IBM'S LEASING STRATEGIES

IBM's leasing strategies

IBM's leasing strategies

Introduction

The growing economic literature on the open-source software (OSS) movement has started to address a number of questions that a priori look somewhat puzzling. For example: Why do individual programmers participate in the process of creating OSS? What incentives do they have to do so? What incentives do commercial software companies have to allow (or even encourage) some of their staff to participate in the production of OSS? What incentives do OSS authors have to release their software artifacts under more or less restrictive licenses? What kinds of business models do companies that “commercialize” open-source products resort to in order to generate revenues in the marketplace? ([Lerner and Tirole, 2000], [Lerner and Tirole, 2001], [Lerner and Tirole, 2005] and [Valimaki, 2003]). To our knowledge, however, very little research has been done on the incentives that a company may have to adopt different approaches to the production, distribution, and commercialization of software over time, in light of changing technologies and business opportunities. This paper is an attempt to start filling this gap: we conduct a historical exploration of the ever-changing strategies that IBM adopted vis-à-vis the production and marketing of software between the 1950s and today.

To frame this paper, in Table 1 we summarize, by decades, the transitions that IBM has made in software writing and fulfillment since the 1950s. The table also lists some of the key events in IBM's history that accompanied these transitions. Put succinctly, in the 1950s IBM followed what today would be called an open-source model - its software source code was open, free of charge, and written collaboratively with its users. By the mid 1980s, all of these attributes had been reversed - IBM's software was closed source, sold or leased independently of hardware sales, and written without the collaboration of its users. It was then operating much as any other independent software vendor (ISV). In the mid 1990s, following the financial meltdown in which IBM famously recorded the largest-ever loss in corporate history, the company embraced both open systems and the open-source model. Since then IBM has been in a state of transition, achieving a balance between free, open-source software and proprietary software that still generates 20% of its revenues.

Table 1.

IBM - Chronology: software production and commercialization.

Open

Free

Collaborative

Related events

SHARE, 1955

1950s

Yes

Yes

Yes

Fortran, 1957

Source/object code, 1959

1960s

Yes

Yes

No

System/360, 1964

OS/360, 1964-1967

DOJ antitrust suit, 1969-1982

1970s

Yes

No

No

Unbundling, 1970

OCO Policy, 1983

Fujitsu arbitration, 1983-1987

1980s

No

No

No

SAA, 1987

Participates in OSF, 1988

1990s

Both

Both

Both

Financial meltdown, 1993

Apache adopted, 1998

2000s

Both

Both

Both

Linux announcement, 2001

IBM's approach to software production and marketing in the 1950s

IBM introduced its first digital computer, the model 701, in April 1953. Although IBM had long been the dominant vendor of punched-card accounting machines, it was far from dominant in computers in the early 1950s. It had come relatively late into the market - significantly behind its office-machine rival Remington Rand, for example - and vendors such as Burroughs, NCR, RCA, and Honeywell, all had products on the market or waiting in the wings.

IBM wrote no application programs for its computer and very little in the ...