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Decision making in IBM

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Description of the company and its history

IBM (International Business Machines Corporation) is a multinational information technology company that has its headquarters in Armonk, New York and it has business operations in over 170 countries across the globe. The company began in 1911 and it was founded in New York’s Endicott and at that time, it was registered as a Computing-Tabulating-Recording Company (CTR). However, it was renamed IBM (International Business Machines) in 1924 (Mills, 2016). This was an amalgamation of 4 different companies that previously operated on their own: the dial recorder of Alexander Dey, the Electric Tabulating Machine of Herman Hollerith, the computing scale of Julius Pitrap and Willard Bundy’s time clock that was meant to record the arrival and departure of workers on a paper tape. They were amalgamated by Charles Ranlett Flint. At the time of their amalgamation, they had five branches in Detroit, Michigan, Ohio, Dayton, Washington D.C and Toronto and it had 1,300 employees (Mills, 2016). The company manufactured Machines for lease and for salve and they ranged from commercial scales and industrial time recorders, tabulators, meat and cheese slicers, and punched cards. In 1937, IBM’s tabulating equipment was advanced by the organization and used to process unprecedented amounts of data of its clients and the US government was included. This was an effort to maintain the records of employment of 26 million people that pursued the Social Security Act.

In 1949, IBM World Trade Corporation was created by Thomas Watson Sr. a subsidiary that was meant to focus on the international operations of IBM. In 1952, he stepped down after leading the company for almost 40 years and his son Thomas Watson Jr. was named the IBM president (Mills, 2016). The first artificial intelligence was first demonstrated in IBM in 1956 by Arthur L. Samuel in New York when he programmed an IBM 704. This was not merely to play the checkers but also to learn from its own operational experiences. The FORTRAN scientific programming language was developed in 1957 (Mills, 2016). The SABRE reservation system for American airlines was developed by the IBM in 1961 and this led to the introduction of the highly successful selectric typewriter. IBM also contributed to the outer space research when its employees and computers helped NASA to track the flights of astronauts in 1963.

IBM produces and sells computer software, middleware and hardware as well as providing consulting and hosting services in a wide range of technology ranging from mainframe computers to nanotechnology. IBM is also a big organization of research and it thus holds the record of most patents in the United States that are generated by a business and this has been done for 26 consecutive years (as of 2018) (Ahamed, Inohara & Kamoshida, 2018). IBM has invented several devices and they include: the floppy disk, the automated teller machine, the magnetic stripe card, the hard disk drive, the SQL programming language, the relational database, the dynamic random access memory (DRAM) and the UPC barcode. The IBM Company has been continually shifting business operations by focusing on higher value and markets that are more profitable. This includes the salve of personal computers (ThinkPad) and a computer serve to Lenovo in 2014 and the spinning off printer manufacture Lexmark in 1990. The organization has also been acquiring companies like SPSS in 2009, PwC Consulting in 2002, the Red Hat in 2019 and the Weather Company in 2016 (Ahamed, Inohara & Kamoshida, 2018). With the nickname Big Blue, IBM is among the 30 companies that are included in the Dow Jones Industrial Average and it is also among the world’s largest employers with a total of 380,000 direct employees known as IBMers as of 2017.

The growth plans of IBM

The IBM Company is shifting towards an emerging and high margin business. The annual investor meeting that was held in New York in 2017 had executives outline an aggressive plan that targeted $40b in annual revenue and this is expected to be retrieved from assets like big data, cloud computing, analytics, security software, mobile and social and the company calls it a strategic imperatives (Canals, 2019). The revenue of IBM has been falling for the past 11 quarters and its earnings have been sporadic. This is the period where the company is reinventing itself, where it is selling off its unprofitable units in its businesses like the semiconductors, low-end servers and cash registers. This is also the period of the company transformation that has seen heavy investments in areas that include artificial intelligence and cloud computing. In as much as it has knocked down its profits, this strategy is putting the company in a better competitive position. The company has thus avoided the targets that are tied down to a specific year in the future and embraced a longer-term model. This is a smart move because the company badly fell short when it tried to get too specific on its targets. This eventually targets that about 80% of total free cash flow will be expected to return to the shareholders each year, eventually causing an annual dividend increase and continued tap on share buybacks (Canals, 2019).

IBM decision making process

The decisions of IBM are not just made by one person or one body of the organization. However, the decisions are made by a number of bodies and units within the organizations. For instance, the annual investor executives do make decisions about the company aggressive plans and targets on annual revenues from various units of the organization. There are some decisions that are made by the president of the company. For instance, Thomas J. Watson Sr. made a decision of putting stamp of NCR onto the CTR’s companies (Saaty, 2018). As the president, he also implemented sales conventions that were meant to focus on customer services. The board of directors of the company also make decisions regarding the organization’s operations and performance strategies. The company also applies the IBM Operational Decision Manager. This is a comprehensive-automated solution that provides extensive capabilities of decision making and thus it helps the business to capture, discover, analyze, automate and govern rules that are based on business to make decisions. From the look of things, the decision making approach used in this organization is the behavioral approach. According to Saaty (2018), this decision making approach assumes that decision makes operate within a rationality that is bounded. In this regard, the decision makers cannot deal with information about all aspects of the organization but rather tackle some meaningful subset of the problem. In this case, the President makes decisions about some sections of the organization like the innovation and development while the investor executives make decisions about revenue recognition and distribution to the individual shareholders.

An analysis of IBM’s plan for growth

The growth strategy of IBM revolves around the cloud business and it is mostly centered on the type of cloud service called “as-a-service” business. Therefore, the company expects this type of services to grow at a rate of 15% to 20% annually with an added scale boosting gross margin from the same services by 3 percentage points per year. This is a good strategy of the organization because even as per 2017, the cloud computing services reached a $10.3 billion (Canals, 2019). The business decision are so diverse when it comes to strategic growth in such that they do not only rely on one section of the organization but rather on several units of the company. This is because the company has checked its technology and cloud services platforms and segmented them and this has brought a 50 basis point of margin expansion annually. The employees are also not forgotten in this reformation because there is a workforce rebalancing as part of the IBM equation because it continues to bring in employees with the necessary skills. In this case, about 50% of its current employees were added to the organization in the past five years, some through acquisitions done by the company.

Conclusion

The IBM organization is one of the most diverse organizations that has operations across the globe. Its decision-making process is so comprehensive such that there is no collision or confusion in making decisions. The decisions are not made by a single body or a person and thus this makes it more possible for the company to cover all aspects of the organization in a more comprehensive way and making things get done as per the expectations.

References

Ahamed, Z., Inohara, T., & Kamoshida, A. (2018). The servitization of manufacturing: An empirical case study of IBM corporation. International Journal of Business Administration, 4(2), 18-26.

Canals, J. (2019). How to Think about Corporate Growth? This paper is based on the author's book, Managing Corporate Growth, Oxford University Press, Oxford, 2000. European management journal, 19(6), 587-598.

Mills, D. Q. (2016). The rise, decline and rise of IBM. Sloan Management Review, 37(4), 78-83.

Saaty, T. L. (2018). Decision making with the analytic hierarchy process. International journal of services sciences, 1(1), 83-98.