e-business
A prescient vision and a USD 500 million marketing campaign prepared IBM for decades of growth
e-business logo mark, red letter "e" with a tail that circles the letter to resemble the @ character

Study any company that has survived more than a decade and you’re bound to discover a capacity to navigate boom-and-bust cycles. This is especially true at IBM. Over the course of more than a century, the company has transcended not just the rise and fall of product lines, but also entire industries.

The darkest days came in the early 1990s, when a booming market for personal computers threatened to render the company’s approach to IT, primarily selling massive mainframe computers to enterprise customers, obsolete. IBM lost USD 8.1 billion in 1992 — the most by any company up to that point — and fired its CEO shortly thereafter. But in the emergence of the internet, the new leader, Louis Gerstner, saw an interesting commercial environment taking shape.

Informed by his strategists and the behavior of some forward-thinking clients, he envisioned a growing tangle of networks, intranets, servers, websites, browsers and search engines coalescing into a vast platform that businesses could harness to transform their revenue models and better serve customers. At the center of it all, there would be IBM. It was a game-changing insight.

The company launched a massive marketing campaign around the term “e-business” to establish IBM’s capabilities and thought leadership in the space. It fueled an epic comeback. From 1994 to 2000, revenue grew nearly 40%, to more than USD 88 billion, and net income nearly tripled. The strategy also laid the groundwork for IBM’s subsequent focus on services, solutions and security in a world where connectivity, data and technology — from AI to hybrid cloud and blockchain — pervade every aspect of modern life.

Embracing the internet
Leading by example

Having recently led IBM out of near-collapse, Gerstner found himself one day in 1995 sitting through a stream of senior-level presentations. One of the last on the agenda explained how the internet might become a useful business-to-business tool. That’s when it hit him: This network-centric world, as it was being called at the time, would change the very nature of business operations.

If his strategists were right, he wrote in his 2002 memoir, Who Says Elephants Can’t Dance?, two revolutions would ensue: one in computing and one in business. He reasoned that workloads would shift from PCs to larger enterprise systems. He gave his direct reports three weeks to develop ideas on how to harness the full power of the networked world in hopes of charting a new course for the company and its clients.

Gerstner eventually formed the IBM Internet Division and charged its leader, Irving Wladawsky-Berger, with formulating the company’s internet strategy across all business units, to get everyone, he wrote, “to embrace the Net.” IBM would be the “networked” example for customers.

Convincing customers
A half-billion-dollar ad buy

Next came the quest to sell the idea. Gerstner had tried to push the network-centric imperative and the importance of a B2B internet strategy to Wall Street analysts in 1994. In the fall of 1995, shortly after the launch of Amazon.com and eBay, he told the audience at the massive Comdex show in Las Vegas that “network-centric computing was about to end the PC’s reign at the center of the computing universe.” (A day later, Bill Gates gave a keynote extolling the merits of a desktop-centric future.) But the message was falling on deaf ears. The internet was largely perceived to be a consumer phenomenon.

IBM’s marketing team landed on “e-business” to make the concept more approachable and embarked on a half-billion-dollar campaign to show that IBM had the talent, the services and the products to help enterprises capitalize on this emerging reality. The advertising, created by Ogilvy & Mather, featured a series of black-and-white “office dramas” depicting the confusion people felt about internet-based business. The ads showed how the internet could add value, and how IBM could help companies “do real business on the web.” The company also took the message to the internet itself, spending a massive USD 28.5 million in online ads in 1998 — a huge budget at the time.

It worked. By 1999, IBM was providing e-business services to more than 10,000 clients, and the unaided association between “e-business” and IBM was seven times higher than for its nearest competitor. “We found our voice, our confidence and our ability once again to drive the industry agenda,” Gerstner wrote. “Our messaging allowed our customers to see benefits and value that were not being articulated by our competitors. The vast new challenges of networked computing reenergized IBM Research and triggered a new golden age of technical achievement for the company.”

Thinking bigger
e-business versus e-commerce

It’s important to understand that in the late ’90s and early 2000s the dotcom space was awash in hype about the e-commerce revolution. On any given day, it seemed, companies built around pet food, toy shopping and web hosting were going public and being rewarded with massive valuations. At the time, IBM’s message — that the internet would transform far more than commerce — was unusual. It foretold a mode of business where the traditional processes would merge with internet technologies. Its arrival would mean that every company would need a web presence to defend its legitimacy and be open 24/7.

Universally, businesses would be able to respond more quickly to market shifts, cut product development cycles, reach new markets and serve customers better. And, significantly, this always-on world would shine a light on the importance of security. As denial of service (DoS) and other malicious attacks became pervasive, every company would have to invest heavily in cybersecurity even while building out capabilities to handle increased web traffic. As such, the company began positioning itself both as the leader in providing security solutions for the e-business era and a champion of the rights of individuals to own their data and to remain private — issues that would bubble up across industry, government and society decades later.

“e-business security is built on a foundation of confidence and trust. The confidence to run your business in a security-rich environment knowing all of your critical data is protected. And the trust that allows your customers, suppliers and business partners to know that sensitive information collected during online transactions is private,” an IBM white paper called “Security and Privacy in an E-business World” argued in 2000. “Privacy is the right of the individual to determine when, how and to what extent personal information is communicated to others.”

IBM’s messaging during that era proved prescient in other regards, as well. It predicted that the arrival of e-business would enable banks to build an electronic debit service so customers could shop at virtual stores. That a university could soon create an online archive of radiology images, ultrasounds, MRIs and CAT scans to replace massive, physical film libraries. That a publisher could open an online store for books, movies, music and videos. That a consumer goods company could manage purchase orders online, and monitor, update and replenish inventory in real time.

All of it has come true, of course — and then some. That the term “e-business” has faded only reinforces how visionary it was. After all, e-business has become merely business.

That the term ‘e-business’ has faded only reinforces how visionary it was. After all, e-business has become merely business.
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