IBM Was Not a Global Company After All

 In Building Successful Partner Channels, Business Model Management, Entering Foreign Markets, Featured, Our Own World

In the autumn of 1988, IBM Denmark convened its System 36 and AS/400 salespeople for an internal after-hours training session on Navigator, the financial management system from the small Danish software house PC&C. The system, developed for PC-DOS, would soon become available for IBM’s AS/400 minicomputers, and then sales should begin.

Among the attendees was Erik Seifert, who already knew Navigator very well. He had been in competition with one of IBM’s Business Centers, who proposed the client a PC solution with the system. Erik succeeded in convincing the customer that the S/36 was a better platform choice, but the order went to the PC solution because the customer liked Navigator.

Erik Seifert (born 1957) now lives and works in Atlanta, Georgia, USA.

The training session was led by two others from IBM, René Stockner and Benny Petersen, who were a kind of product manager for Navigator. In October 1987, IBM Denmark announced an exclusive agreement with PC&C for the distribution of Navigator, which was to be resold through IBM’s Business Centres, and which was subsequently presented purely as an IBM product. One needed to look very carefully to find out that the small PC&C was behind Navigator. Yes, many, even at IBM, believed that Navigator was a foreign product that IBM Denmark had imported, translated, and adapted to local market requirements.

Navigator was ahead of its time

Prior to joining IBM in 1987, Erik, with a master’s degree in economics and international law from the University of Georgia in the United States and a cand. merc. from the Copenhagen Business School in his backpack, took a job at HP-Denmark’s finance department. He was therefore not completely unprepared for the hands-on drills that followed the presentation of Navigator.

As he became familiar with the software, he realized how brilliant it was. And when he was able, over the following few days, to digest the experience, he could see the potential when Navigator would be ported to AS/400. Not only in Denmark, but globally.

Navigator was by far the best, most user-friendly and most flexible financial system he had ever seen. With that system, IBM could get close to all SMBs (small and medium-sized businesses) across the globe. But the focus should be shifted from the hardware to the software. Could such a change of focus be carried out within IBM?

Erik thought a lot about the potential, not least spurred on by his great desire to get away from Denmark and work internationally. Preferably returning to the United States.

On January 1, 1989, Erik was appointed Product Manager for AS/400 in Denmark, but he could not dismiss the idea of Navigator’s global potential for IBM in the SMB market.

Of course!

The idea came to him out of the blue. IBM Denmark and PC&C should enter into a joint venture that would remain an independent company. The purpose of the company should be to mature Navigator for the different countries in the world. And why not start with the United States? The joint venture should collaborate with IBM’s sales and marketing companies in each country. Erik was to be Sales Director of the company, and then a senior IBM person should be found to handle the post as CEO.

But how would he get that idea off the ground?

If he started discussing the subject with his colleagues then he could be considered disloyal to his current position with the AS/400 department, that was entirely focused on sales in Denmark. A joint venture probably needed to be conceived at the highest level in the organization, but how would he get that ball rolling?

After many considerations, he decided to speak with PC&C first. Did they support his idea?

Through an acquaintance, he got the phone number of PC&C (which had a secret number, so customers and others could not disturb the developers) and on June 2, 1989, he called their CEO, Jesper Balser. A secretary answered the phone and would not put him through unless he identified himself and explained what he wanted. That was not possible. As an IBM employee, he had no formal reason for contacting PC&C. He convinced the secretary to put him through nevertheless, after which he arranged a lunch meeting with Jesper at Hotel Store Kro in Fredensborg.

PC&C agreed to the idea of a joint venture

Jesper Balser liked the idea and recommended Erik to find support within IBM’s organization.

In the late 1980s, IBM Denmark was the most successful subsidiary of the entire group. Over 4,000 Danes were employed by the company, which had a culture blended by the somewhat formal and bureaucratic style that originated from the US headquarters and the more informal and open style that characterizes Danish leadership. The CEO, Frank Petersen, had on several occasions stated that his door was always open if an employee had a good idea. In addition, at the end of the 1980s, with 400,000 employees present across the globe, IBM had claimed that they were no longer a multinational company but a global company. (Where a multinational company primarily sells products developed in its home country through subsidiaries in other countries, a global company has development and production divisions in many countries and sells across national borders.)

With his idea well digested, Erik got an appointment with Frank Petersen, who after listening and asking some elaborate questions did not quite know what to do with it. Good ideas were usually about how to do things better in Denmark, but this idea would exclusively create business abroad. Erik was sent to the CFO, Max Roesen, who was positive, but also a little uncertain. How would you handle such an idea?

International ambitions

Denmark makes up less than 0.4% of the world market.

With the cat out of the bag, Erik could now brief René Stockner about his plans, and René could, in return, involve Erik in the communication that already went on with other European IBM subsidiaries. So far, only IBM Spain had responded positively and a visit to PC&C at Karlobogaard north of Copenhagen had been arranged.

As it turned out Navigator on the AS/400 was technically troubled which caused the idea to lose a strategic leg. It could still be delivered on the PC platform, but IBM’s market shares outside Denmark were considerably smaller and the Business Centres serving the SMB market did not exist.

Perhaps IBM Denmark’s management wanted to see how the current discussions with the sister companies developed. And perhaps management had a hard time imagining how a joint venture located in Denmark could sell to IBM worldwide. And perhaps they could not figure out how some of the revenue from the joint venture could end up in the local IBM books. The command lines and budget procedures were not structured to accommodate that. And what would the small PC&C contribute? Besides the product, they could hardly do much.

Erik Seifert’s idea of a joint venture between PC & C and IBM ran into the ground. An activity that would not produce results in Denmark did not fit into IBM Denmark’s organization, where everyone was busy serving (and being measured on the results) in the Danish market.

IBM’s later efforts to acquire ownership in PC&C would come from a completely different area and have completely different reasons than international expansion. And in March 1990, Erik Seifert left IBM to pursue his idea in another way.

The article series about Damgaard Data and Navision Software continues.

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