There used to be no three bigger letters in the computer world than IBM. Despite its reduced influence, IBM is still a major player today among large enterprises.
IBM was founded in 1911 as the Computing-Tabulating-Recording Company from the merger of two existing companies and in 1924 was renamed International Business Machines. Early on it specialized in manufacturing employee time clocks, sales and leasing machines, and arithmetic tabulators.
Despite the word “Computing” in its original name, this was all well before digital computers were invented. In fact, IBM’s president at the time that computers were being developed wasn’t optimistic about their prospects. In 1943 Thomas Watson famously said, “I think there is a world market for maybe five computers.”
Its first general-purpose digital computer put into use was the ENIAC, designed at the University of Pennsylvania and used by the U.S. Army to calculate weapons’ projectiles. When it was unveiled in 1946, the press called the ENIAC a “Giant Brain.”
It wasn’t until 1953 that IBM came out with its first mass-produced digital computer, the IBM 650. But it wasn’t long before IBM began dominating the world of large mainframe computers. Introduced in 1964, the IBM System/360 was enormously popular, allowing commercial businesses, scientific organizations, and government agencies to process large amounts of data quickly and efficiently.
One of the most profitable catch phrases of all time, heard frequently from IBM sales people in the 1970s, was “Nobody ever got fired for buying IBM.” Going with an established, mainstream choice helped people making weighty decisions and avoid FUD—fear, uncertainty, and doubt. IBM was “Big Blue,” given this nickname because of its blue logo and the de facto employee dress code of blue suits and white shirts.
In the late 1970s a new phenomenon was developing—small computers or “microcomputers” that hobbyists were putting together themselves from kits. In 1975 Micro Instrumentation and Telemetry Systems of Albuquerque, New Mexico, created the Altair 8800, the first commercially successful personal computer. Ed Roberts, the largely forgotten cofounder of MITS and the principal designer of the Altair, is sometimes called the “father of the personal computer.”
The Altair was barebones—no monitor, keyboard, or operating system. Later in 1975 MITS contracted to buy an interpreter, or programming interface, not even a complete operating system, from Bill Gates and his partner Paul Allen. When that deal went through, Gates dropped out of Harvard and cofounded Micro-Soft, which later became Microsoft.
This time IBM saw the writing on the wall. Wanting to develop a personal computer with an IBM moniker on it that businesses could have confidence in, it partnered with Microsoft and in 1981 introduced the IBM PC, originally called the IBM 5150. The operating system it ran was Microsoft’s DOS, Microsoft having acquired it for this reason from Seattle Computer Products.
But the 26-year-old Bill Gates outmaneuvered mighty IBM, then larger than all the other computer companies in the world combined. Gates negotiated a deal that let Microsoft license DOS to other PC makers as well as IBM, which allowed for the development of “IBM-compatible PCs,” also called “IBM clones,” and put Gates on the path to becoming the world’s richest person. IBM’s version was PC DOS, Microsoft’s MS-DOS.
With the help of MS-DOS, in 1996 the market value of the once tiny Microsoft surpassed that of IBM. In 1999 Microsoft set the record as the most valuable company in the world, with a market value of $616 billion. Apple and Alphabet, Google’s parent company, have since surpassed Microsoft.
IBM involved itself in the world of personal computers for only a generation. Never able to compete as it wanted against IBM-compatibles, IBM sold its personal computer business in 2005 to the Chinese company Lenovo. Since then Lenovo has grown from the world’s third largest PC maker to the largest.
Things have changed recently in other ways as well, with the PC business facing stiff competition from the digital devices business. People like their smartphones, tablets, ereaders, and game consoles—especially their smartphones, ever since Apple released its groundbreaking iPhone in 2007.
These days IBM makes most of its money not from manufacturing computers but from providing computing services and from cloud hosting—running programs and storing data for others over the Internet. Headquartered in Armonk, New York, IBM operates in 170 countries, with 380,000 employees and $80 billion in annual revenue.
Things go back a ways, well before even IBM. Where did it start? Perhaps on the African savannah, counting fingers.