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Innovation Wars

Innovation Wars

By Geetika Khurana

“My R&D is better than yours” The rivalry between HP and IBM took an interesting turn with the publication of an interview with IBM CEO, Sam Palmissano, wherein he stressed the importance of R&D mockingly criticizing HP’s less investment in the area.

This was not the first time that two IT giants boasted and commented against each other. Many ex-CEOs had done the same.

It all started when HP decided to enter in the software market, the area of IBM’s monopoly.

Hewlett-Packard was facing a major overthrow from the hardware market before it took the switch. The major dysfunctions started with its merger with Compaq in 2002 and then everything collapsed when company’s CEO, Carly Fioria publicly ridiculed Walter Hewlett, the son of founder of one of the founders. Extreme low revenue, less profit, bad public image and low market share, missteps, scandals and less innovation damaged the company’s image.

Well the move was as if HP and IBM CEOs were in the same lift, one pressed the button for lobby and the other for the terrace.

And thus with stiff competition, rivalries were born and soon the war of words started, “I think it would take a long way anybody to accumulate the kind of capital that we have” said IBM CEO and HP continuously back lashed with new software that created tension.

IBM has always been regarded the leader in mainframe computers with years of establishment, it earned millions but the HP-UX systems had more popular demand. It was reported at times that HP made false claims regarding its lead over IBM. To state, in Q2 of 2008, IBM’s total revenue increased almost 12% but HP’s increased at 9% and HP in the same quarter declared revenue much higher than of IBM’s.

Twenty years back, HP was in its ascendancy and IBM had nearly collapsed. Today the positions are reversed. IBM is stronger in software and other computer services than HP. It offered Lotus, Web sphere and Tivoli apps and tools far better than that of HP’s. In 2011, IBM’s supercomputer WATSON competed on a TV show and won successfully.

Why is HP seriously challenged? Innovation is the reason. HP lacks innovative ideas and therefore lags behind. Rapid terminations of multiple CEOs and employees didn’t do any better.

There is room for both the companies to thrive whenever the global economy improves but for whom? The financial markets measure a discrepancy. IBM was up 13% so far (2012) and HP down by 29%. IBM has a market cap of 246 billion and HP is valued at 6 billion, a sixth of its rival’s value.

However even after years of trying its luck in market, HP is on a decline. With less or almost no innovative products in its bland array of products, it has been unable to boast a single hit consumer product. Many people believe that the only single metric R&D says more than anything. IBM spent $18 billion to HP’s 9 billion in 2013.

In recent times Apple’s newly announced partnership with IBM has been greeted by a number of analysts. HP was caught in a corruption scandal in April 2014.

Having more than one company is quite normal in any industry, but it is also a well known fact that the IT industry is more like a field of varieties than a herd of sheep. Merely imitating each other, never works here. The ones, who claim their victory here, are indeed the smartest ones.

Geetika Khurana is currently a student of commerce at Shri Ram College Of Commerce, She loves reading novels, mainly thrillers. She has a keen interest in economics, is fond of debating and loves travelling. Passionate about writing, she believes it helps her to define and express herself.

Edited by Nandini Hatia,Senior Editor, The Indian Economist

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