IBM to acquire Confluent

This is so fascinating to me. I mean how IBM keeps taking over other companies, but they consistently deliver low quality/bottom-tier services and products. Why do they keep doing the same thing again and again? How are they generating actual revenue this way?

Ok, so does anyone remember 'Watson'? It was the chatgpt before chatgpt. they built it in house. Why didn't they compete with OpenAI like Google and Anthropic are doing, with in-house tools? They have a mature PowerPC (Power9+? now?)setup, lots of talent to make ML/LLMs work and lots of existing investment in datacenters and getting GPU-intense workloads going.

I don't disagree that this acquisition is good strategy, I'm just fascinated (Schadenfreude?) to witness the demise of confluent now. I think economists should study this, it might help avert larger problems.

I’m pretty convinced there is a bell curve of “understanding what IBM does” where idiots and geniuses both have absolutely no idea.

It really is probably that strangest company in tech which you think could be mysterious and intriguing. But no one cares. It’s like no one wants to look behind the boring suit and see wtf. From my low point on that bell curve I can’t see how they are even solvent.

Your fascination seems hinged on the fact that IBM has "lots of talent to make ML/LLMs work" which judging by what they've put out so far and talk publicly about, is very far from the truth. Anyone who has a clue seems to (rightly) have left IBM decades ago, and left are business people who think "Managed to increase margin by 0.1%" is something to celebrate.

To be a bit more candid, they have lots of employees outside of the US (particularly in India). and both in the US and elsewhere, people need to eat. They may not have the talent to innovate new tech like OpenAI and others, or do cutting-edge R&D, but they certainly have the talent to take LLM breakthroughs and adapt. They could have competed with many of the B-Tier LLM services out there with the right leadership.

Why in the world would economists need to study this? It's been known that large bureaucracies have been dysfunctional for over a couple of decades now if not centuries. The large reason is because 1) the incentives to do great work are not there (most of the credit for a huge company's success goes to the CEO who gets 100X the salary of a regular worker while delivering usually pretty much nothing) 2) politics usually plays a huge role which gives a huge advantage to your competition (i.e. your competition needs to spend less time on politics and more time on the actual product) and 3) human beings don't functionally work well in groups larger than 100-250 due to the overwhelming complexity of the communication needed in order to make this type of structure work. Incentives though I think are the primary driver - most people at companies like IBM don't have any incentives to actually care about the product they produce and that's the secret behind the ruin of almost every large company.

Edit: you also seem to be giving too much credence to Watson. Watson was actually mostly a marketing tool designed to win in Jeopardy and nothing else. It was constructed specifically to compete in that use-case and was nowhere near to the architecture of a general transformer which is capable of figuring out meta-patterns within language and structurally understanding language. You can read about Watson's design and architecture here if you're curious: https://www.cs.cornell.edu/courses/cs4740/2011sp/papers/AIMa...

>Why do they keep doing the same thing again and again? How are they generating actual revenue this way?

IBM has a ton of Enterprise software, backed by a bunch of consultants hiding in boring businesses/governments.

They also do a ton of outsourcing work where they will be big enterprise IT support desk and various other functions. In fact, that side has gotten so big, IBM now has more employees in India in then any other country.

> but they certainly have the talent to take LLM breakthroughs and adapt

I'll believe that when I see it. They had a decade headstart with all of this, and yeah, could have been at the forefront. But they're not, and because of the organization itself, they're unlikely to have a shot at even getting close to there. Seems they know this themselves too, as they're targeting the lower end of the market now with their Granite models, rather than shooting for the stars and missing, like they've done countless of times before.

> Ok, so does anyone remember 'Watson'? It was the chatgpt before chatgpt. they built it in house. Why didn't they compete with OpenAI like Google and Anthropic are doing, with in-house tools?

Leadership in IBM also thought that Watson was like what what OAI/Anthropic/Google are doing now. It wasn't. Watson was essentially a ML pipeline over-optimized on Jeopardy, which is why it failed in literally every other domain.

Outside of Jeopardy, Watson was just a brand.

There are entire niches of us that make a living (not at IBM) making certain IBM products actually do what they're supposed to. From my vantage point I see essentially zero maintenance going on with their products. I sincerely don't understand the market (why do people keep paying hundreds of thousands to millions of dollars for non-existent support?) - but whatever.

To add to that i think their R&D labs along with HPE were one of the few to innovate on the memristor and actually build some fascinating concept machines.If i rememeber HPE's was 'The Machine'.

Athough i think they just di/dont know how to adapt these to market that isnt a enterprise behemoth , rather than develop/price it so more devs can take a hold and experiment.

> Ok, so does anyone remember 'Watson'? It was the chatgpt before chatgpt. they built it in house

I do. I remember going to a chat once where they wanted to get people on-board in using it. It was 90 minutes of hot air. They "showed" how Watson worked and how to implement things, and I think every single person in the room knew they were full of it. Imagine we were all engineers and there were no questions at the end.

Comparing Watson to LLMs is like comparing a rock to an AIM-9 Sidewinder.

If anyone is curious to see what Watson actually was you can find it here (it was nowhere near to a generalized large langue model -- mostly made for winning in Jeopardy): https://www.cs.cornell.edu/courses/cs4740/2011sp/papers/AIMa...

Sure, but they were doing that stuff. They had ML people, infrastructure, marketing, branding,etc... already. Their product sucked, but they could have copy-catted OpenAI in 2022+ like everyone else.

Everything will make sense when you realize that IBM is a consulting company. They don't care about building great products. In fact building self-serve products will directly take away from their consulting revenue. They instead need to be good at marketing and selling their services. Watson was exactly that - a marketing demo that got them in the news cycle and helped them sell a giant wave of contracts under a single brand to unsuspecting CIOs of legacy non-tech companies. Every acquisition helps with this goal. Red Hat - locking companies into licenses and support contracts for the OS. HashiCorp & Confluent - locking companies into support contracts for their cloud infra.

Watson was nothing like ChatGPT. The first iteration was a system specifically built to play Jeopardy. It did some neat stuff with NLP and information retrieval, but it was all still last generation AI/ML technology. It then evolved into a brand that IBM used to sell its consulting services. The product itself was a massive failure because it had no real applications and was too weak as a general purpose chat bot.

It’s a shame because people forget how good IBM research was back in the day. I do wonder if they still have great people in those r&d labs, or if they all left.

They gave up on watson about 18 months before llm's popped up, and they have simply just not got enough cash on hand to compete. While the big boys grew fantastically bigger over the past 15 years as cloud happened ibm fumbled time after time and shrank ever smaller, and is now desperately hoping it can stay relevant. but in the end they just haven't got the resources to compete on that stage anymore.

There are good people in IBM. But they don't have the resources behind them anymore. Look at the market cap of ms, Amazon. Google, meta et al, compared to IBM.

The recent interview with Arvind had the “grapes are too green, anyway” energy. They missed the train because they were licking their Watson wounds. Then sorta regretted it but it’s too late.

Same thing happened with their cloud offering. They laughed at AWS, then tried to catch up, then missed and pivoted to “hybrid” (cloud and local).

The service part you are likely referring to is now Kyldryl, a separate company. IBM now focus on software and cloud. There are still services but are much less prominent.

> most of the credit for a huge company's success goes to the CEO who gets 100X the salary of a regular worker while delivering usually pretty much nothing

Well, in Confluent's case I'm not so sure that's true given that their CEO is also the company founder as well as one of the original authors of Apache Kafka.

Not Confluent, IBM.

I had no idea about what Watson was initially meant to solve.

I do remember they tried to sell it - at least in the meeting I went - as a general purpose chatbot.

I did try briefly to understand how to use it, but the documentation was horrendous (As in, "totally devoid of any technical information")

I don't think that would have gotten them much of anywhere. They already spent a decade trying to find markets for Watson to fit and generally failing at it. The problem with Watson wasn't technology, it was that it had no direction.

> they consistently deliver low quality/bottom-tier services and products

I worked with IBMers. The main priority for a lot of them is to ensure continuous employment for themselves and their buddies. They'd add unnecessary complexity to a product to stretch out the development for another couple of years. And they work at leisure pace for tech. Actual 9 to 5, many coffee breaks. They can't compete.

FWIW, both of your comments can have some truth:

- the pure consultancy is another company now - the IBM portfolio of software "products" are being packaged in ways that emphasize professional services and elaborate licensing schemes (rather than turnkey software)

Have you seen Office Space? I'm sure it was based on IBM

> And they work at leisure pace for tech. Actual 9 to 5, many coffee breaks.

Ultra-based. We should all be so lucky.

They will die happy knowing they did more than just create shareholder value.

I'll say this about IBM: because it's so old, it was the most diverse company I ever worked for- including age, nationality, race, sex, and any other category you can think of. Basically you had all types of people in all stages of life, not just young white workaholic tech-bros. The founders are long gone, so everyone there (including CEO) is a professional- meaning nobody has any kind of personal attachment to the company. We were all in the same boat, as it were. When your older coworker suddenly disappears due to a stroke, it puts things in perspective.

The fast-paced startup is really the hack, combining the energy of youth with the ego-mania of their founders. Ask yourself, is it healthy?

Anyway, IBM's customers tend to be other fortune 100s and governments- basically other similar organizations, and my experience was that we took care of them pretty well. The products were not pretty (no Steve Jobs-like person to enforce beauty), and rather complex due to all the enterprise requirements. But they were quite high quality, particularly the hardware.

Sounds like the German government. Or probably other governments as well.

If they hadn't sold the ThinkPad (and related) brands I would care.

More like we need psychologists to ask "why are companies still working with IBM's efficiencies 30 years after its peak?" The workers don't have to care but the businesses dealing with IBM should.

In Sweden, IBM makes a shit tonne of money from SAP implementation consulting.

>> Actual 9 to 5, many coffee breaks

Found my dream job :-)

They have some real money printers that most probably haven't heard of. IBM Maximo for example dominates some industries the way SAP and Salesforce does.

>> Ok, so does anyone remember 'Watson'? [...] Why didn't they compete with OpenAI like Google and Anthropic are doing, with in-house tools?

> Everything will make sense when you realize that IBM is a consulting company.

This and.

The 'and' being that consulting companies, in their DNA, build solutions for their customers.

Which is a very different business than building products for all users.

Not least because the former is guided by understanding a customer's requirements, while the later is having a strong intuition (backed up by market fit) about what all users want.

I'm pretty sure there might not be a full end user capable (in the sense of design-build-iterate) product team in IBM at this point.

Mostly because I don't think they've any middle/upper management that can think that way. They've got the engineers!

Watson was intended to solve fuzzy optimization problems.

Unfortunately, the way it solved fuzzy was 'engineer the problem to fit Watson, then engineer the output to be usable.'

Which required every project to be a huge custom implementation lift. Similar to early Palantir.

I worked with IBM several decades ago for a customer project, and the solution suggested by an IBM'er for backing up a NoSQL database (Lotus Notes) on a daily basis was to translate and migrate the data to a relational one (DB2), then use a DB2 tape backup system to back it up.

When I pointed out that this was a stupid way to do it, they openly told me that they just wanted to sell DB2.

You mean you DONT work a leisurely 6-8 hour day with breaks? I thought everybody did that until there was some urgent firefighting

Power10-based processors are manufactured by Samsung using a 7 nm process

The way you put it, looks like IBM is a pretty good place to work at

Watson was a marketing exercise designed to sell a bunch of disconnected text and image processing libraries pulled together by consulting services. It did not function as advertised.

At one point we worked with a large energy company that was basically sold something LLM-like (large-scale indexing and searching/querying of documents) in 2016 or so. IBM had a team of 90 people doing full-time data ingestion for something like 26,000 documents. We got asked to do a counter-product in two weeks, which was literally just a TF-IDF search and some smarts around ingesting different types of documents. Both solutions performed approximately equally, except one cost something in the order of $185m and one cost $40k. Watson continued running for about a year until an external data science contractor realised they could query Watson for highly confidential board meeting notes, and it would provide full previews into the documents. The project was shuttered shortly after.

Alas, nobody gets fired for hiring IBM.

Aside from having like 9 managers, 8 of whom are totally purposeless in your professional life, then yeah it’s not bad. The benefits are good.

I worked with some pretty talented and dedicated people at IBM. The “hop on a 2am call to put out a fire because they happened to check their email and they owed the person on pager duty a beer” kind of people.

That company was a red tape rats nest, but that’s management’s fault. And you get lazy people or shit departmental culture at various points in nearly every company, but painting a tens-of-thousands strong workforce with that brush is ridiculous.

"Actual 9 to 5", meaning the standard 40 hour work week?

If someone is telling you to work more than 40 hours a week in a salaried position, and they're not paying out the nose, you're being scammed.

We should all be so blessed. :pray:

IBM is where good (acquired) software goes to die. RIP Clearcase.

What I'm hearing you say is that IBM is basically just a private equity firm now.

Sounds miserable if you like solving real problems.

HPE's advanced technology constructed "The Machine" from Plexiglas, not known for its high switching performance. It was a total scam of moron management by their revenant R&D lab management. I saw this close up.

RSUs :) //Steve Jobs e-mail smiley

I do advisory for pre-Series A startups as a last ditch effort to save them.

I do not get the unified industry delusion about "why X company has a bad product". It is usually either one of two things: comfort or ego. Everyone knows that but do not want to say it out loud.

I have seen these happen time and time again. Companies that are cash cow, do not care to do a better job. There is no incentive to do a better job. Moreover, the recurring thing is that if I did something different, I wouldn't have been this much successful in the first place.

The rest of the smart consultants walk on eggshells. They hint at stuff but never want to bite the hand that feeds them because the clients would rather fire you than be challenged.

It is not an IBM thing; it's generic business thing to some degree. I really have to call this a delusion. Good consultants submit generic reports that just tell them what they want to hear. It is not you; it is the economy. Stupid consultants that are well-meaning tell them they should be the best on competitor intel. Do you not think some stupid person did not approach IBM to do what Oracle or AWS is doing? Of course, they did, and they were fired immediately.

The best consultants are less of a consultant and more of a therapist.

After doing only four-month projects for the entire year, this year's realization was that nobody in the industry wants to do better. Everyone is in their place because of ego or a perceived sense of success. Or because of a grand conspiracy theory. IBM has a significant number of government contracts, so they are set for life because the vast majority government IT systems are pigeonholed into IBM systems. The acquisition is to tell the shareholders that we are so successful that we can literally buy companies. We do not even care to do things. Whatever the new thing is, we will buy it at some point.

The awe induced when standing in front of a brand new, kitted out x95 frame with all its drawers full and that special shade of IBM blue on everything is definitely something. Pull out the HMC and just think about how many decades of R&D and experience and tears went into the entire system.

no you need to be a "cracked engineer" working "7 days a week in our house/office in SF"

I may be wrong but I think it's mostly for things like enterprise support in case something goes wrong. IBM has had a large footprint in enterprises (WebSphere MQ, etc). People don't want disruptions in case your own kafka cluster with in-house engineers accountable for everything. So having enterprise support for product/ infra gives a sense of safety. At times rightly so. Depends on a lot of factors- risk appetite, capabilities of in-house engineers, what's at stake, and mostly psychological safety, etc.

at least they are honest? Also "thanks for the tape backup idea anyway"

Just to be clear, you honestly believe that IBM does no maintenance.

For my package on one VERSION alone: https://gitlab.com/redhat/centos-stream/src/kernel/centos-st...

I dont know if you were trying to be funny, or simply dont understand how much change really goes on.

depends, "out the nose" is relative based on what else you could be doing and what else is out there

and no job i've had considered 9-5 40 hours after a 1 hour lunch break

Tape backups were the norm back then.

They were only honest because I was working for an IBM Business Partner. They wouldn't disclose it to the customer.

> Watson was a marketing exercise designed to sell a bunch of disconnected text and image processing libraries pulled together by consulting services. It did not function as advertised.

Okay, but why can't IBM enter the LLM business reviving the Watson brand?

They have?

https://www.ibm.com/watson

I'd wager most people around here would have more use for Granite, however.

https://www.ibm.com/granite

Just the set the record straight on how and why these acquisitions go at IBM. This is a first hand account working at and with IBM and competitors and being in the room as tech-guy accessory to murder.

IBM lives off huge multi-year contract deals with their customers, each are multi-multi-million dollars worth. IBM has many of these contracts, maybe ~2000 of them around the planet, including your own government wherever it is that you live. This is ALL that matters to IBM. ALL. That. Matters.

These huge contracts get renegotiated at every X years. IBM renewal salespeople are tough and rough, in particular the ones on the renewal teams, and they spend every minute of every hour in between renewals grooming the decision makers, sponsors, champions and stakeholders (and their families) within these big corporations. Every time you see an IBM logo at a sports event (and there are many IBM-sponsored events), that's not IBM marketing to you the ad-viewer. They are there for grooming their stakeholders, who fight hard to be in the best IBM sponsored-seats at those venues, and in the glamorous pre and after party, celebs included. IBM also sponsors other stuff, even special programs at universities. Who go to these universities? Oh, you bet, the stakeholder's kids, who get the IBM-treatment and IBM-scholarship at those places.

But the grooming is not enough. The renewal is not usually at risk - who has the balls to uninstall IBM out of a large corp? What is at risk is IBM's growth, which is fueled by price increases at every renewal point not the sale of new software or new clients - there are no new clients for IBM anywhere anymore! These price increases need to happen, not just because of inflation but because of the stock price and bonuses that keep the renewal army and management going strong, since this is a who-knows-who business. To justify the price increase internally at those huge client corps (not to the stakeholder but to their bosses, boards, users, etc) IBM needs to throw a bone into these negotiations. The bone is whatever acquisition you see they make: Red Hat, Hashicorp... Or developments like Watson. Or whatever. They are only interested in acquiring products or entering markets that can be thrown at those renewal negotiations, with very few exceptions. Why Confluent? Well, because they probably did their research and decided that existing Confluent licenses can be applied to one (yeah, one) or many renewal contracts as growth fuel for at least 1-to-N iterations of renewals.

Renewal contracts correspond anywhere from 60% to 95% of IBM's revenue, depending on how you account for the the consulting arm and "new" (software/hw sales/subscriptions). I particularly have not seen lots of companies hiring IBM consultants "just because we love IBM consultants and their rates", so consulting at a site is always tied to the renewal somehow, even if billed separately or not billed at all. Same for new sw sales, if a company wants something IBM has on their catalog from their own whim and will, then that will just probably be packed into the next renewal because that's stakeholder leverage for justifying the renewal's increase base rate. Remember, a lot of IBM's mainframes are not even sold, they are just rentals.

Most IBM investment into research programs, new tech (quantum computing!) etc are there just to help the renewals and secure a new Govt deal here and there. How? Well, maybe the increase in the renewal for the, ie, State of Illinois contract gets a bone thrown in for a new "Quantum Research Center (by IBM)" at some U of I campus or tech park that the now visionary Governor will happily cut the ribbon, photo op and do the speech. Oh wait! I swear I made this up as an example, but this one is actually true, lol:

https://newsroom.ibm.com/2024-12-12-ibm-and-state-of-illinoi...

You get the drill?

Yep, and I think they've already used the Watson brand for a good bunch of different technologies, and most if them have been retired for lack of success. In fact, seems like a couple weeks ago they've sold a good chunk of Watson Healthcare to private equity [0]. Edit: When I talk about the lack of success, I talk not only about market success, but the usefulness of the product.

Until 3/4 years go I was in healthcare for 15 years, a good bunch of them being partners with IBM in radiology imaging solutions. I've been in their IBM La Gaude (former) research/presentations lab a couple times and I've seen a lot of their Watson product come and go, without much success. I have to say that I've seen a couple that were very interesting, but were mostly statistical, with no AI/LLM/... involvement.

And don't talk me about Softlayer/Bluemix. Or their private cloud racks that I cannot even remember their name...

--

  0: https://pharmaphorum.com/news/ibm-sells-off-large-parts-of-watson-health-business

It's not stupid when you can bill for $1Mi instead of $100k ;)

good? That POS is the one SW that 100% deserves it place in hell

having worked in a government agency that ditched IBM, let me offer a view of what that looks like from the customer side:

IBM bought a company whose product we'd been using for a while, and had a perpetual license for. A few years after the purchase, IBM tried to slip a clause into a support renewal that said we were "voluntarily" agreeing to revoke the perpetual license and move to a yearly per-seat license. Note: this was in a contract with the government, for support, not for the product itself. They then tried to come after us for seat licenses costs. Our lawyers ripped them apart, as you can't add clauses about licensing for software to a services contract, and we immediately tore out the product and never paid IBM another dime.

I tell this story not to be all "cool story, bro", but to point out that IBM does focus on renewal growth, but they're not geniuses...they're just greedy assholes who sometimes push for growth in really stupid ways.

I sure do, if I'm at my computer longer the work quality goes way down. I'm thinking about it much longer each day than working on it.

Yes it really was quite good despite all the hate it seems to get in internet comments. I used it for several years. The feature set, particularly config specs and dynamic views, was brilliant. The product was pretty mature and complete 25 years ago. I agree that administration was complicated and performance could be slow if misconfigured. We configured right, it was very intuitive and pleasant to use. IBM has effectively killed it by continuing to charge an excessive premium while adding nothing significant since they bought Rational (for Clearcase, DOORS, Apex etc.)

Well, I don't know anyone who takes a full 1 hour lunch break -- back when I was in the office, I reckon it was more like 30-45 minutes? But people at all 4 office jobs I've worked did a standard 9-5 schedule.

But yes, "out the nose" is qualified by your particular situation. For me, that might be 2-3x my normal salary, which would mean I could take breaks for a few years or retire sooner.

I think the driving force behind the look of the recent mainframes is from IBM's Italian designer, Camillo Sassano:

https://www.idsa.org/profile/sassano/

Well there's a whole group, but Camillo is the guy I worked with when I was there.

> Watson was intended to solve fuzzy optimization problems.

> Unfortunately, the way it solved fuzzy was 'engineer the problem to fit Watson, then engineer the output to be usable.'

I'm going to review my understanding of fuzzy optimization because this last line doesn't fit the bill in it.

hustle culture bro, everyone needs 996

we are achieving true egalitarianism here, everyone can be a slave regardless of color, creed, or origin

The reason LLMs are viable for use cases that Watson wasn't is their natural language and universal parsing strengths.

In the Watson era, all the front- and back-ends had to be custom engineered per use case. Read, huge IBM services implementation projects that the company bungled more often than not.

Which is where the Palantir comparison is apt (and differs). Palantir understood their product was the product, and implementation was a necessary evil, to be engineered away ASAP.

To IBM, implementation revenue was the only reason to have a product.

> Read, huge IBM services implementation projects that the company bungled more often than not

Well this is _not_ what they wanted to sell in that talk.

But the implementation shown was über vanilla, and once I got home the documentation was close to un existent (Or, at least, not even trying to be what the docs for such a technology should be).