Kudos to Vijay Vijayasankar for saying “he is very proud to be an IBMer” as he continues a debate we have been having for a while now about whether IBM is innovative or not. He cites SAP and Sabre (the reservation system) as long term examples of IBM innovation. Let me come back to each. Wish he had talked more about something more recent – like Watson and related impact on natural, smart systems.
IBM deserved plenty of ink earlier this year for what Watson demonstrated with its prowess at Jeopardy as Deep Blue did when it beat Garry Kasporov at chess in 1997. It was a feel good moment for all of us in tech – we cheered for IBM even if we competed against it.
But I have not seen IBM articulate clearly what Watson means to its business customers. And when it does, I will tell clients to also look under the covers at Apache Hadoop and see the Yahoo! contribution to that open source tool and Cloudera’s distribution of the tool. I have also tell them to talk to Google whose labs are teaching computers that pointy towers define edifices like the Eiffel Tower and by transcribing millions of Google Voice messages they are teaching computers to understand nuances of human accents. And to talk to Microsoft which is pioneering surface computing and Kinect based gesture interface technology. And to companies like Mercedes which is pioneering digital avatars like “Gloria” to communicate with us in its cars.
Now back to Sabre and SAP. To me, when I hear Sabre I think less of IBM but of the IT industry icon, Max Hopper (later in his career he was on Gartner’s board and I had a chance to shake his hand on a couple of occasions) and Bob Crandall, the crusty CEO of American Airlines who saw the value in the Sabre infotech business versus the messy core business of running an airline and related butting heads with unions and weather and other operational issues.
But Sabre to me also reminds of so much that went wrong with aviation. It was the antithesis of the frequent flyer CRM innovation. I remember writing a letter to the Delta CEO in the mid 90s saying I had analyzed my records and flew on average 100K miles a year with them, and my air tickets averaged $ 15,000. Could we not agree on a simple arrangement of 15c a mile? Save yourself and me (and my accountants) the aggravation of buying tickets each time, and just send me a statement each month. They laughed at me.
Yield management – the Sabre design principle – was meant to optimize revenue per seat and here was this moron daring to propose something so simple. The reality is yield management brought them 45c a mile on some trips, 7c on others. Markets dictate pricing not systems. On average Sabre brought airlines 15c a mile. They could have simplified reservations, eliminated hairy ticket accounting (remember how long it took to change paper tickets?), got predictable revenue by getting away from yield management which forced us to check on competitor fares every time we flew. It would have fit with their evolving frequent flyer long term customer management mindset. Yield management was about optimizing each seat. CRM was about optimizing customer life time revenues.
Along came Southwest and simplified fares to close to what I was proposing. Southwest was started in Texas to compete with car driving so their fares were sensitive to mileage based costs. And Southwest showed they could be profitable while the majors went yo-yo on their numbers most years. (Vijay, go talk to IBM procurement folks and see how they negotiated hefty discounts with each airline using Sabre and negated the so called advantages of yield management)
The other ancillary problem with yield management was a focus on hub and spoke networks. American anchored their yield management around DFW airport, Delta around Atlanta Hartsfield, United with O’Hare etc. So they forced us all to adjust to those monstrosities with their miles of walkways and endless delays. Books could be written about the enormity of impact to the economy in extra fuel and passenger cost in transit and extra flying time these hubs have cost us. Southwest (and Jetblue and others) again showed us there was a different way – fly into Dallas Love Field, Chicago Midway, Oakland and other secondary airports. Less convenient, the majors said. Getting on the L to downtown Chicago or BART to San Francisco or driving another 15 miles to Fort Worth with another $ 200-300 jingling in my pocket is not inconvenient in my books. Especially when I flew in non-stop into those airports (where the majors allowed us to – remember all their lobbying for decades to not allow Southwest to fly non-stop into Love Field?)
On SAP, if IBM is doing innovative stuff around HANA or educating SAP about multi-tenancy around ByD that may be worth talking about about. But bragging about hundreds of FI/CO, SD projects is not innovation. In that vein, my respect goes to Chris Everett, who built Price Waterhouse’s SAP practice into a multi-billion dollar business which IBM ended up buying. In 1993, he took the risk of betting big on R/3 when it was just coming out. He did this in a conservative accounting firm. That was risky and innovative. Or my little team at Price Waterhouse in London in 1989. We installed R/2 on a mainframe in the Docklands – a rough area back then, on a platform from a company called IBM which was widely considered then as dying. We prototyped using manuals in German which none of us were fluent in and from a company few had heard of outside Germany.
Sorry, Vijay – I am old school. Show me areas where IBM is putting big bets – and taking risks. Innovation without risk-taking is just “new and improved” toothpaste marketing.
(Read this and other articles @ Deal Architect)