matter to its managers. Much of their pay is based on IBM’s earnings per share so their prosperity is already assured, so in some sense they are betting on failure. By tying pay to earnings per share, IBM embraced a false Wall Street value. Real growth and real value comes from companies that innovate, like Apple Computers. IBM is proving to be the stodgiest and most tone deaf of companies. The Davids of the corporate world have already hit this Goliath with a rock on the forehead. Goliath simply hasn’t figured out that he is falling to the ground.

At the start of the book, Cringley relates a real story. As a child in the 1950s he had a great idea that he took to IBM. Thomas J. Watson himself read and forwarded his letter. He actually got an interview with a group of IBM engineers. To say the least those days are long gone. Watson should be rolling in his grave. Most likely though IBM executives will remain clueless until Wall Street finally notices, and the company collapses into a bunch of sub-prime parts that get sold off by ticked off stockholders. Pretty much any company out there could do a better job of managing these parts than IBM.

I hope you will read Cringley’s book. It doesn’t take long and should make you cry, particularly if you knew the IBM that used to be. It should also make you very angry.

You can sort of go home again

Can you really go home again if no one is there? Yes, you can, providing you don’t want to live in the space you used to inhabit (for about forty years it has been occupied by other people) and you don’t mind if there is no one really to call on. There probably are people in the Binghamton area who might know me and I might know them, but I don’t know where to find them, they don’t know that I’m here and if we remember each other at all we’ll probably confuse names, dates and facts. So instead former residents like me arrive and leave anonymously, and the closest you come to confessing that you are a native is to the waitress at Christie’s steakhouse in Johnson City, who receives the information with a blank stare.

View of Johnson City and Vestal from Traditions Resort, Johnson City, NY
View of Johnson City and Vestal from Traditions Resort, Johnson City, NY

“The Triple Cities” we used to call them, but Binghamton, Endicott and Johnson City are hardly the only trio of cities in New York State with the moniker. There is, for example, Albany, Schenectady and Troy. I was born in Schenectady and expect to be in Troy in October. Nor are they all real cities. Endicott promotes itself as a village. Endwell, where I grew up next door to Endicott, is part of the Town of Union (which includes Maine to the north) and may be bigger than Endicott. Across the Susquehanna on its southern side is Vestal, neither a city nor a village, but a town. Arguably Endicott was a city in its glory days of the 1950s. Back then the shoe factories lining the railroads were cranking out shoes by the railcar full. The smell of tanning leather was pervasive as you drove down North Street. Then there was also IBM, busy building the precursors to the information age: electric typewriters but also mainframe computers that read programs from stacks of paper cards and saved data to giant reels of magnetic tape.

The abandoned shoe factory eyesores are now finally gone. This is probably for the best, because they were ugly and safety hazards. If Endicott is to have a renaissance, it could not happen until these eyesores were demolished. Still, they should have kept one, prettified it up and sold tickets to tourists to see it. History sells in upstate New York. IBM is virtually gone, with only a couple of hundred employees in Endicott. The huge IBM administrative building still proudly proclaiming its name on North Street is still there, and it is easy to mistake for a high school. The boxy white concrete IBM buildings along McKinley Avenue remain as well. Not much has replaced these employment centers, which has resulted in the predictable result: lots of boarded up storefronts. When IBM mostly left, a company called Huron took over and is now marketing the former IBM campus to prospective employers. Arguably, Endicott would be a great value to any prospective employer. There is no rush hour to worry about, plenty of cheap real estate and there is never a problem with finding a parking space, except as I discovered at the George F. Johnson Memorial Library. Some things are new on Washington Avenue, Endicott’s old downtown, including an “adult emporium”.

In 2012, the Triple Cities are not exactly looking up but they definitely feel less bleak than they did when I last visited in 2000. It was perhaps exemplified by our choice of lodging, Traditions in the Glen, a four-star hotel, spa and golf resort occupying what used to be the IBM Country Club, before IBM vamoosed. The elite of the area, such as they are, seem to hang out here. It is a lovely resort, beautifully restored and feeling much like a scaled down and less pricey version of The Homestead, a huge resort we visited in 2010 in Virginia’s Blue Ridge Mountains. In the lobby you can see pictures of the country club at or before I remembered it, with pictures of IBM founder Thomas Watson, Sr. taking the first shot on the then new country club, or Bing Crosby with Jack Nicholson’s trainer swinging away on the course.

Unfortunately, it’s but a short drive of a mile or so from Traditions down Watson Boulevard where you will find suboptimal retail: an ugly old coin Laundromat, a Dollar General store and a Yum Yum ice cream stand that looks like it deferred about twenty years of maintenance. Much of my home town of Endwell is still a sad place. East Main Street in particular is distressed. And yet, there is community along East Main Street. Wander down Davis Drive and onto Stack Avenue, where my friend Tom and his family used to live, and you find a real family community just as nice, if not nicer, than my memories of it from the 1960s and 1970s. Nearby Christ the King Church has been sold to an evangelical faith, perhaps for hard cash to pay off various priest child abuse suits. It is now the Triumphant Life Church, and they must be doing well because the building has been expanded. The old parochial school across the parking lot where I suffered eight years of elementary school under the watchful eyes of frequently tyrannical sisters remains boarded up. Many of the windows are covered in plywood and the blue plastic veneer siding is fading and peels. Catholicism is dying in The Triple Cities, as evidenced by the consolidation of churches and parochial schools, and is being slowly replaced by evangelical faiths like the Triumphant Life Church. A high school in Endicott where I spent a little over a year is still there, but is now a junior high. Seton Catholic High School was relocated to Binghamton.

Yes, of course things have changed back home in forty years, but it looks and feels much the same. Some things are truly for the better. Formerly a community as white as Wonder Bread but with a heavy Greek presence (evidenced by the Eastern Orthodox churches in Johnson City), now real diversity can be found: Asians, blacks and other minorities have moved in, perhaps drawn to the dirt cheap real estate. Endwell is not exactly a city of color but it has become a loaf of spotted Pumpernickel. The local gas station on East Main Street is full serve, and an Asian teenage woman there happily pumped my gas. (Full serve does not mean they check your tire pressure and engine oil, however.)

The houses are newer in Endwell the further north you go. My old neighborhood along Scribner Drive feels reasonably well kept up. What is different is vegetation: lots more of it with forty years to settle in. Our old house at the corner of Scribner and Winston drives has been transformed over forty years. There is a lot of natural landscaping in the backyard and more trees. The garage has been turned into a room, and there is an additional driveway along Winston Drive. Otherwise the neighborhood remains inviting  and a healthy place to raise children, with Homer Brink Elementary (where I went to kindergarten) a few short and safe blocks down the street. Forty years have not eroded the terrain either. The hills of Endwell and Endicott remain steep and challenging, and doubtless it remains difficult to get to houses at the top of the hill after a snowfall. A four wheel drive vehicle is recommended for those homeowners.

For me the heart of Endwell is the intersection at Hooper and Country Club roads. All the retail establishments I recall are gone, but new ones have come to supplant them including  a large community credit union. The firehouse remains. A Dunkin Donuts has moved in as well, and today that chain and Dollar General stores seem to have taken over the Southern Tier. Still, I could retire back to this area because Johnson City has a Wegmans supermarket, and it is just like the Wegmans we have back near our real home. Surely, a community is civilized and shows fortitude if a Wegmans has taken up residence.

There was not time for a proper tour of the area when you arrive late in the afternoon and leave around noon the next day after taking time to do your laundry at an Endicott Laundromat. We merely drove through Binghamton. What we saw of Johnson City looked a bit more hopeful than it did in 2000, although my father’s former General Electric Plant, sold and resold a few times, is now boarded up too. Recent floods caused a lot of damage to an area that was already distressed. The area has been abused and kicked around, but it is hardly dead. It may be on an almost imperceptible rebirth. Its gentle green hills and usually benign Susquehanna and Chenango Rivers give it a peaceful and comforting feeling, interrupted only by the annoyance of swarms of gnats during the summer. It needs some company with bigger pockets than the Huron Corporation to believe in it again. I hope that someday true vitality returns to the community I will probably always consider my home.