They were ahead of the industry in Marketing but not in reality.
Having AI and an army of consultants is the market standard today. This is because it works.
IBM slapped Watson on everything, and claimed a ton of revenue. In reality they had a bunch of customers who hated them for decades of broken promises.
This shouldn’t surprise anyone who has dealt with IBM over the past 10-20 years.
1 - IBM audits your company’s software usage.
2 - They find a couple servers that someone forgot to turn off a decade ago that nobody uses.
3 - Since it was found in an audit “you’ll lose the 90% discount” and they present the CFO with a $20 million bill.
4 - “It pains us to have to enforce this MSA that your predecessors signed 20 years ago. In the spirit of partnership we can make this go away with a $2 million Watson purchase.”
5 - You get the Watson subscription which you don’t dare turn on.
6 - IBM touts the growth of AI to Wall Street [0] and fires a bunch of old people [1].
In addition to what others say, the potential for profiting later increases the initial price.
Think of it this way… let’s say two identical companies are going to IPO. Company one you can sell the shares for a profit later if you like. Company two you can only sell for the price you bought.
This shouldn’t surprise anyone who has dealt with IBM over the past 10-20 years.
1 - IBM audits your company’s software usage.
2 - They find a couple servers that someone forgot to turn off a decade ago that nobody uses.
3 - Since it was found in an audit “you’ll lose the 90% discount” and they present the CFO with a $20 million bill.
4 - “It pains us to have to enforce this MSA that your predecessors signed 20 years ago. In the spirit of partnership we can make this go away with a $2 million Watson purchase.”
5 - You get the Watson subscription which you don’t dare turn on.
6 - IBM touts the growth of AI to Wall Street [0] and fires a bunch of old people [1].
The price tickets sell for will be higher if scalping exists. Demand increases for 2 reasons:
1 - I’m more likely to buy a ticket or pay a higher price if there’s a chance of turning a profit if I can’t go.
2 - Speculators are more likely to buy unused inventory if they can turn a profit. This increases total tickets sold. (Scalpers get paid for taking risk)
I’m not defending this. I’ve given up on concerts for my favorite larger bands due to sticker shock.
You’ve hit on a big reason - short term gains. The partners at Accenture, Infosys and the rest circle the execs at old industry companies. The companies start performing worse, though nothing some accounting gimmicks can’t cover. Then they have a very bad quarter, enough that it will ruin their fiscal year. Fingers start pointing, and talk turns to “belt tightening” and “turning fixed costs to variable.” All of a sudden the proposals from Big Consulting that provide savings bankable this fiscal year sound very good.
It doesn’t take long for the cracks to show:
- Not enough program/project management.
- An intuition that service dropped but no good metrics.
- Retrain the outsourcers after the first team quit.
- Inability to size new projects.
- Shadow IT departments form in the business units.
- The outsourcers don’t care about things like vendor consolidation or holding other vendors feet to the fire.
All of this might still be worth it if it’s done strategically to improve a chronically underperforming IT department. It’s rarely effective when rushed to cover up poor performance of the core business.
Sort of. They can use the debt to grow, in which case they’re betting that they will get more profit than the principal plus interest payments. (Beating a 4% return on the loan, not the whole company)
They could also use it to change the capital structure buying back shares. This simultaneously increases risk and share price, unless the reissue more shares.
In both cases, if they can’t pay the interest payments, the company gets handed over to the creditors. Not an issue for Google, but a lot of startups struggle with venture debt.
The question is are we more like farm workers who will be unemployed because of the farm or accountants who become much more valuable and high paid because of the spreadsheet?
And I am grateful for not working on a farm, it’s hard work!
It’s not necessarily the sale. Some private equity companies move from “Let’s invest like we’re shooting for the moon” to “Let’s invest like we want to improve margins and flip this on 3-5 years”
It’s not inherently wrong but it is a different model, and sometimes companies suffer as a result.
Interesting. My observation on IBM is their entire business model is:
1 - Audit your customers
2 - Buy back shares
3 - Force early retirements
It was easy to see why Watson failed in that environment. The revenue was “We’ll let you out of the $6mm audit bill if you buy $2mm of Watson”. Companies would agree, install better asset management, and never put Watson into production.
I couldn’t imagine Quantum Comouting surviving there. Spinning it off the best play.
It doesn’t have to be this way. Other working cultures have adopted committees as the top. Is is the dominant form in US shareholder capitalism.
The original post is surely satire.