Ten catastrophes: All-time worst tech industry executive decisions

Ten catastrophes: All-time worst tech industry executive decisions

Summary: IT, software and computer companies are certainly not without their share of poor executive decisions and mismanagement. While dozens of notable examples could have made our list, these were by far the top top 10 worst in the history of the technology industry, causing many billions of dollars of lost revenue or resulted in the downfall of entire companies.

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  • Information Technology, software and computer companies are certainly not without their share of poor executive decisions and mismanagement.  While dozens of notable examples could have made our list, these were by far the top top 10 worst in the history of the technology industry, causing many billions of dollars of lost revenue or resulted in the downfall of entire companies.

     
    In the late 1970's, a small team within IBM began development of its legendary 5150 PC, which recently had its 30th anniversary. But to run this PC, IBM needed an operating system.
     
    At the time, there was only one serious contender, Digital Research's CP/M, which ran on a number of early personal computers including the Apple ][, The Osborne and the Kaypro, all of which had substantial market share in a small but quickly growing industry.
     
    In 1980, Under the direction of CEO John Opel, IBM attempted to contact Digital Research's founder and CEO, Gary Kildall, to license CP/M for use on the 5150 and other future PCs, but when negotiations failed, IBM went looking for another suitor.
     
    Bill Gates, Steve Ballmer and Paul Allen at Microsoft, seeing an opportunity in the making, approached a tiny software company, Seattle Computer Products, which had an x86-compatible OS which used a similar command interpreter to CP/M called 86-DOS. Microsoft purchased the OS and perpetual usage rights, which they then re-christened as "DOS", for a mere $75,000.
     
    After negotiating an almost unheard of non-exclusive licensing agreement with IBM, the company would be established as the leader in personal computer software for decades to come. 
     
    Microsoft's MS-DOS would go on to sell tens of millions of licenses, and the software business for Windows and related follow-on products that Microsoft would generate which would build upon it would turn the company into an industry giant.
     
    Digital Research could very well have had the same licensing deal and IBM could have imposed stricter licensing terms on MS-DOS, or could have purchased either of the two companies outright, giving the company an exclusive. But it was not to be. 
     
    Digital Research's CP/M became an also-ran and the company eventually attempted to produce it's own DOS clone, DR-DOS, which although having a number of technical improvements over Microsoft's OS, was a dud. It was eventually sold to Novell, then Caldera and then later on became the property of SCO.
     
    Eventually, the highly competitive MS-DOS based PC clone business made Digital Research's CP/M irrelevant and also would eventually force IBM to exit their own PC business in the late 1990s and early 2000's.  
     
  • The year was 1982. British computer pioneer Dr. Adam Osborne, a man who has been universally credited with creating the portable computer industry announces the “Executive” OCC-2, the the successor to his current shipping product, the CP/M-based Osborne 1. In fact, over the next year, he also publicly discusses a second, smaller model, the “Vixen”, one which would follow on after that.

     
    Not many people will remember Adam Osborne and the significant contributions he made to help establish the personal computer industry. Many people reading this article weren’t even born when the Osborne 1, let alone the Vixen was shipped.
     
    However, there is one particular event in computer history in which Mr. Osborne’s name will forever be associated with:The Osborne Effect.
     
    What happened to the Osborne Computer Company after the announcements of the “Executive” and the “Vixen” is now classic business school material. Due to the pre-announcement of the newer, better products while the current inventory in the reseller channel was still full, buyers were no longer interested in current products.
     
    Despite the fact that the company had a number of advantages, one of those being that it bundled application and OS software with its computers, Osborne was also facing heavy competition from companies like Kaypro, Apple and IBM, so the timing couldn’t possibly have been worse.
     
    By November of 1983, the company went bankrupt, and Osborne Computer Corporation was no more.
  • In the late 1980's, HP determined that their PA-RISC systems architecture for enterprise-class servers was going to hit a performance scaling threshold and began to investigate a new systems architecture, VLIW (Very Long Instruction Word). 

     
    In 1994, under the direction of CEO Lewis E. Platt, believing that it was no longer cost-effective for HP to have its own microprocessor foundry, the company ceased production and development of PA-RISC, shut down its own foundries and instead partnered with Intel to produce this new VLIW 64-bit enterprise chip, which came to be known as the IA-64.
     
    Released by Intel and HP as the "Itanium" in 2001 after seven years of development and billions of dollars of R&D invested, the chip earned the early nickname of "Itanic" due to its low performance compared to less expensive, commodity x86 chips in most regular business applications. IA-64 also proved to be horribly slow when executing x86 instructions, which it had to do using software emulation.
     
    Eventually, both AMD and Intel would produce 64-bit x86 systems, which when clustered in HPC configurations would easily outperform equivalent IA-64 systems for significantly less money.
     
    IBM and Sun would continue to develop their POWER and SPARC architectures for their high-end servers, which eroded most of HP's high-end market share.
     
    While other vendors such as Dell and IBM briefly introduced and sold Itanium-based systems, they shortly discontinued them. An executive at Dell publicly referred to the product as an "Albatross".
     
    As if this wasn't awful enough, in 2002 HP merged with Compaq, which had only just acquired Digital Equipment Corporation (DEC) four years before, along with its powerful 64-bit Alpha RISC chip and Windows NT/Digital UNIX servers that had seen some moderate success in High-Performance Computing environments.
     
    Seen by both executives at HP and Compaq as a redundant overlapping product under the new merged company and with Intel's IA-64 efforts underway, the Alpha -- arguably a much more mature, better supported and more desirable platform was phased out.
     
    Third-party OS development for Itanium other than HP's HP/UX UNIX derivative is now practically non-existent, as Microsoft no longer produces an IA-64 version of Windows Server. Itanium is considered to be a deprecated and legacy architecture by the Linux Kernel Project and is no longer actively supported by mainstream Linux distributions such as Red Hat, SuSE, Debian and Ubuntu. 
     
    HP is now the only company to sell Itanium-based servers under their Integrity brand, and Oracle recently announced that it would no longer be developing software for the chip.    
     

Topics: Banking, CXO, Enterprise Software

About

Jason Perlow, Sr. Technology Editor at ZDNet, is a technologist with over two decades of experience integrating large heterogeneous multi-vendor computing environments in Fortune 500 companies. Jason is currently a Partner Technology Strategist with Microsoft Corp. His expressed views do not necessarily represent those of his employer.

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  • So, what goes down as the all time worst?

    I picked what I thought were the all-time worst decisions in the history of the technology industry. But maybe I missed a few key ones. What other ones caused billions of dollars of lost revenue or sank entire companies?
    jperlow
    • RE: Ten catastrophes: All-time worst tech industry executive decisions

      @jperlow What about Excite's George Bell turning down Larry Page's and Sergey Brin's offer to sell Google to them for $1M in 1999?
      jim.mcmaster
      • It gets worse than that...

        @jim.mcmaster : if you trust wikipedia's recount of the story, Vinod Khosla had decreased the amount to $750K but George threw him out of the office, thinking he had wasted both men's time.

        George is now a venture capitalist with General Catalyst and still talks about his tenure at Excite@Home.

        http://en.wikipedia.org/wiki/Google#Financing_and_initial_public_offering

        http://www.generalcatalyst.com/team/george-bell
        cosuna
    • RE: Ten catastrophes: All-time worst tech industry executive decisions

      @jperlow

      Xerox's decision to sideline it's PC development then allowing Apple and Microsoft to basically walk in and take whatever they wanted from it at a minimal cost.

      The rest is history.
      bannedagain
      • 'Allowing' was different, though: Apple paid with its shares, and Microsoft

        @bannedagain: ... paid nothing.
        DDERSSS
      • RE: Ten catastrophes: All-time worst tech industry executive decisions

        @bannedagain Xerox's PARC (Palo Alto Research Center) was a great incubator of future new technology breathroughs for many others - not for themselves. Besides Steve Jobs grabbing the mouse GUI technology for Apple, Bob Metcalfe - a PARC engineer, invented Ethernet and walked out to start his own company 3Com. Xerox would just say, we are a "document" company.
        jcruns26
      • RE: Ten catastrophes: All-time worst tech industry executive decisions

        @bannedagain

        I knew a lady who worked at Xerox. She almost wept when talking about the stuff tha the research division came up with, but the suits basically gave away for peanuts reasoning that there was no market for it.
        dsf3g
      • RE: Ten catastrophes: All-time worst tech industry executive decisions

        @bannedagain Yes, the Xerox PARC thing has to be the worst fiasco of all time. They had everything, GUI, OOP, TCP/IP, etc., and basically gave it away.
        rm.hutchings@...
      • RE: Ten catastrophes: All-time worst tech industry executive decisions

        @bannedagain Xerox did not have PC development, they had own personal computer line.

        PC was IBM's own personal computer line and it lost it to PC-clone manufacturers who it had licensed PC BIOS and because it did not buy PC-DOS from Microsoft but just licensed and allowed Microsoft to license it to PC-compatible personal computer manufacturers (later made PC-clone personal computers).

        Even today Xerox Star GUI is awesome. They had everything correctly then and if Xerox would have continued and pursued that, they would have own the world and today we would have much better tech industry and better personal computers at home and work instead what Microsoft and Apple has come up even today (OS X 1.6, iOS 5, Windows 7, Windows 8, Windows Phone).

        Thanks to IBM who invented the PC at 1981 as without it, we would have now incompatible personal computers (if not counting what Xerox was doing).
        Fri13
      • RE: Ten catastrophes: All-time worst tech industry executive decisions

        @bannedagain
        Maybe it was the best decision for us - users. Ideas are not worth much without implementation.
        paul2011
    • RE: Ten catastrophes: All-time worst tech industry executive decisions

      @jperlow great article but how did you leave out Xerox PARC? If you calculate the value to computing of Ethernet, the mouse and the GUI interface, three developments that were born at XEROX PARC and walked righgt out the front door, I think this closely parallels the Microsoft -IBM blunders.
      whooizit1
      • RE: Ten catastrophes: All-time worst tech industry executive decisions

        @whooizit1 Xerox PARC is a big time blunder, but the company was never really serious about creating a PC industry or being a real computer company. It was pure research. For the money they put into these technologies compared to some of the other catastrophic losses we're talking about on this list, it's probably not on the same order. Had they continued to develop it and make a real business out of it and ship the Alto in numbers (remember the early graphical workstations they made in limited quantities cost a fortune) they may have created something wonderful and made a lot of money, but I have difficulty quantifying "losses" with PARC per se. There is no question that Apple was able to capitalize on PARC, but it wasn't until years later when the board electronics could be miniaturized and the costs could be brought down to produce the first Mac.
        jperlow
      • RE: Ten catastrophes: All-time worst tech industry executive decisions

        @whooizit1 I don't get author's rationale ("research entity") excluding Xerox given their colossal blunders. Another missed opportunity... Adobe founders are also PARC alumni.

        Xerox's workstations were still being produced (and pricey - $12k) a few years after the Mac's intro.
        UnCommonCents
    • Microsoft's decision to make Ballmer CEO

      @jperlow ... the personal loyalty of one man to another has cost shareholders untold money, and humbled a once vibrant and powerful company.

      Microsoft 1995: Toyota
      Microsoft 2011: Kodak
      HollywoodDog
      • HollywoodDog

        @HollywoodDog

        HollywoodDog 1995: John Travolta
        HollywoodDog 2011: Gilbert Godfried.

        Oh, that's not tech related. Wow, just like you. ;)
        William Farrell
      • HA!

        @HollywoodDog ... That's a good one, thanks.

        When they make the movie of my life, I was rather hoping for Richard Gere, not Gilbert Godfried.
        HollywoodDog
      • RE: Ten catastrophes: All-time worst tech industry executive decisions

        @HollywoodDog

        Didn't Richard Gere get a hampster shoved up his butt?

        hmm... nice ambition
        UrNotPayingAttention
    • RE: Ten catastrophes: All-time worst tech industry executive decisions

      @jperlow I see that there are already numerous replies regarding Xerox, but I wanted to cast one more vote. They invented the GUI, mouse, laser printer and Ethernet and gave it all away. They virtually help Apple steal the Mac technology and never received a dime from it, then they tried to sue Apple 10 years later.

      Read the book "The Billions Nobody Wanted" which is about the copier industry and then contrast it to what Xerox did with all the brilliant ideas that came out of PARC.

      Obviously as hot button of mine as an ex-Xeroid!
      adolimpio
      • RE: Ten catastrophes: All-time worst tech industry executive decisions

        @adolimpio I think ncr had some horrible blunders too but don't recall them.
        LarsDennert
      • RE: Ten catastrophes: All-time worst tech industry executive decisions

        @adolimpio
        if xerox PARC is unforgiving we won't have a vibrant tech industry. luckily they forego greed for the benefit of the US of A, kudos to them and many thanks.
        kc63092@...