Chief executives are worried about the Internet, and IBM is tailoring its business to soothe their fears The news from International Business Machines is that the mainframe is back, and its new model, the G6, was introduced last week with much fanfare, amid signs that such big computers are regaining market share from their smaller rivals.
The more important news for the company is that the chief executive is back: big-business bosses are once again seizing control of the information technology agenda. That matters to IBM, because selling big-picture business solutions to worried chief executives is what it does best, a visceral instinct inherited from its creator Tom Watson's days as a turn-of-the-century cash-register salesman.
Though IBM has a distinguished track record of inventions, it has never been particularly good at selling technology. Instead, it focused on soothing the boss's worries. Sure, computers were big and scary and expensive - but IBM would insulate you from all that. That worked like a charm for 30 years, but then came the 1980s, for IBM a slow-motion corporate disaster. Lots of things went wrong for the company simultaneously, including some it wished on itself. Even if it had played its hand perfectly it would still have run into trouble because of an underlying shift in the business environment: bosses stopped being scared of computers.
Angry, yes. Frustrated, frantic, cost-conscious - all those. But not scared. A new generation of bosses had grown up with computers, and saw information technology as a conventional business issue, to be managed like any other. The arrival of the personal computer and off-the-shelf software made the whole thing much less intimidating.
So they decided that they would stop listening when the IBM salesman came calling. They told their ever-changing roster of computer managers: cut costs, move to PCs, adopt industry standards and above all, leave me alone! It is not surprising that a company like IBM - high cost, ambivalent about PCs, traditionally hostile to industry standards, with a sales process based on high-level access - nearly went under.
IBM has addressed most of the practical problems of the past decade: its costs are down, it has adopted industry standards, it has changed its sales processes, and it can live with the PC world it helped to create. That is enough to ensure survival. To survive in style, however, as the company now seems to be doing, required more than internal reforms: it required the return of fear. Thank the Internet for that. The creation of pervasive networks, linking companies with customers, suppliers, offices and intermediaries around the world, is the sort of sea change that keeps bosses awake at night.
It is big, and completely unknowable. That calls for reassurance, and a sales pitch to the chief executive. "Information technology has become a CEO issue again," says a happy Mike Lawrie, IBM's general manager for Europe. This might seem odd - after all, the Internet is the province of US West Coast start-ups, not the East Coast establishment. But as long as the systems integrators, such as IBM, can stay close enough to the new technology's leading edge, they can profit by packaging it to solve business issues.
The sort of software the new era needs, for example, is not just off-the-shelf applications, no matter how clever or Web-centric. Instead, it is the middle-ware that links together existing applications and the Internet; the e-commerce software that allows customers to purchase online; the database-driven web-sites that change to reflect each user's preferences. These are areas that play to IBM's strengths. They require learning new technologies, but not entirely different ways of thinking. Who are the competitors in the new era? It is easy to tell: anyone who is trying to lay claim to the Internet.
Each of the leading competitors is trying to associate the new challenge with its own slogan, defining it in ways that play to its own strengths. IBM's phrase is "e-business", intended to suggest that there is more at stake than e-commerce. Sun's phrase is "We're the dot in .com". Oracle calls itself "the foundation of the Internet and electronic commerce". EDS talks about "end-to-end electronic business". It is a sign of the problems engulfing Compaq that it has failed to lay claim to this space, as yet.
For the moment, all these competitors can exploit the heady mixture of opportunity, fear and complexity. That is a wonderful atmosphere in which to be selling, because it means that conventional considerations of price go out of the window. There are some spectacular e-commerce success stories, such as the online stockbrokers Schwab and E*Trade, or Dell's computer sales web-site. These are enough to underpin the whole story.
That will not last. Electronic business, like conventional computing before it, will become routine. Chief executives will think they understand it. Fear will ebb away. The integrated systems suppliers - such as IBM - who promise to let bosses sleep at night will lose their edge. The e-commerce equivalent of shrink-wrapped software will take over, and high-powered solutions salesmen will lose their access to the executive suite. But there is a long way to go before that happens. In the meantime, the boss is back - and worried.