Category: Nontechnical

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How to get your startup acquired by IBM

IBM as we know it now has been absorbing other companies since the early 1900s. The first IBM-related acquisition happened in 1899 when IBM precursor Bundy Manufacturing bought a company that made time clocks. As a reference point, that sale happened 34 years after the end of the Civil War. Since then, Big Blue has acquired a staggering amount of firms, including 47 since 2008[1].

So if you’re looking for an exit, it wouldn’t hurt to see what kind of firms big enterprises are interested in. So how can we characterize those 47 acquisitions made from 2008 to today?

Virtually all of them are software companies

This isn’t surprising. By now, most people are familiar with IBM’s reinvention as a software and services company. Tom Friedman devotes a few paragraphs to the metamorphosis in The World is Flat. Making the World Work Better, the IBM book given to every employee, belabors the point.

Literally all of them have B2B business models.

Business!

“A million people walk into a bar in Silicon Valley. Nobody buys anything. The bar is declared a huge success.”

Again, enterprise software and services are IBM’s bread and butter. While people joke about the valley celebrating SoLoMo companies that don’t make any money, enterprise software firms have been laughing all the way to the bank.

Anecdotally, I’ve noticed that some IBM products aren’t really the best available or the most user friendly. Anyone who’s used NetInsight or Lotus Notes can attest to that. Perhaps this is just a symptom of enterprise software in general: You don’t have to have the best product, you just need to convince a bunch of companies they need you. The enterprise market is ostensibly ridden with friction and inefficiency. After the sale is made, the product just has to do what it says on the box halfway decently. It doesn’t really matter if it’s slow and unintuitive. I’d really like to see UX lessons learned from bubblegum web startups osmose into the b2b domain [2].

The average age at acquisition is 13.5 years

IBM buys established, profitable companies that have a lot of traction. These companies don’t look like they were “built to flip”. There is a very real, proven demand for the products or services.

60% are from the US. Of those 29, 8 are from Massachusetts and 8 are from Silicon Valley.

It’s not surprising that Silicon Valley is well represented, but the Bay Area hardly has a monopoly. Only 17% of all companies acquired since 2008 were from the Valley.

Massachusetts is home to MIT, Harvard and about 100 smaller schools. And local VC’s have a reputation for funding companies selling to big business.

Of the “rest of the world” group, Israel is well represented. Haifa is known as a tech engine and IBM has a large research presence at the University of Haifa.

In the next 20 years expect to see acquisitions from BRIC nations. India and China are producing very high numbers of engineering students with graduate degrees. The oft repeated argument that “they aren’t as innovative as us” is going to look pretty silly by 2030. The biggest reason we haven’t seen any BRIC acquisitions so far is because of the long incubation time mentioned above. Many of the companies in emerging markets that IBM will acquire have likely already been founded.

This post wouldn’t be complete without mentioning Austin. Since 2008 IBM’s only Austin acquisition was the 2009 purchase of Lombardi Software. Former Lombardi CEO Rod Favaron is now at Spredfast, a company worth mentioning because a) they do social for enterprise and b) they gave me a T-shirt. Note that both companies came out of ATI, a UT partnership with the private sector.

And long before Lombardi there was the huge Tivoli merger in 1996. If you have the opportunity to see Frank Moss (former Tivoli CEO) speak, you should take it. He’s an interesting dude. And, strangely enough, he began his career working for IBM Research in Haifa.

The Bottom Line

IBM likes to acquire established enterprise software firms that have been in business for over a decade. Their cities of origin are geographically diverse, but many are characterized by high availability of venture capital and a strong history of academic interaction with the private sector.

You may be able to glean some insight of your own from the Google Doc spreadsheet with all the data:

P.S.:
Cringely just wrapped up a series of posts announcing the imminent downfall of IBM, due in part to its inability to deliver on service agreements. I expect software revenue will continue to grow and mitigate failures of global services. Cringely is pessimistic about all the software buys and doesn’t believe that IBM can turn new software products into billion dollar business. I disagree. The companies that IBM bought were profitable. There are enough smart people [3] at IBM to figure out how to assemble halfway decent software products into coherent packages that can be sold by a proven sales force.

Update 3/23/2013: @miquelcamps has done some analysis of Crunchbase acquisition data. IBM is listed as the 4th largest acquirer behind Cisco, Microsoft, and Google.

[1] Most of data in this post comes from Crunchbase and Wikipedia.
[2] Mixpanel appears to be doing this. And Palantir claims to bring Silicon Valley level software to government.
[3] I just wrapped up a 2 year internship in IBM’s developerWorks.

 

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Book Thoughts: March 2012

God Bless You, Dr. Kevorkian by Kurt Vonnegut

Vonnegut scores points for brevity here. If you like Vonnegut, you have no excuse for not reading this half-hour paperback. If I say anything else, I’ll spoil it.

Siddhartha by Herman Hesse

Siddhartha will help you recover from this XKCD.

xkcd critique

I’m probably not the only person who suffered collateral damage from the criticism in the second-to-last panel. Fortunately, Siddhartha offers a somewhat helpful interpretation. Hesse conveys the idea that you can’t have a second-hand epiphany, even if you’re talking to Buddha himself. Sitting around and thinking for a while won’t really help either. You’ve got to live the enlightenment.

The Hunger Games trilogy by Suzzane Collins

I could write a whole post about the Hunger Games zeitgeist, but I’ll make one point. The series is, on the whole, good. Kids get lured in with the promise of a twilight-esque teen love triangle, but also receive a political narrative about the human cost of war. It’s no Harry Potter, but the pop culture ubiquity is well deserved.

As for the movie: The film is just a few plot points away from being an English version of Battle Royale. The similarities are uncanny.

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Book Thoughts: February 2012

Steve Jobs by Walter Isaacson

I loved this book. The narrative happened to be about a tech company and I’m sure that helped draw me in, but at its core this is just a great story. There are a handful of criticisms aired in this HN thread focused around the technical accuracy of products and software lineage. Those things don’t really matter. Isaacson was telling a multi-faceted story and managed to weave in the stuff that really mattered. As far as I can tell, he imparts the exact impression that he intends to.

A useful metric of a book’s efficacy is whether or not it’s convincing. This book was. Whether or not the portrayal of Jobs was 100% accurate isn’t all that important. Isaacson sold it. It worked.

 

Night by Elie Wiesel

English teachers like to throw this in to the curriculum to give kids a little holocaust exposure. It’s the trump card of bleakness. Great AP test essay material. Here’s my attempt:

The Times quote on the cover describes Wiesel’s story as “A slim volume of terrifying power.” But what gives the book its power is his vivid portrayal of powerlessness.

But seriously. By the end you’ll be a little pissed off. Looking for justice? Look no further than the Wikipedia article on Adolf Eichmann.

Shortly after the execution, Eichmann’s body was cremated in a specially designed furnace, and a stretcher on tracks was used to place the body into it. The next morning, June 1, his ashes were scattered at sea over the Mediterranean, beyond the territorial waters of Israel by an Israeli Navy patrol boat. This was to ensure that there could be no future memorial and that no country would serve as his final resting place.[58]

This is likely the best instance of “People don’t forget!”

 

 

Getting Things Done by David Allen

Look at that cheesy-ass cover. Under normal circumstances I would not have read an ostensibly dopey self-help book. But, a few people I trust all confirm that the method delivers on its promises. Besides, an effective placebo is still effective so I didn’t have a ton to lose.

I’ve been using Omnifocus for about 3 weeks now. It’s a nice organization system, and it works to a point. Capturing tasks certainly feels good. I know exactly what my obligations are and what I need to do to advance my progress. But these lists don’t solve the problem of being the only person working on a substantial software project. Knowing exactly what you need to do next doesn’t offer much solace when the task list is 50 items long and there’s nobody to delegate to.

That said, I enjoy the method because it has helped me manage the smaller projects I’m involved in. That’s mostly because it’s a formalization of common sense: Be organized. Make lists. Figure out what you need to physically do next. Keep your calendar clean.

At some points it reads like an advertisement for Allen’s consulting business, but he’s gotta eat so I won’t hold that against him. It’s a little bit difficult to give a full evaluation of the method at this point, so expect another report in a few months. All I can say now is that it isn’t hurting anything.

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Book Thoughts: January 2012

It’s a popular mantra: We’re becoming slaves to technology. Many people, most above 30, say that instead of living in the real world, we’re glued to our devices. But this notion is a knee-jerk reaction that ignores a powerful trend.

Since humanoids showed up, they have developed technology to makes their lives easier. From the rock-wielding apes in A Space Odyssey to the passengers on steam-powered locomotives, technology has consistently given us the ability to make unpleasant tasks more efficiently. The Internet and personal computing comprise a microtrend rolled up inside this larger epochal arc. We are not “slaves to technology”. We are living in an age where technology frees us from unnecessary errands faster than ever before. To deny this progress is counterproductive.

In the late 90s search engines started to really get good for general research. I can’t remember the last time I opened a physical encyclopedia. It’s not surprising considering the amount of work that would entail. I can’t fathom driving to a library, finding the reference section, looking for the correct volume, and thumbing through pages for a specific topic. It would be completely nonsensical to do this instead of typing the word into my browser’s URL bar.

Fastforward to the early 2000s when the pace really starts to pick up. Napster obliterated the record store. The last piece of physical music media I paid for was Smashmouth’s Astrolounge on casette tape. Today all ~30,000 of my songs live on Amazon’s cloud. I really can’t believe people still have CDs littering their homes.

5 years ago Netflix started to put a dent in movies and television. Watching a good TV series commercial free years after its debut is a wonderful experience. Streaming a film within 45 seconds of learning it existed is even better. When cast in this light, there were only three good things about Blockbuster:

  1. You ran into people you knew in your neighborhood.
  2. For a while you got to play Pokemon Snap on that N64 they had in there.
  3. I can’t remember the third thing, but I will put it here if I do.

Anyway, recognizing this unstoppable march of information technology isn’t rocket surgery. Friedman would likely consider the aforementioned examples as legitimate “flattening”. You can’t stop it, so don’t stress out about letting go of old inefficiencies.

I’m free from going to the post office, free from going to the library, free from going to the record store, and free from going to blockbuster. I have a finite amount of time on this earth and I don’t intend to spend it en route.

Whovians may find the Cybermen to be a better metaphor.

You will become upgraded!

Why is this rant in a post of book reviews?

I came home on New Year’s Day to find a Kindle Touch in my mailbox. I then downloaded one thousand books for it.  Check bookstores and libraries off the to-flatten list. They’re toast.

Here’s what I actually read.

Decoded by Shawn “Jay-Z” Carter

This book did two worthwhile things: 1) Makes an effective case for rap as a legitimate art form. 2) Establishes Jay-Z as a cohesive personality. To be honest I didn’t need a ton of convincing on either of these points. I was a fan long before this book was written. But I would recommend it to people on the fence about rap.

A People’s History of the United States by Howard Zinn

If I’m trying to read as many books as possible, this was a poor choice. At 900 pages, it took me a while. Regardless of politics, this book is important. Contemporary histories do emphasize hero figures rather than the experiences of the common folk. Summary: things have been pretty terrible for most people for a long time. Zinn explores a weird utopian fantasy at the end, but it’s still a great read. And as a bonus, check out this 2005 Daily Show interview with Zinn. I think Jon likes him, but keeps his distance because of the whole communism thing.

The Zombie Survival Guide: Complete Protection From the Living Dead 

This book shows up on Amazon as “also purchased” by people who bought Robopocalypse and Ready Player One. Unfortunately, this one didn’t do it for me. The satirically preachy style just wasn’t as funny as critics make it out to be. It’s worth noting that I only read the first 2/3. I didn’t see it getting any better.

The Innovator’s Cookbook edited by Steven Johnson

This is an enjoyable collection of essays. A few feel like much business literature in that they express very obvious ideas with invented jargon. But on the whole I like the book because it generally confirms what I already believe: creative people and creative spaces are absolutely vital to developing vibrant cities and successful companies. Save yourself the time and read the best article on the rise of the creative class.

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Book Thoughts 2011

I began 2011 with a bold new year’s resolution: Consume more books than movies. I failed miserably. Movies are just too easy to watch. But I still found time to read some great (and some not so great) books:

The World is Flat by Thomas Friedman

I put off reading this for a long time. Friedman sheds some light on globalization for us laymen, but the value comes from the specific examples he gives about real companies. It’s full of “that’s interesting” moments.

Breakfast of Champions by Kurt Vonnegut

“The story isn’t as important as the writing.”

–Jodi Z, right now

My girlfriend made this remark when I told her I couldn’t remember why I enjoyed Breakfast so much. The joy of Vonnegut comes from the short passages that happen to be particularly poignant.

The Big Switch by Nicholas Carr

I recommend this book to any layperson who mentions “the cloud”. Carr walks the reader through the history of electricity as an analog to computing. It’s a compelling read, but it wasn’t enough to get me to take a job at a certain San Francisco PaaS company.

The Book of Sand and Shakespeare’s memory by Jorge Luis Borges

Lots of fun little inception tales in here. Borges must have been a writer for Arrested Development because I could read this thing again and it would still be just as good. Fun fact: In the edition of the book I read, Borges gives a shoutout to UT’s Perry-Castañeda Library where I checked out the book itself.

Hitchhiker’s Guide to the Galaxy by Douglas Adams

You’ve already read this so I won’t discuss it. I will tell you that one of my friends used to say “That’s so 42, dude.” in high school. Bullies were invented to sniff out phrases like that.

A Scanner Darkly by Philip K. Dick

I wish I had never seen the film, because I kept picturing Keanu Reaves’ rotoscoped face. The narrative was great, but the druggie lingo started to wear on me by the end.

Little Brother by Cory Doctorow

This was a ton of fun. I immediately gave it to my little brother as a sneaky way to teach him about public key cryptography, RFID, and sticking it to the man.

Machine of Death by various authors

I’m not sure if “concept book” is a real term. If not, consider it coined. The concept of this anthology is that there is a machine that gives you a short vague description of how you will die. About 20 different authors give their takes on the idea in the form of short stories. It’s a good read because many of the authors are pretty clever.

The Restaurant at the End of the Universe by Douglas Adams

The first original was funny, so I really had no choice about reading this one. The obnoxiously cheerful computer and the paranoid android are the number one reason to read these books.

Making the World Work Better by various authors

This book was given to every single IBM employee. It’s three accounts of IBM’s rise, near-fall, and resurrection. I love Watson’s original motto: “Think”. It’s so basic, such a far cry from the bullshit corporate mission statements of the last few decades. But the best part of the entire book is the paragraph where the author hand-wavingly explains that IBM is totally not liable for that Holocausty stuff and basically solved Apartheid. No big deal.

The Wave by Todd Strasser

The target demographic for this book is likely preteens, but I picked it up because the wikipedia article was intriguing. Poor decision. It’s an embellishment of a true story in which a high school teacher demonstrates how easy it is for a population to get swept up in Nazism.

White Noise by Don DeLillo

Probably the most “important” book I read all year. I’m reminded of it whenever I hear the reverberations of advertising ringing in my ears. “This program brought to you with limited commercial interruption by AT&T.”

Robopocalypse by Daniel H. Wilson

This book is exactly what it sounds like. The narrative is told through journal entries detailing many different subplots that eventually converge. I used to find frequent context switching kind of annoying, but now it’s somehow more appealing to my web-addicted brain. The survival section could have been a lot longer. I’m not really convinced that the humans could overcome their new robot overlords in 50 pages. It could have been drawn out and split into several volumes. Can’t wait for the movie.

Ready Player One by Ernest Cline

This was so easy to finish because it’s a thriller-for-nerds. Cline knows how to relate to his target demographic. At one point the protagonist is inserted into War Games and has to “play” as Matthew Broderick’s character. It’s good to know that there’s a substantial number of people who also aspired to be like him.

I’ll be reading a lot more in 2012, as per my new year’s resolution. A kindle showed up in the mailbox today so I picked up some books– 1000 of them.