Herman Hollerith (1860-1929) entered and won a competition to find a faster way of analysing the data from the 1880 US census. By 1889 he had devised the Hollerith Tabulator and Sorter which used an electromechanical system to automatically read and count the data stored on a deck of punched cards. His machine was used for the 1890 census and in 1896 the Tabulating Machine Company (TMC) was formed. In 1911 TMC was merged with International Time Recording and the Computing Scale Company to form the Computing Tabulating Recording Company (CTR), making a variety of data processing equipment for businesses.
Around 1920, Thomas Watson, recently fired from National Cash Register, joined CTR as general manager. He brought with him various questionable management policies he had learned at NCR, including insisting all salesmen be white and Protestant, but also some which made the company flourish. [Times have changed. In January 2007 Stonewall declared IBM to be the UK's most gay-friendly company.]
The 601 Multiplying Punch, introduced by IBM in 1931, was a simple calculator using electrical relays, which could multiply two eight digit numbers (read in from a punched card) and punch the answer back onto the card. Later versions from 1948 onwards used vacuum tubes instead of relays and could perform additional arithmetic operations.
The 1930s are a time in IBM's history that the company prefers to gloss over. In the last few years it has emerged that IBM supplied Hollerith tabulating machines to the Third Reich in Nazi Germany and occupied Poland, initially through their German subsidiary Deutsche Hollerith Maschinen Gesellschaft, and after September 1939 through a newly created Polish company named Watson Business Machines. (See for example http://www.nizkor.org/hweb/people/b/black-edwin/ibm-and-the-holocaust.html)
The IBM Automatic Sequence Controlled Calculator was built in 1944 and at five tons was the biggest computer to use just mechanical relays. It was used for calculating military tables. IBM's Selective Sequence Electronic Calculator first ran in 1948 and was essentially a programmable calculator. It used huge rolls of punched card stock for storage and with over 33,000 vacuum tubes and relays it took up a large room.
Watson's son, Thomas Watson Jr, had overseen the development of IBM's vacuum tube calculators and pushed the company towards fully electronic computers. Their first commercially available model, in 1953, was the IBM 701, originally built for the US government to help design aircraft and nuclear weapons during the Korean War. The 701 was followed in 1956 by the 305 RAMAC, which was the first computer with a hard disk drive. Its drive platters were 24 inches in diameter and each held 100 kilobytes of data. A unit containing a stack of 50 platters (total capacity 5 megabytes) could be rented for $35,000 per year.
Probably the most significant of IBM's early computers was the System/360. This was a family of devices which were inter compatible so that the system of processing unit, printers, terminals etc. could be easily changed or expanded, with no need to rewrite software. The 360 used transistors rather than vacuum tubes and was reliable. It sold in large numbers to universities, businesses and government and allowed IBM to dominate the 'mainframe' market.
In 1975 IBM produced a stand-alone desktop computer, the 5100 (right), which had a keyboard, 5 inch monitor, tape drive and 16 kilobytes of memory in a single case. The 5100 could be programmed in BASIC but, at $8975, it was restricted to wealthy institutions and businesses.
However the machine that changed the face of desktop computing was the IBM 5150, introduced in August 1981. IBM's business up to this point had concentrated on large and expensive mainframe and mini computers but they had seen the success of cheap(ish) machines like the Apple II and Commodore PET, and decided they should make an entry into this market. IBM never expected the desktop computer market to be profitable and so did not put many resources into developing the machine. They chose the Intel 8088 microprocessor (the Motorola 68000 was rejected because it was thought to be too powerful and might take sales away from IBM's minicomputer sector) and the designers made use of off-the-shelf components to keep development time to a minimum. Rather than writing their own operating system they bought one from a small company called Microsoft, who themselves bought it from an even smaller company named Seattle Computer Products.
The IBM 5150, or 'IBM PC' as it was usually known, was launched with great publicity and the fact that IBM, the world's biggest computer company, had entered the desktop market encouraged businesses to see such computers as desirable office equipment rather than toys. The original IBM PC was very underpowered, with a fairly slow processor, monochrome text-only display and only 16 kilobytes of RAM, and was not really a match for the likes of the Apple or Atari home computers. The two things it did have going for it though were the IBM brand name and the fact that its capabilities could be expanded by plug-in cards.
An unusual decision by IBM was that they published sufficient technical details for other companies to make expansion cards, and they also licensed the basic 5150 design to other manufacturers, with IBM receiving a royalty on each 'clone' sold. IBM intended to retain control over the market via the BIOS, the low level program which controls how the parts of the computer interact. All clones needed a copy of this BIOS in order to be 'IBM compatible' and makers would be sued if they did not pay IBM's price for each copy.
Unfortunately for IBM one would-be clone manufacturer, Compaq, realised there was a way round the BIOS licensing. One group of engineers could document, in great detail, exactly what IBM's BIOS did (though not how it did it), then a second group could write their own BIOS which did the same things but in a different way to the IBM code. So long as Compaq could prove that there had been no direct communication between the two groups then Compaq's BIOS was not a copy of IBM's, and thus was free from royalties. Other companies did the same thing and soon many IBM compatibles were available which were entirely independent of IBM.
IBM continued to sell PCs based on Intel (or equivalent) processors and running Microsoft operating systems, but no longer controlled their design. This did not prevent IBM remaining a very large business but did dent their profits. In 1991 IBM had a turnover of $64.8 billion and 345,000 staff but in 1992 and 1993 made losses of several billion dollars. In 2005 IBM sold off its loss-making PC division to Lenovo Group of China, so the company which invented the 'standard' modern desktop computer no longer makes them.
IBM still remains one of the biggest players in the computer industry and after shedding almost 200,000 staff in the early 1990s is back into profitability. In the first quarter of 2006 IBM had sales of $20.7 billion, providing a net income of $1.7 billion.