IBM Founded as the Computing-Tabulating-Recording Company in 1911 in Endicott, New York

IBM Founded in 1911 as the Computing-Tabulating-Recording Company in Endicott, New York

The Industrial Landscape and Precursors to IBM's Formation

The early 20th century in America was a period of remarkable industrial transformation and economic consolidation. As Model Ts began honking in the streets, telephones connected homes, and electricity illuminated cities, the U.S. economy was dominated by powerful industrialists like Andrew Carnegie and John D. Rockefeller, whose oil and steel monopolies amassed colossal fortunes in a largely unregulated environment . Against this backdrop of rapid industrialization and technological progress, the seeds of what would become International Business Machines (IBM) were being sown through several innovative but separate enterprises focused on automating business processes.

The foundation of IBM traces back to four distinct companies that would eventually merge in 1911:

1. The Tabulating Machine Company: Founded by Herman Hollerith in 1896, this Washington, D.C.-based company specialized in punched card data processing equipment. Hollerith, a former census clerk, had developed his tabulating system to help automate the 1890 U.S. Census, which reportedly saved the government two years of work and $5 million . His invention used patterns of holes punched in cardboard cards to represent individual data points like age, residence, and occupation—a system that would become an industry standard for data processing for decades .

2. The International Time Recording Company (ITR): Established in 1900 in Jersey City, New Jersey, ITR manufactured employee time clocks and other time-keeping devices. It had grown through acquisitions including the Willard & Frick Manufacturing Company and the Chicago Time-Register Co. before relocating to Endicott, New York in 1906 .

3. The Computing Scale Company of America: Formed in 1901 in Dayton, Ohio, this company produced commercial scales and computing devices that could weigh items and calculate their costs automatically. It was itself a consolidation of several regional scale manufacturers .

4. Bundy Manufacturing Company: Founded in 1889 by Harlow Bundy in Binghamton, New York, Bundy was the original manufacturer of mechanical time clocks. While its time recording business was sold to ITR in 1900, Bundy continued manufacturing adding machines until the 1911 merger .

These four companies, though operating in different niches, shared a common thread—they were all involved in developing technologies that automated various aspects of business record-keeping and data processing. Their products reflected the growing need for efficiency and accuracy in an increasingly complex industrial economy.

Charles Flint and the Creation of CTR

The architect behind the merger that created IBM's immediate predecessor was Charles Ranlett Flint, a financier and industrial consolidator who had earned the nickname "Father of Trusts" for his role in creating numerous industrial combinations including United States Rubber Company and American Woolen . Flint was a colorful figure—an international businessman who made his first million selling munitions in Latin America, an avid sportsman, and owner of one of the world's fastest yachts .

By 1911, Flint had shifted his focus from traditional manufacturing mergers to information technologies. He recognized that the Tabulating Machine Company, International Time Recording Company, Computing Scale Company, and Bundy Manufacturing all shared an emphasis on data processing and automation, despite their different products . Flint envisioned that combining these companies could create a diversified business less vulnerable to fluctuations in any single market.

On June 16, 1911, Flint finalized the merger of these four companies into a new holding company called the Computing-Tabulating-Recording Company (CTR), headquartered in Endicott, New York . The consolidation was accomplished through stock acquisition, with Flint's group paying $10.5 million for the four companies but inflating the new company's stock value to $16.5 million—a clever financial maneuver that yielded quick profits for the investors .

The new corporation had 1,300 employees and operations spread across multiple locations: Endicott and Binghamton, New York; Dayton, Ohio; Detroit, Michigan; Washington, D.C.; and Toronto, Canada . Its product line was remarkably diverse, including employee time-keeping systems, commercial scales, automatic meat slicers, tabulating machines, and punched cards .

Financially, CTR faced significant challenges from the outset. The company carried $6.5 million in bonded debt—three times its current assets—with $4 million loaned by Guaranty Trust Company 2. Flint justified the merger by arguing that the diversified business lines would provide stability: "in normal times the interest and sinking funds on its bonds could be earned by any one of these independent lines, while in abnormal times the consolidation would have three chances instead of one to meet its obligations and pay dividends" .

Early Struggles and Leadership Challenges

Despite Flint's optimistic vision, CTR struggled in its early years. The company's balance sheet showed substantial debt, and managers from the original companies often resisted full integration, maintaining loyalty to their former organizations . The initial leadership structure reflected this uneasy consolidation:

• George Winthrop Fairchild, an investor and former congressman who had been involved with ITR, became CTR's chairman. However, his political commitments kept him frequently absent from company operations .

• Frank N. Kandolf, former CEO of ITR, served as president but lacked the forceful personality needed to unify the disparate businesses .

• Herman Hollerith remained as a consulting engineer for the tabulating machine business until his retirement in 1921 .

• Flint himself served on the board but was primarily focused on financial engineering rather than day-to-day management .

This leadership vacuum became increasingly problematic as CTR's businesses failed to integrate smoothly. The tabulating machine division showed the most promise technologically but required significant investment to grow. The time recording business was profitable but mature, while the scale business faced limited growth prospects . Flint recognized that CTR needed a unifying leader with vision and charisma to transform the collection of businesses into a cohesive company.

The Arrival of Thomas J. Watson

The turning point for CTR came in 1914 when Flint hired Thomas J. Watson as general manager. Watson was a remarkable figure—a born salesman with no formal education who had risen through the ranks at National Cash Register (NCR) to become its top sales executive . His hiring was controversial because Watson and other NCR executives had recently been convicted of antitrust violations for their aggressive tactics against used cash register dealers (a conviction that was later set aside) .

Watson joined CTR at age 40, taking charge of about 1,300 employees . Initially, due to his legal troubles, the board only gave him the title of general manager rather than president. After eleven months, when the court ordered a retrial that never materialized, Watson was promoted to president in March 1915 .

Watson brought with him several key philosophies from his NCR days that would fundamentally shape CTR and later IBM:

1. A focus on customer service: Watson believed in "selling and delivering service" rather than just products .

2. Ethical business practices: Having learned from his antitrust case, Watson emphasized conducting business in an "honest, fair and square way" .

3. Employee loyalty and morale: He instituted employee sports teams, family outings, and a company band .

4. The power of corporate culture: Watson introduced strict dress codes (dark suits, white shirts), banned alcohol, and led company singing sessions featuring songs like "Ever Onward" from the official IBM songbook .

Watson also brought NCR's famous "THINK" slogan to CTR in 1915, which would become IBM's enduring motto .

Watson's Transformation of CTR

Watson's leadership marked the beginning of CTR's transformation from a collection of disparate businesses into a unified, forward-looking technology company. His strategies included:

1. Focusing on Tabulating Machines: Watson recognized that Hollerith's tabulating technology had the greatest potential for growth and innovation. He shifted resources toward this division while de-emphasizing scales and time clocks . This proved prescient as demand for data processing equipment grew rapidly in the early 20th century.

2. Building a Professional Sales Force: Watson took personal charge of CTR's 400 demoralized salesmen, molding them into a highly trained, professional sales organization modeled after NCR's successful approach . He implemented generous sales incentives and created the Hundred Percent Club to reward those meeting their quotas .

3. Emphasizing Research and Development: Under Watson, CTR invested heavily in improving tabulating technology. Key innovations included:

• The first printing tabulator (1920) that eliminated manual transcription of results 

• The electric keypunch (1923) that automated card punching 

• The Carroll Rotary Press (1924) that revolutionized punched card production 

• The 80-column "IBM Card" (1928) that doubled data capacity 

4. Expanding Globally: Watson aggressively pursued international growth, establishing operations in Brazil (1917), Germany (through acquisition of Dehomag in 1923), Japan (1925), and Italy (1927) .

5. Creating a Distinct Corporate Culture: Watson implemented policies that made CTR/IBM known for progressive employee relations:

• Hired the company's first disabled worker in 1914 

• Created one of the first corporate education departments in 1916 

• Established the Quarter Century Club in 1924 to honor long-service employees 

• Implemented an Open Door Policy encouraging employees to voice concerns 

These strategies proved remarkably successful. Within four years of Watson's arrival, CTR's revenues had doubled . The company weathered the post-World War I recession better than many competitors and continued to grow through the 1920s.

The Birth of International Business Machines

As CTR expanded globally and its focus shifted decisively toward business machines, Watson found the name "Computing-Tabulating-Recording Company" increasingly limiting and outdated. He wanted a name that reflected the company's aspirations and global reach .

The name "International Business Machines" had actually been used by CTR's Canadian subsidiary since 1917 . On February 14, 1924, CTR formally changed its name to International Business Machines Corporation (IBM) . The timing coincided with the death of chairman George Fairchild, allowing Watson to assume complete control of the company .

The name change symbolized the company's transformation from a collection of industrial equipment manufacturers into a unified enterprise focused on advanced business technology. While the legal subsidiaries continued operating under their original names until full integration in 1933, IBM-branded products began appearing shortly after the name change .

Legacy of the CTR Years

The period from 1911 to 1924 laid the foundation for IBM's century-long dominance in information technology. Several key elements of IBM's enduring corporate identity emerged during these formative years:

1. Technological Leadership: The focus on tabulating machines established IBM's core competency in data processing that would evolve through punch cards, mainframes, and modern computing .

2. Corporate Culture: Watson's emphasis on employee loyalty, ethical business practices, and customer service created a distinctive IBM culture that would become legendary in American business .

3. Global Perspective: The early international expansions established IBM as a multinational corporation decades before globalization became common .

4. Innovation Ecosystem: The combination of research labs, employee education, and customer-focused solutions became IBM's formula for sustained innovation .

The physical legacy of CTR also endured in Endicott, New York, where the original factories grew into a massive campus that IBM occupied for most of the 20th century. At its peak, IBM Endicott employed 17,000 people in the region before declining in the late 20th century . Today, many of the original buildings stand as reminders of IBM's industrial origins, with frescoes depicting hourglasses, abaci, and scales—symbols of CTR's original product lines—still visible on some facades despite decades of weathering .

From its origins as an uneasy combination of time clock, scale, and tabulating machine companies, CTR under Watson's leadership became the prototype for the modern technology corporation. The values, strategies, and technologies developed during these formative years would guide IBM through the computer revolution and beyond, making it one of the most enduring and influential companies in business history. As the Computer History Museum notes, "IBM was the world leader in providing computer systems for both business and scientific applications" throughout most of the 20th century—a dominance that began with Herman Hollerith's punched cards and Thomas Watson's vision for the Computing-Tabulating-Recording Company .

Photo from: iStock

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