International Business Machines And the Attack of the Clones

Subject: Case Studies
Pages: 8
Words: 2256
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Study level: PhD

In the recent past, technology has speedily evolved to replace the conventional ways of doing things. Most of the technology advancement manifests in the form of embracement of personal computers (PCs) and the Internet in organizations. As opposed to the past when computers were only available in a few institutions, today, almost every individual has a personal laptop (Schiling, 2008). There is strong evidence connecting the use of computers and the Internet to high performance in a company. The described connection has driven the demand for PCs upwards, a situation that has led to increased production by technology companies. Competition has also stiffened in the industry since each firm seeks to maximize its market share by producing high-quality PCs. The first PCs were introduced in the 1980s, with International Business Machines (IBM) being credited for being the pioneer company to innovatively produce such devices (Benj, 2012). The stated company identified the gap in the market for PCs and exploited it by introducing them. In the first years of the innovation, it recorded high sales, which were attributed to its monopolistic status. However, in the subsequent years, its turnover started to decline since more companies penetrated the market, hence stiffening competition in the industry. The situation was catalyzed by the lack of proper copyright protection for IBM’s technology (Benj, 2012). This state of affairs caused other companies in the industry to copy the technology to produce substitutes, which led to far-reaching rivalry in the PC industry. The objective of this paper is to explore the history of computing with reference to IBM, which was the pioneer company in the industry. Besides, the paper explores IBM’s future, innovations, and competitors who stole its computing technology, thus blurring its dreams of becoming the market leader in the PC business.

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Background

IBM is a multinational Corporation, which is headquartered in the US. The company specializes in the production and sale of electronics. It has branches in over 170 countries across the world. Its main product line is computer hardware and software. It is known for its innovation to introduce new products in the market. During its inception, its operations were limited to the US. However, through mergers and acquisitions, the company has managed to penetrate more countries around the globe. The dawn of 1981 marked a huge turnaround to the company’s operations when it introduced its first ever PCs. The PCs were made from outsourced components, which were bought from other companies in the technology industry such as Microsoft. Following the innovative move to introduce the PCs, the company’s profits were highly boosted (Miller, 2013). At the time of the introduction, only a few companies operated in the PC industry, implying that the company would benefit from huge sales of its computing devices. By 1983, the company controlled about 76% of the PC market. This figure was large enough to ensure that it earned sufficient profits. However, in the subsequent years, other businesses in the industry stole the IBM’s technology and produced their PCs, which were similar to those of IBM. By the end of 1986, IBM controlled only about 26% of the PC market. The rapid drop in the overall IBM’s market share was largely attributed to the availability of substitutes introduced by its rivals. Although the company had acquired a copyright protection for its invention, it failed to secure an agreement with Microsoft, which would bar the latter from selling the disk operating system (which it sold to IBM) to the rivals.

Discussion

Current Issues

In the recent past, technology has grown tremendously, with the computer industry recording the largest expansion. As technology advances, issues concerning the extent to which the copyright laws protect a company’s invention continue to emerge (Christensen, 2013). In essence, copyright laws protect a person’s invention from undue invasion by other people. If a person or a corporation invents a technology, the pioneer has to apply for copyright protection to avoid the unlicensed use of the same expertise by the rivals (Drucker, 2014). As competition increases, companies are tempted to use other peoples’ technology to remain relevant in the ever-changing business environment. In the case of IBM, the company acquired copyright protection against the wrongful use of its Basic Input/Output System (BIOS). The IBM-BIOS was a unique code, which would be used to start the company’s computers. The BIOS code was protected from being used by the company’s rivals (Benj, 2012). However, as much as the corporation had secured copyright protection of the BIOS, rival businesses in the industry managed to use the reverse engineering to develop their BOIS codes that were compatible with IBM’s hardware and software. Through reverse engineering as a current issue, a firm or a company can develop and use an existing technology without being held accountable for copyright infringement.

One of the rival businesses that proved to be a threat to IBM’s technology is the Columbia Data Products Inc. The mentioned company introduced its first PC clone in 1982, just a year after IBM introduced its PCs. Dynalogic and Compaq followed suit. In 1983, they introduced their brands into the market to compete with those of IBM (Benj, 2012). Other companies such as Phoenix Technologies also followed the same steps. They equally introduced their brands in the subsequent years. As of 1986, the PC market was saturated with numerous brands from different companies, which had copied IBM’s technology.

As it stands today, the PCs that are currently available in the market where they are freely using manipulated versions of the BIOS that were originally developed by IBM. As stated previously in this paper, the existing copyright laws allow individuals and firms to use an accessible technology, provided they utilize reverse engineering to manipulate it to the extent that the new innovated expertise does not resemble the original invention (Williams et al., 2013). The stated gap in the copyright protection laws was a major setback to IBM, which introduced its invention without considering the possibility of rivals to copy the technology. The problem was compounded by the fact that the company used the outsourced products, which were also available to the rivals. Such opponents would soon acquire the components and use the copyright laws to their advantage to introduce substitutes into the market. Today, there exist numerous PC brands, all of which trace their origin from the IBM 1980’s invention (Benj, 2012).

Innovation

Competition is high in the technology sector, with companies in the industry struggling to outsmart each other and/or gain a competitive advantage over the competitors (Christensen, 2013). Aware of the stiff rivalry the company faces, IBM remains innovative to outsmart its opponents as a move to acquire a considerable market share for its products. Since its inception, the company has remained innovative. It has continuously introduced new products into the market in close intervals. The company’s penetration into the PC industry was a major boost to its mission of becoming the global leader in the technology industry. The company’s PCs initially dominated the industry apparently due to their exceptional customer experience. In spite of the corporation using outsourced components to manufacture its initial computers, it still replicated some features that were unique to IBM (Benj, 2012). Additionally, although rival companies had successfully used reverse engineering to develop IBM compatible PCs, they were legally barred from using a certain suite of the available IBM PC software and hardware add-ons. The protection of such add-ons is illustrative of the innovative nature of IBM to counter the negativities associated with competition. Besides, it gave IBM a competitive advantage over the competitors since its PCs were perceived to be superior to those of the rivals.

Upon realizing that its competitors had successfully copied its technology and/or could not be stopped by applying the copyright laws, IBM innovatively introduced PC AT in 1984 to replace its earlier brand PC XT (Benj, 2012). PC AT was more powerful relative to the PC XT in terms of the individual features. The new brand took the market by storm since it had more innovative features, which increased its customer experience. However, its superiority only lasted for the following 2 years. In 1986, Compaq officially launched a new brand, DeskPro 386, which was more powerful relative to IBM’s PC AT. The development blurred IBM’s desire to control the PC industry. It had to invest in research and development to come up with a superior brand. Through research, the company soon introduced a new brand by the name Personal System/2 (PS/2) in 1987. The introduction of PS/2 was meant to counter the rivalry that was evident in the PC market, which was a threat to its future. The new PC brand came in three models, namely, Model 30, 50, 60, and 80 (Benj, 2012). The four models had different features. They were released in phases with model 30, which had the least powerful features, being released first while the most commanding model 80 was released last.

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Future Use

As stated previously in this paper, the current PCs trace their origin from the IBM’s inventions. IBM is the source of the PC technology. Although modern computers are more powerful compared to the conventional ones, they are 100% based on IBM’s technology (Miller, 2013). Only a few features have been added to make the devices more effective in the backdrop of the stiffening competition in the PC industry. Although technology may advance for IBM-based computers to be replaced by more improved technology, the company’s technology will continue to shape future innovations. However, companies in the PC industry must remain innovative to come up with more improved devices to be relevant in the highly competitive market (Knight, 2012). If IBM ever plans to make a comeback in the industry, it has to utilize inimitable technology to outsmart its rivals. Since the company had already established a good reputation among its customers coupled with its great strength compared to its competitors, it needs to focus on innovation to produce an improved must-have device with more features relative to the existing ones. The company should invite reviews from customers through the social media and comment cards to gain an insight into customers’ needs that are not fulfilled by the existing PC brands. There is the need for a more integrated device since the company’s customers are mainly the young population, which is very slippery to technology. Therefore, retaining this class of clients will require improved devices.

As technology advances, rivals place the security of a firm’s inventions at the risk of imitation. Therefore, a company needs to secure copyright protection against any unlicensed use of its inventions in order to benefit from its technologies (Schiling, 2008). Additionally, firms in the industry need to be cautious when signing agreements with the vendors of the components. Long-term accord with suppliers of the components may be important in the future since such agreements may bar the suppliers from supplying similar components to the rivals. In the agreement between Microsoft and IBM for the supply of MS-DOS, IBM failed to negotiate for the exclusive sale of the product to it and not to its rivals (Benj, 2012). This situation empowered other companies in the industry to produce similar products since the MS-DOS was readily available in the market. In the future, IBM needs to be cautious when signing procurement agreements with the suppliers of its components. Additionally, it needs to partner with other technology companies to improve its products and services and to ensure that customers’ wants are satisfied (Schiling, 2008). The firm should seek to impart more features in its PCs to make them more attractive to customers relative to those of its rivals. This strategy will have the effect of increasing the company’s market share while helping the company to outshine its competitors since counterfeits will lack the additional features. Lastly, the company needs to invest a considerable amount of money in its employees in the form of introducing a non-discriminatory training program that will see its workers acquire additional guidance. Employees’ remuneration should be matched with their performance while new ideas should be rewarded to encourage innovation. Motivated employees will see the company retain its competitive advantage since they will continue being innovative, a situation that will result in more integrated products.

Conclusion

IBM is credited with being the first company to introduce powerful PCs in the market. The company introduced its first ever PC in 1981. The PC was made from components that had been outsourced from several suppliers. The company’s PCs dominated the industry in the early 1980s until competitors forged the technology and implemented similar devices. Although the company had secured copyright protection for its BIOS, rivals reverse engineered and developed a code similar to that used by IBM. By reverse engineering, competitors avoided legal liability that would arise from copyright infringement. The problem was compounded by the fact that IBM outsourced the components from the local corporations, implying that rivals would easily access similar materials to produce substitutes. Following the release of substitutes by the rivals, IBM lost its market share. Its overall profits reduced. Currently, the PCs market is saturated, with numerous companies producing and selling their PCs. Although the current PCs are produced based on IBM’s original invention, this situation might change as technology advances. If IBM plans to make reappearance, it must invest in research to come up with inimitable technology. Additionally, the company must secure copyright protection for its invention to avoid possible copying by rivals. Lastly, it must engage in renewable long-term agreements with suppliers while barring them from supplying similar materials to rivals.

References

Benj, E. (2012). The IBM PS/2: 25 years of PC history.

Christensen, C. (2013). The innovator’s dilemma: When new technologies cause great firms to fail. New York, NY: Harvard Business Review Press.

Drucker, P. (2014). Innovation and entrepreneurship. London, England: Routledge.

Knight, F. (2012). Risk, uncertainty and profit. North Chelmsford, MA: Courier Corporation.

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Miller, R. (2013). Complexity of computer computations: Proceedings of a symposium on the Complexity of Computer Computations, held March 20 22, 1972, at the IBM Thomas J. Watson Research Center, Yorktown Heights, New York, and sponsored by the Office of Naval Research, Mathematics Program, IBM World Trade Corporation, and the IBM Research Mathematical Sciences Department. Berlin, Germany: Springer Science & Business Media.

Schiling, M. A. (2008). Strategic management of technological innovation. New York, NY: McGraw-Hill.

Williams, E., Kahhat, R., Bengtsson, M., Hayashi, S., Hotta, Y., & Totoki, Y. (2013). Linking informal and formal electronics recycling via an interface organization. Challenges, 4(2), 136-153.