Computer Wars: The Post IBM World by Charles H. Ferguson and Charles R. Morris Computer Wars: The Post IBM World
By Charles H. Ferguson and Charles R. Morris
2003/01 - Beard Books
1587981394 - Paperback - Reprint - 288 pp.

A documentary on how and why big businesses can be destroyed and the opportunities that may arise as a result.

Publisher Comments

Category:  Bankruptcy & Restructuring

This title is part of the Business Histories list.

Of Interest:

Thomas Watson Sr.: IBM and the Computer Revolution

This well-written book presents the absorbing story of IBM's dizzying rise to prominence in the computer industry and its dramatically accelerating decline. The authors expound on the array of policy implications for computer companies and the vast opportunities for American companies. This saga presents fascinating reading for business historians, business and governmental leaders, economists, and all who have a curiosity about the undercurrents in the East-West race for technological superiority. It was one of the ten best business books on the BusinessWeek list for 1993.

Referring to an earlier version:

The authors "begin by chronicling IBM's rise to dominance in the {computer} industry and its . . . decline. Next, they analyze the . . . strategies of smaller American companies that constitute the force {they see as} necessary to win the computer wars without IBM; they delineate . . . {their} rules for future success. Finally, the authors outline political implications and emerging opportunities for Western firms in consumer electronics. Other topics of discussion: the impact of government policy, the prospects and problems facing companies, and the effect of the computer wars on every citizen." 

Referring to an earlier version:

Reveals how the leading computer firms in both the U.S. & Japan lost golden opportunities to dominate the industry & how the battle is being waged successfully today by smaller companies like Microsoft & Intel. The cautiously optimistic message is that American market share in most critical areas has stabilized & that Western firms now have the opportunity to take back the lead — but not without new government policies & new company strategies. A masterful overview of the computer industry, with bold advice for ambitious companies. The analysis is penetrating, but it reads like a detective story. This book takes a look at IBM since the 1960s. The history is then used to analyze how U.S. computer companies should compete today. The authors suggest that IBM's problems resulted from it taking its eye off the ball in the 70s and missing a whole generation of development of its computers. The authors go on to argue that establishing and controlling an architectural standard is the only way for the U.S. to compete in computers. They also argue that U.S. companies should focus on technical vision and design and leave mass production to others.

From BusinessWeek.Com 
The Ten Best Business Books of the Year (1993) 

Another forward-looking industry analysis is Computer Wars: How the West Can Win in a Post-IBM World by Charles H. Ferguson and Charles R. Morris (Times Books). The work "presents a cogent, technically savvy history of IBM's business since the mid-1960s," in the words of Information Processing Editor John W. Verity. It then uses that history to analyze how U.S. computer companies should compete.

The authors argue that IBM's top executives lost their way--or, more significantly, their nerve--as early as the 1970s. They begin with the oft-told tale of how IBM "bet the company" on its System/360 mainframe family in the mid-1960s. They also tell the largely unknown story of how IBM began work on an entirely new, more powerful design code-named Future System, or F/S, in the early 1970s and became so distracted that it missed a generation of development on the 360, giving a leg up to clonemakers. "F/S was IBM's own quiet Vietnam," the authors write. After F/S, "a status quo mind-set" took hold.

Ferguson and Morris use IBM's story to argue that establishing and controlling an architectural standard is the only way to compete in computers. U.S. companies, they suggest, should focus on technical vision and design, leaving mass production to the Japanese.

From Christopher Lehmann-Haupt 
Books of The Times; Battles Lost in a War That Is Far From Over
March 1, 1993, Monday, Late Edition - Final

Has this country really lost all its business to Japan? In "Computer Wars: How the West Can Win in a Post-I.B.M. World," Charles H. Ferguson and Charles R. Morris, two technology analysts, say that all is far from lost. The electronics business, shortly to become "the world's first trillion-dollar industry," is still up for grabs. "A country with a strong vendor's position in computer technology enjoys an inherent advantage in almost every other technology-based, productivity-driven industry." The winner of the battle for control of computer technology has not yet been settled.

True, until very recently the welfare of the American computer industry was concentrated in the International Business Machines Corporation, and that gigantic, seemingly impregnable enterprise has lately fallen on extremely hard times. In fact, so vital to the American computer industry do the authors consider I.B.M. that they devote nearly the first half of their book to a painstaking analysis of how the big blue egg had its great fall.

In their view, the causes of I.B.M.'s downfall lay in Project F/S, for "Future Systems." This was an "absurdly ambitious" attempt undertaken in the 1970's to retool the entire shape of computer technology. Its inevitable failure was I.B.M.'s "own quiet Vietnam." "In the new, post-F/S I.B.M., power slowly shifted to the stakeholders in existing methods and products," the authors write. "For the first time, I.B.M. had room at the top for placeholders and sycophants."

The subtly different company that emerged was unable to build on successful products like the I.B.M. personal computer the way it had once exploited its mainframe computers. Bullied by William Gates of Microsoft into relinquishing control of the PC's basic operating system, I.B.M. failed, in the authors' words, to convert "an innovative technology into a broader, longer-term, proprietary architectural franchise." In short, the company gave up the keys to the kingdom. It may never fully recover.

Yet despite the collapse of I.B.M., say Mr. Ferguson and Mr. Morris, the issue of who will control the future of computers remains far from resolved. I.B.M.'s main competition, the Japanese electronics industry, also has its weakness. What Japanese companies are superb at doing is producing commodities within well-defined, stable, open, nonproprietary standards, "standards, that is, that are defined by regulatory agencies, other government bodies, industry standards-setting organizations, or very slow-moving incumbents, such as I.B.M. has been in mainframes in recent years." Such commodities include memory chips, printers, VCR's, CD players or facsimile machines.

The authors continue, "But industries that are fast-moving, where standards are constantly evolving, and where the standards themselves are within the proprietary control of an individual company, are hostile environments for commodity implementers." And the computer industry in the 1990's "has been transmuting into just such an industry, shifting the ground out from under both the slow-moving Western giants and the commodity manufacturing-oriented Japanese giants."

This then is the United States's golden opportunity: to encourage fast-moving start-up companies capable of first developing products with "architectural promise" and then exploiting that promise with perfect timing and a sophisticated strategy. Potential American winners include Apple, Intel, Sun, Microsoft, Novell and Adobe. Among the most promising Japanese companies, surprisingly enough, are the two game makers, Nintendo and Sega.

The trouble with the authors' prescription for industrial success is that it sounds better as a description of a successfully completed trip than as a set of directions to be followed when setting out on a journey. Consider the fifth instruction in their eight-point computer strategy: "Careful development of a broad, complex supporting infrastructure increases customer switching costs. The lock-in player encourages second sourcing and third-party development when it broadens an architecture's reach. The leader can usually pick and choose which parts of the market to leave to clones." This may be a perfect description of what Microsoft did with MS-DOS and Windows. But it remains easier said than done.

The chanciness of a winning industrial strategy is no doubt why the authors strongly emphasize the right Government industrial policy, which, they insist, the United States has embraced in the past, if only through programs financed by the military. They also refer to a persisting anti-business bias in Government, which, they imply, led to the 13-year anti-trust suit against I.B.M. and did almost as much damage to the company's psychology as Project F/S.

Tantalizingly, they write in passing of intellectuals "already mocking organization men early in the 1950's." You wish they had developed that thought in more detail. You also wish they wrote a prose less easy to be mocked as the kind written by organization men.

Still, "Computer Wars" remains a useful and highly instructive book, with an appealing moral. It isn't so much that you want the West to win in the coming battle for computer dominance. The good news is that victory will go to the witty thinker with the ability to adapt, a timeless sort of Western hero.

From David Rouse - BookList  

Ferguson is a computer analyst and high-technology consultant; Morris, a political and economics writer who most recently authored "The Coming Global Boom" (Bantam, 1990). Their title suggests that, recently, IBM and the computer industry were one and the same. Gone are the days, though, when Nancy Foy could claim "The Sun Never Sets on IBM" (Morrow, 1975). Ferguson and Morris show that that's all in the past. They document the decline of IBM with its shrinking market share, massive cutbacks, and decreasing sales as the company faces increased competition from electronics giants abroad and from upstarts such as Microsoft, Intel, and Sun at home. In their thoughtful analysis of the world computer industry in the next decade, they offer a silver lining. There are three types of contenders in the "post-IBM world": the traditional big American and European companies like IBM, the integrated electronics conglomerates of Japan, and the small but innovative niche-market companies such as those that make up California's Silicon Valley. The authors argue that this third group now has the competitive edge and outline what America must do to maintain and increase this lead, pointing out the need not only for a U.S. government industrial policy but more specifically a technology policy.
From Library Journal  

Ferguson, a computer analyst, and Morris, an economist, paint a cautiously optimistic picture of America's potential to reclaim its leading market share in the area of technology. They begin by chronicling IBM's rise to dominance in the industry and its dramatically accelerating decline. Next, they analyze the ingenuity and strategies of smaller American companies that constitute the force necessary to win the computer wars without IBM; they delineate the essential rules for future success. Finally, the authors outline political implications and emerging opportunities for Western firms in consumer electronics. Other topics of discussion: the impact of government policy, the prospects and problems facing companies, and the effect of the computer wars on every citizen. A superb blueprint that will intrigue an informed audience.-- Joe Accardi, Northeastern Illinois Univ. Lib., Chicago
From Mark Clayton - The Christian Science Monitor (Eastern edition)  

The authors' big contribution is putting IBM's decline in a larger context, showing where the industry is headed and how smaller, nimbler United Statescompanies can keep ahead of larger counterparts in Japan and Europe. . . . A small disclaimer: 'Computer Wars' reads like a 'business' book--its tone and phrasing stiff and starched like an IBM salesman's shirt. Rife with computer jargon and numbers, the book is intelligible if you can stick with it for 50 pages or so. But it might send a general-interest reader scurrying for a mystery novel.
From Elaine L. Appleton - The New York Times Book Review  

Those who fear for the national economy as I.B.M. flounders can take hopefrom the authors' optimistic description of innovative Silicon Valley companies--the businesses they believe can boost America's competitiveness. Unfortunately, the authors--Mr. Ferguson is a high-technology analyst and consultant, Mr. Morris a partner in Devonshire Partners, a technology consulting and financial advisory firm--all too often slip into an obfuscating mix of technical and business-school jargon. Still, it's worth digging through the uneven writing and the textbook history of I.B.M. to get to the more skillful analysis and strategy--such as the authors' suggestion that companies supplant their own successful technologies before competitors inevitably cannibalize them--that awaits in the second half of the book.
From Publisher's Weekly - Publishers Weekly  

Reading more like a consultant's report than a popular narrative, this densely written analysis suggests that small, maverick companies, rather than giants, have the best chance to lead the computer business. At first, Morris ( The Coming Global Boom ) and computer consultant Ferguson draw on anonymous, inside sources to chronicle the decline of IBM, blaming mainly the corporation's managers but also trade barriers raised by both the U.S. and Japan. Then the authors look more broadly at the industry. Noting America's edge in innovation and software, and Asian advantages in manufacturing, they suggest that the battle will be over ``architectures''--the standards that define computer networks--and explore business strategies to control those standards. Only in the final chapters do Ferguson and Morris address industrial policy: they propose a ``pro-technology policy agenda'' that supports basic research and intervenes to prevent other countries from establishing cartels over crucial components. Even more important to industrial growth, the authors note, is a reordering of federal spending in areas such as health care. 

Charles H. Ferguson is a Nonresident Senior Fellow, for Economic Studies. Prior to co-founding CapitalThinking, he founded Vermeer Technologies, Inc., the creator of the FrontPage web page development software, which was acquired by Microsoft in 1996. Dr. Ferguson is a fellow of the Brookings Institution and a member of the Council on Foreign Relations, and is an active private investor. He holds a Ph.D. from MIT, and has written many articles on technology and public policy, as well as books. He has been a Lecturer at UC Berkeley Graduate School of Journalism; on Board of the French-American Foundation; Former Visiting Scholar, Center for International Studies, Massachusetts Institute of Technology (MIT); Former Visiting Scholar, Haas School of Business, University of California at Berkeley; Co-Founder and former Chairman and CEO, Vermeer Technologies; former Postdoctoral Fellow, MIT Center for Technology, Policy, and Industrial Development; former Senior Staff Member, MIT Commission on Industrial Productivity; former Software Technology Analyst, IBM
He obtained his B.A. from the University of California at Berkeley in 1978; and his Ph.D. from Massachusetts Institute of Technology in 1989. Photo from the CapitalThinking.Com Website.

Charles R. Morris is a financial expert and prolific author. He has received high praise for a number of his books, including Computer Wars (on the fall of IBM) and the acclaimed American Catholic. He has published opinion pieces in the New York Times, the Wall Street Journal, the Atlantic Monthly, the New Republic, and the Harvard Business Review. He was for many years managing partner of a consulting firm specializing in the financial services and investment banking industries. He also has served as a group executive at Chase Manhattan Bank. Morris is currently writing an analysis on health care spending for The Century Foundation. He was for fifteen years Managing Director of Devonshire Partners, a consulting firm specializing in financial services and high technology. Clients included Merrill Lynch, the Blackstone Group, Equitable Capital, Apple, Xerox, and Texas Instruments. Previously, he was a Corporate Banking Group Executive at the Chase Manhattan Bank (responsible for loan pricing, currency consulting, trade banking, and cash management services) and was a member of the startup group for one of the country’s first successful for-profit private-practice HMOs. He is also a lawyer, admitted to practice in New York and Washington State, and has written several well-received books and many articles (Harvard Business Review, Atlantic Monthly, New York Times, and Wall Street Journal) on finance and technology. Photo from the CapitalThinking.Com Website.

Acknowledgments vii
Introduction xi
Part I. The Fall of IBM
1.  Coloring the World Blue 3
2. Guerrilla Warfare 17
3. The Roots of Decline 30
4. The Rise of the Clones 51
5. Revenge of the Nerds 66
6. Picking Through the Shards 84
Part II. Winning in a Post-IBM World
7. Three Contenders 101
8. Competing in Radically Decentralized Systems 115
9. Winning: The Basic Argument 127
10. Locking In a Winning Position 145
11. Life Cycle Strategies 159
12. Management Strategies in High Technology 170
Part III. Prospects and Opportunities
13. The Next Decade's Market Opportunity 191
14. The Future of Computer Companies 205
15. Government and Computers: Prologue to Policy 223
16. Toward an American Technology Policy 240
Further Reading 259
Index 263

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