You Are What You Charge For
Notice, however, that while all of these companies stage experiences, most are still charging for their goods and services. Companies generally move from one economic stage to the next in incremental steps. In its heyday in the 1960s and 1970s, IBM’s slogan was “IBM Means Service,” and the computer manufacturer indeed lavished services—for free—on any company that would buy its hardware goods. It planned facilities, programmed code, integrated other companies’ equipment, and repaired its own machines; its service offerings overwhelmed the competition. But eventually IBM had to charge customers for what it had been giving away for free, when a Justice Department suit required the company to unbundle its hardware and software. The government order notwithstanding, IBM couldn’t afford to continue to meet increasing customer-service demands without explicitly charging for them. Services, it turned out, were the company’s most valued offerings. Today, with its mainframe computers long since commoditized, IBM’s Global Services unit grows at double-digit annual rates. The company no longer gives away its services to sell its goods. In fact, the deal is reversed: the company will buy its clients’ hardware if they’ll contract with Global Services to manage their information systems. IBM still manufactures computers, but now it’s in the business of providing services.
It’s an indication of the maturity of the service economy that IBM and other manufacturers now make greater profits from the services than from the goods they provide. General Electric’s GE Capital unit and the financial arms of the Big
You Are What You Charge ForNotice, however, that while all of these companies stage experiences, most are still charging for their goods and services. Companies generally move from one economic stage to the next in incremental steps. In its heyday in the 1960s and 1970s, IBM’s slogan was “IBM Means Service,” and the computer manufacturer indeed lavished services—for free—on any company that would buy its hardware goods. It planned facilities, programmed code, integrated other companies’ equipment, and repaired its own machines; its service offerings overwhelmed the competition. But eventually IBM had to charge customers for what it had been giving away for free, when a Justice Department suit required the company to unbundle its hardware and software. The government order notwithstanding, IBM couldn’t afford to continue to meet increasing customer-service demands without explicitly charging for them. Services, it turned out, were the company’s most valued offerings. Today, with its mainframe computers long since commoditized, IBM’s Global Services unit grows at double-digit annual rates. The company no longer gives away its services to sell its goods. In fact, the deal is reversed: the company will buy its clients’ hardware if they’ll contract with Global Services to manage their information systems. IBM still manufactures computers, but now it’s in the business of providing services.It’s an indication of the maturity of the service economy that IBM and other manufacturers now make greater profits from the services than from the goods they provide. General Electric’s GE Capital unit and the financial arms of the Big
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