During the 1980s and early 1990s, IBM was thrown into turmoil by back-to-back revolutions. The PC revolution placed computers directly in the hands of millions of people. And then, the client/server revolution sought to link all of those PCs (the "clients") with larger computers that labored in the background (the "servers" that served data and applications to client machines).
Both revolutions transformed the way customers viewed, used and bought technology. And both fundamentally rocked IBM. Businesses' purchasing decisions were put in the hands of individuals and departments - not the places where IBM had long-standing customer relationships. Piece-part technologies took precedence over integrated solutions. The focus was on the desktop and personal productivity, not on business applications across the enterprise. By 1993, the company's annual net losses reached a record $8 billion. Cost management and streamlining became a chief concern. And IBM considered splitting its divisions into separate independent businesses.
Louis V. Gerstner, Jr. arrived as IBM's chairman and CEO on April 1, 1993. For the first time in the company's history IBM had found a leader from outside its ranks. Gerstner had been chairman and CEO of RJR Nabisco for four years, and had previously spent 11 years as a top executive at American Express.
Gerstner brought with him a customer-oriented sensibility and the strategic-thinking expertise that he had honed through years as a management consultant at McKinsey & Co. Soon after he arrived, he had to take dramatic action to stabilize the company. These steps included rebuilding IBM's product line, continuing to shrink the workforce and making significant cost reductions. Despite mounting pressure to split IBM into separate, independent companies, Gerstner decided to keep the company together. He recognized that one of IBM's enduring strengths was its ability to provide integrated solutions for customers - someone to represent more than piece parts or components. Splitting the company would have destroyed a unique IBM advantage.
With the rise of the Internet and network computing the company experienced another dramatic shift in the industry. But this time IBM was better prepared. All the hard work IBM had done to catch up in the client/server field served the company well in the network computing era. Once again, customers were focused on integrated business solutions - a key IBM strength that combined the company's expertise in solutions, services, products and technologies. In the fall of 1995, delivering the keynote address at the COMDEX computer industry trade show in Las Vegas, Gerstner articulated IBM's new vision - that network computing would drive the next phase of industry growth and would be the company's overarching strategy. That year, IBM acquired Lotus Development Corp., and the next year acquired Tivoli Systems Inc. Services became the fastest growing segment of the company, with growth at more than 20 percent per year.
In May 1997, IBM dramatically demonstrated computing's potential with Deep Blue, a 32-node IBM RS/6000 SP computer programmed to play chess on a world class level. In a six-game match in New York, Deep Blue defeated World Chess Champion Garry Kasparov. It was the first time a computer had beaten a top-ranked chess player in tournament play, and it ignited a public debate on how close computers could come to approximating human intelligence. The scientists behind Deep Blue, however, preferred to stress more practical concerns. Deep Blue's calculating power - it could assess 200 million chess moves per second - had a wide range of applications in fields calling for the systematic exploration of a vast number of variables, among them forecasting weather, modeling financial data and developing new drug therapies.
As the decade drew to a close, IBM stood on the threshold of the new century having reestablished itself as a leading information technology innovator. Its leadership helped create the e-business revolution. And it had successfully transformed itself, achieving an impressive business turnaround. As the new century opened, IBM moved confidently into a future it helped create, one that is linked to the ubiquitous and surging presence of the global networks that are connecting every computer, and soon perhaps, every electronic device in the world.