back to article Watson AI panned, 5¼ years of sales decline ... Does IBM now stand for Inferior Biz Model?

If there's one thing you can give IBM credit for, it's Big Blue's ability to put on a brave face. Not only has its Watson offering been skewered by Wall Street analysts, it's also just reported its 21st straight quarter of revenue decline. Its CEO Ginni Rometty, whose annual pay package is a whopping $33m (£25m), hasn't …

  1. DougS Silver badge

    Not sure comparing job postings is that accurate

    If you want top level AI talent (or top level talent in any field) you don't post a want ad. You have headhunters go after specific people and create a position to fit them.

    Maybe it is just what the tech press wants to write about, but you hear about Apple or Amazon hiring some top AI person, but you never seem to read about IBM doing it. Though maybe they are, and it just doesn't make the news.

    1. Charlie Clark Silver badge

      Re: Not sure comparing job postings is that accurate

      It should also be noted that Watson goes a bit beyond the ML stuff that most companies are focussing on for speech and image recognition (this is where the developer service market is). I've always understand Watson to be a play for the far more lucrative support industry aimed at automatically white collar jobs like insurance claims handling. No idea whether they'll really succeed or whether Google will beat them to it, but full marks for identifying the market and continuing invest in the research.

      1. John Smith 19 Gold badge
        Unhappy

        " white collar jobs like insurance claims handling."

        You're a bit behind the times.

        Large chunks of that have been handled by work flow automation, and have been for a long time.

      2. Anonymous Coward
        Anonymous Coward

        Re: Not sure comparing job postings is that accurate

        "I've always understand Watson to be a play for the far more lucrative support industry aimed at automatically white collar jobs like insurance claims handling"

        Then you need to stop listening to your IBM sales droid. Watson is, first and foremost, a brand. It's not a product, it's not a technology, it's not even a nebulous "solution" or "platform". It's something like 35 legacy (mostly acquired) products bolted together in various marketing solutions to try and squeeze some more cash out of old, dead products. Speaking at the technology level it's usually just Cognos and SPSS with a bit of Lucene thrown in.

        It's also an utter failure of the worst kind. IBM and Watson stripped $62 _million_ dollars MD Anderson, a cancer research institute, before being unceremoniously thrown out the door in disgrace. Buyer beware.

        IBM don't hire top data and ML folks because top data and ML folks aren't daft enough to work for IBM. These are people who like flexibility, innovation and open source tooling. That's the antithesis of what IBM are about.

        1. Frank N. Stein

          Re: Not sure comparing job postings is that accurate

          IBM isn't "hiring". They have gutted their internal position ranks and sacked Contractors. They barely have enough staff and contractors left to do Server Support for their own products, as well as their client, Lenovo. Customers are bailing on Lenovo hardware, decreasing the need for Server Support Techs, but the one place where you find positions not being eliminated, is management. There are plenty of those, and they aren't doing anything more than sitting around, pointing and snapping fingers, and protecting their own positions while sacking the people who need to be there doing the work.

          1. Michael Strorm

            Re: Not sure comparing job postings is that accurate

            @Frank N. Stein; "the one place where you find positions not being eliminated, is management"

            Wasn't an excess of management- i.e. everyone wanted to be a manager- combined with failure to move with the times, the reason that IBM almost went bankrupt in the early 1990s?

        2. Anonymous Coward
          Anonymous Coward

          Re: Not sure comparing job postings is that accurate

          Reminds me of the time the god awful mainframe copy uitlity "IEBCOPY' got rebranded as a "Tivoli" product about 30 years after it was hacked together. Same old code, same sucky interface, same performance problems -- but a new logo on the same manual.

          Nice to no Ginny is keeping up the old IBM traditions:

          "If the customer hates the product don't re-write just re-brand"

    2. Anonymous Coward
      Anonymous Coward

      Re: Not sure comparing job postings is that accurate

      Not sure comparing job postings is that accurate

      But it is a good proxy. Most businesses don't release sufficient information to estimate their future value, so what any reasonable analyst will do is look for a credible proxy measure for the information they would prefer to have. This use of proxy measures happens in many fields beyond business - medicine, law enforcement, public health, planning and policy, demand forecasting in many industries etc etc.

      In the case of ML (and for that matter in the field of equity analysts who did the research), top talent may be head hunted, but public job postings for lower and mid -senior levels are a very good clue about the depth of resource being taken on, and the commitment of the company concerned.

      Looking at the financials, I'll side with Jeffries on this.

    3. Anonymous Coward
      Anonymous Coward

      Re: Not sure comparing job postings is that accurate

      They just called me direct. Not sure how they had my number but I am very grateful for the call.

  2. AMBxx Silver badge
    Paris Hilton

    Other than failing, what do the following have in common

    Ginni Rometty

    Carly Fiorina

    Marissa Mayer

    Meg Whitman

    Plenty of successful women CEOs in other industries, wtf happens when they enter IT?

    1. m0rt Silver badge

      Re: Other than failing, what do the following have in common

      We could list all the other idiots who oversaw the demise of the IT firms in their care - they would mostly be male names.

      Obligatory XKCD

      1. AMBxx Silver badge
        Thumb Down

        Re: Other than failing, what do the following have in common

        It would be more interesting to see a list of successful women...

      2. elDog Silver badge

        Hello El Reg - could we have that particular XKCD as a emoji-thingee?

        I don't remember what you call them - the pints of beer, etc. - but this correlation != causation seems to be a natural.

    2. Anonymous Coward
      Anonymous Coward

      Re: Other than failing, what do the following have in common

      Plenty of successful women CEOs in other industries, wtf happens when they enter IT?

      The answer is simple - they are either MBAs or marketing wonks. Gender does not really enter into it other than there are not a lot of good female engineers that want top management positions.

      Any tech company that replaces engineers on the board with MBAs and/or marketing wonks is headed in the down direction and, in this case, 'the bigger they are the harder they fall'.

      1. Anonymous Coward
        Anonymous Coward

        Re: Other than failing, what do the following have in common

        You need sales types and good administrators; these companies live and die by sales and not many engineers are good managers. They need good engineers to deliver the service and technology, the problems occur when the engineers are overridden by the commercial side.

    3. Anonymous Coward
      Anonymous Coward

      Re: Other than failing, what do the following have in common

      To be fair IBM did make a pre tax profit of $8.79 billion for the quarter which isn't bad on revenues of $19.39 billion. Yes revenue may have declined and gross profit margin has dropped to 45.6% but it's hard to call that level of success a failure.

      1. Frank N. Stein

        Re: Other than failing, what do the following have in common

        Math tricks can't help IBM when they are paying a CEO a 33 million annual bonus that isn't performance based, while sacking staff and contractors. Watson is utter crap. Too many chiefs and not enough Indians. Server Hardware Techs who aren't being sacked are leaving to go to HPE. Failure is failure. No way to cover that, with IBM.

        1. James Anderson Bronze badge

          Re: Other than failing, what do the following have in common

          Gotta be really bad if HPE looks better.

        2. Anonymous Coward
          Anonymous Coward

          Re: Other than failing, what do the following have in common

          Actually there are a lot of Indians and they are suffering some of the pain too.

    4. Anonymous Coward
      Anonymous Coward

      Re: Other than failing, what do the following have in common

      They're working with lots of men?

    5. Anonymous Coward
      Anonymous Coward

      Re: Other than failing, what do the following have in common

      They fail, insure their company is bought off, get a golden parachute, and leave. Whitman just hasn't gotten there yet, but look for her to move in that direction. The others have and that's not gender hate. That's just fact.

    6. Captain DaFt

      Re: Other than failing, what do the following have in common

      Plenty of men crash and burn IT as well.

      In fact, here's Stephen_Elop's record, one man who's record is worse than all the women above, combined!

      Oh, and let's not forget Irving Gould at Commodore.

      Took a company that had 60% of the home computer market and downsized it to the point that in 1990 his $1.75 million salary was larger than Commodore's $1.5 million profit.

      And there's way too many more for me to depress myself with. It's a nice day outside.

  3. Anonymous Coward
    Anonymous Coward

    Ask Watson?

    "how do we fix IBM, Watson?"

    I expect it'll give a deepthought type answer though.

    1. Lord Elpuss Silver badge

      Re: Ask Watson?

      ... in seven and a half million years.

      1. Anonymous Coward
        Anonymous Coward

        Re: Ask Watson?

        ...and you're not going to like it.

    2. Anonymous Coward
      Anonymous Coward

      Re: Ask Watson?

      "Mirror mirror on the wall, who's the worst CEO of them all?"

    3. GrapeBunch Bronze badge

      Re: Ask Watson?

      "I'm sorry, you give the answer, then I ask the question."

      1. Anonymous Coward
        Anonymous Coward

        Re: Ask Watson?

        Sounds like my wife.

  4. Mage Silver badge

    Unfair

    Where is Compaq, DEC, Wang, ICL, STC, GEC, Zenith, RCA, Westinghouse (the bit that did TV & Radio), Mitel. Motorola and many others?

    All those above are examples of already endangered behemoths before those women took over.

    1. Anonymous Coward
      Anonymous Coward

      Re: Unfair

      All those above are examples of already endangered behemoths before those women took over.

      But the challenge is that these women have mostly had ample time to come up with a solution to the male-induced malaise, but in practice they've merely continued the poor decisions and corporate decline initiated by their male predecessors.

      I've worked for a whole range of female bosses, and the sample from my career is that they are generally better people managers than my male bosses (with the women having a pleasingly "stereotypical" leaning towards EQ over logical planning). Equally, I've worked with quite a lot of directors, and the female directors don't seem to have that EQ. My guess is that the top executives are all pushy, self promoting, aggressive alpha male types, and those are the characteristics that the named female tech executives were recruited for, and that "executive search" firms look for.

    2. bombastic bob Silver badge
      Holmes

      Re: Unfair

      this whole male vs female CEO business is just irritating. It's REALLY all about experience and talent, and on occasion, luck. But most of us already knew that, probably...

  5. EveryTime Silver badge

    My tips for improving IBM's business

    They could improve the bottom line by:

    Outsourcing everything possible to India, because customers love that

    Have their employees shape up by randomly laying off groups of them for no specific reason.

    Make certain that the layoffs include profitable groups proportionally, because deadwood is equally spread.

    Cut the budget for customer site visits, to better prepare the customer for the value of outsourcing to India.

    Make certain that any remaining site visits take at least several hours of paperwork for the chance at reimbursement.

    Encourage employees to strive for promotion by having none of the pain impact upper level executives.

    1. bombastic bob Silver badge
      Devil

      Re: My tips for improving IBM's business

      how about:

      1. Develop an "IBM Linux for PCs" that people WANT to purchase, at reasonable cost, with support, hardware compatibility, etc. and *NO* *SPYWARE* *ADWARE* or *2D FLATSO*.

      2. Shrink Watson down to a robot chassis, one that's affordable to a reasonable slice of the population

      2a. Make female versions called "Wanda". Dress them as Victorian Maids. Make sure they walk naturally (like Miim attempts to do) and stay out of the uncanny valley.

      3. Focus on consulting, sorta like what Oracle does.

      etc.

  6. Anonymous Coward
    Anonymous Coward

    Eat this, Dorothy Dietrich

    That lady, Ms Rometty, has my total respect as the ultimate magician. Making revenues disappear over 4+ years, making her income inflate quite dramatically during that same period, all the while firing people who might be actually useful in helping the company create useful and smart products. Wow...I can't wait for the encore...the next five years...what other magic awaits us !!

    1. tony2heads

      Re: Eat this, Dorothy Dietrich

      I really think that a CEO's pay should be directly connected to growth in income of the firm.

      If it grows 10% the pay should grow 10%, and if it drops 10% their pay should drop 10%.

      And if they drive it to bankruptcy - NO PAY.

      As the meerkats say - simples.

      1. A Non e-mouse Silver badge

        @tony2heads Re: Eat this, Dorothy Dietrich

        I really think that a CEO's pay should be directly connected to growth in income of the firm.

        That, and other metrics such as share price or profit, typically encourage short-term gains over longer term growth & stability.

        Something like X years profit/income/etc could be a better metric as it would make short term fudges less rewarding.

        But CEOs won't go for it as they won't get their quick buck/pound.

      2. Anonymous Coward
        Anonymous Coward

        Re: Eat this, Dorothy Dietrich

        I think the banks tried that. Look where that got us.

      3. Anonymous Coward
        Anonymous Coward

        Re: Eat this, Dorothy Dietrich

        "As the meerkats say - simples."

        Except CEOs aren't actually that common in the business world, yet they're pretty much a necessity. Point is, since companies seek CEOs rather than the other way around, it's a demand-driven market. CEOs can dictate terms and walk away if the price isn't right; after all, there's always the next offer.

        The only way you could enforce something like that is by law; good luck with that.

        Not so simples.

    2. Anonymous Coward
      Anonymous Coward

      Re: Eat this, Dorothy Dietrich

      She will retire soon, just watch the share price rise then.

  7. Anonymous Coward
    Anonymous Coward

    It's a pivot

    Yes, their revenues are down. They always knew they would drop for a while. This is known as a pivot and is fully expected while they invest in their future business and watch their past business disapear. Microsoft have done this too and come out the other side smiling with higher profit per revenue.

    The real question is whether IBM have the ability to build a services business at all given their love of high cost slow to deliver solutions, I certainly hope so as they have a lot to offer the industry. The future (and services in general) is agile, good value, quick to market and that might take quite a large crowbar for IBM to achieve.

    The length of time their pivot is taking is a testament to this, and may indicate they are better off shrinking the company and keeping their large slow customer base while just accepting that they don't want to change.

    Other "AI"* vendors have managed to productise individual pre-learned ML algorithms such that they can be integrated immediately without costly consultancy. They also have easy to use ML systems which allow experimentation and quick delivery for anyone who understands the data. This may be why IBM are having trouble - they are trying to keep the consultancy engagement in a world where that's not really done any more.

    *The name AI makes me cross, we're literally just talking about machine learning and pattern recognition following very well understood algorithms. AI implies something more than that which just doesn't exist right now. When people say "we don't even know how the machine works" they are lying or stupid - they know the algorithm and could easily reproduce the results manually using maths.

    1. Kaltern

      Re: It's a pivot

      "*The name AI makes me cross, we're literally just talking about machine learning and pattern recognition following very well understood algorithms. AI implies something more than that which just doesn't exist right now. When people say "we don't even know how the machine works" they are lying or stupid - they know the algorithm and could easily reproduce the results manually using maths."

      PR or ML doesn't sound as pretty or impressive as AI. AI is recognisable and markets well, it's purely a sales gimmick to call it AI - especially when dealing with somewhat dim bosses.

    2. Doctor Syntax Silver badge

      Re: It's a pivot

      "They always knew they would drop for a while. This is known as a pivot and is fully expected while they invest in their future business and watch their past business disapear."

      How do you differentiate between revolving round a pivot and circling the drain?

      1. Anonymous Coward
        Anonymous Coward

        Re: It's a pivot

        Don't get wet.

      2. Lusty

        Re: It's a pivot

        "How do you differentiate between revolving round a pivot and circling the drain?"

        Easy, a pivot is preceded by well documented plans shared with the shareholders, as it was in this case. Circling the drain involves random actions with no direction.

  8. John Smith 19 Gold badge
    Unhappy

    Sounds like IBM want to use Watson as a flagship for their consultancy business

    while their competitors just want their AI to do AI.

    It also sounds like they Watson has not been well marketed to emphasize what it can do that their competitors cannot, which is important if someone is going to spend more time, money and effort to use it. Stripping away some elements would probably be a good idea as well.

    Is any of this going to happen? Who knows?

  9. Joe 35
    FAIL

    Cloud fail

    15% increase in cloud revenues when cloud spend is running at 20% CAGR should be regarded as a fail, not something to shout about.

    1. Anonymous Coward
      Anonymous Coward

      Re: Cloud fail

      Bingo. Particularly given how data-intensive IBM's core business is it's even worse. Data-on-cloud is running at closer to 40% as the traditional enterprise plays catch up with those hip young web-centric companies that formed the first wave.

      1. Anonymous Coward
        Anonymous Coward

        Re: Cloud fail

        Data on Cloud at 40% - this makes me question the breadth of the definition of 'cloud'. I assume data being on 'cloud' means at least some degree of an application having its processing hosted on cloud. So what *is* cloud - $ per CPU for a VM that's 100% managed touch-free? Or just 'put your server in my data centre'? The variety of offerings covers the whole spectrum right down to models that I'd have considered a normal hosting agreement, simply rebranded. So I am extremely wary of industry stats like '40% of data is on cloud!' or 'our cloud division grew 10% (oh but our overall revenue fell 20%!)"

        My 2c, take it or leave it:)

        1. Anonymous Coward
          Anonymous Coward

          Re: Cloud fail

          For IBM and Oracle, "cloud" is any still-profitable product they're selling on a pay as you go basis, in order to look a little bit less terrible in their accounts. For everyone else it's running a workload on AWS, Azure or (far less frequently) GCP. For example IDC put the growth of workloads running on Redshift (AWS's data warehousing service) at over 200% last year. The Hadoop vendors are still plugging away at 40-odd percent per year or more (though only a small proportion of their business is cloudy) and Azure is growing like the blazes.

          Doing 15% YoY on cloud is shite.

          1. theblackhand

            Re: Cloud fail

            "Doing 15% YoY on cloud is shite."

            And even worse than shite when most of it comes from shuffling existing lines of business rather than actual growth. i.e. shifting the hosting of an outsourcing customers data centre from a newer IBM data centre on the US east coast to an older less efficient "cloud" data centre on the US east coast.

  10. Anonymous Coward
    Anonymous Coward

    Why ?

    Why is the quarterly grouch about IBM results in Emergent Tech, should this be in the business section?

  11. Anonymous Coward
    Anonymous Coward

    When I was with IBM I went through all the extensive mandatory training for Watson plus a bunch of extra material because it sounded interesting. Then I went to explain it to a customer, and we ended up talking about motorbikes for an hour.

    1. Anonymous Coward
      Anonymous Coward

      "When I was with IBM I went through all the extensive mandatory training for Watson plus a bunch of extra material because it sounded interesting. Then I went to explain it to a customer, and we ended up talking about motorbikes for an hour."

      If you were able to use motorbikes and the associated industry for examples of where Watson might be applicable, what's wrong with that? My business studies course used the British motorbike industry as a Horrible Example of How Not to Do It.

      (Including examples of how not to motivate engineers, like paying a bonus for winning the TT, which is a cost, and not for something like reduction in warranty expense. Which is partly what did for Norton.)

  12. Anonymous Coward
    Anonymous Coward

    Cloud is cool

    If only IBM hadn't squandered something like $150B in share buybacks. Unlike the fanboys for Amazon which can do no wrong. They are bringing in something like $30B in revenue a quarter, but everyone says they keep 'reinvesting' their profits. Really? How much re-investing do you really need to do after 10+ years. Maybe the margins really ain't that great in retail....

    1. Anonymous Coward
      Anonymous Coward

      Re: Cloud is cool

      "Really? How much re-investing do you really need to do after 10+ years"

      Enough to build 125-200 data centres globally and link them together so that when the world has moved to cloud, you have all the business (or a substantially portion of it).

      AWS people have stated as much and Google/MS seem to be playing similar games and spending around US$10B annually to achieve it.

      1. Anonymous Coward
        Anonymous Coward

        Re: Cloud is cool

        I'm sure Amazon will start pay some profits more than the cash rate soon or later :-) Amazon is only allowed enough rope from Wall St/bankers as much as Bezos is around.

  13. Stella Duvel
    Facepalm

    Utility of AI

    Surely, if the AI was any good it would have already worked out a winning business strategy...

  14. IGnatius T Foobar

    India Business Machines?

    Weren't they a tech company back in the 20th century?

  15. craigferg501

    A bleak future for IBM

    The infographic doesn't show a bright picture for IBM; inferior business model or whatever. The current quarter earnings were a disappointment. http://alph.st/b1c255c5

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