IBM's 5 billion dollar gamble
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In the 1960s, IBM was already a blue-chip company; they had been around in one form or another since the 1880s and had been making computers for a while. At the time, computers were usually an all-in-one commitment; you could not upgrade piecewise, such as the hardware, without throwing out the software. Some within IBM were building a new form of modular mainframe computer focused on compatibility called the System/360, where certain parts and peripherals could be swapped and upgraded. This endeavor was a risky bet at the time; there was infighting within the company and a massive risk about the money spent.
IBM had to spend over 5 billion dollars on developing the System/360 computer family, more than one year of revenue then. There were problems with the development, but IBM managed to deliver the computers to the initial customers as promised in 1965. The result was a resounding success; more small and big businesses would want the systems. IBM would more than double its revenue within five years. In the end, this was a breakthrough that led IBM to where it got in its heyday, a name synonymous with a computer.
Quotes
[The System/360] was the biggest, riskiest decision I ever made, and I agonized about it for weeks, but deep down, I believed there was nothing IBM couldn’t do.
Thomas J. Watson
...But when I looked at those new products, I didn’t feel as confident as I’d have liked. Not all of the equipment on display was real; some units were just mockups made of wood. [It was] an uncomfortable reminder to me of how far we had to go before we could call the program a success.
Thomas J. Watson
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References
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Chronological History of IBM
It was a bold departure from the monolithic, one-size-fits-all mainframe. Fortune magazine dubbed it "IBM's $5 billion gamble."
IBM
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System 360
In the end, the payoff to IBM, the computer industry and the world were nothing short of extraordinary. The System/360 transformed they way IBM functioned as a business, and it changed the way people thought about computers forever.
IBM
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Building the System/360 Mainframe Nearly Destroyed IBM
This mainframe series forever changed the computer industry and revolutionized how businesses and governments worked, enhancing productivity and making countless new tasks possible.
IEEE Spectrum
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April 7, 1964: IBM Bets Big on System/360
In what some consider the biggest business gamble of all time, International Business Machines invested $5 billion ($35 billion in today's dollars) in a family of six mutually compatible computers and 40 peripherals that could work together and be expanded in multiple combinations.
Wired
