CEO Palmisano moves to chairman soon having done much for IBM. Darryl Taft asks what successor Rometty’s legacy might be
Virginia “Ginni” M Rometty’s taking the helm of IBM is no surprise.
IBM held out that there were three to four front runners for the position, but Rometty was the clear leader. In fact, at IBM’s recent Think Forum in New York, Sam Palmisano, IBM’s outgoing president and CEO practically thrust Rometty on the scene as his successor, playing her up and playfully chiding her about a $300 million (£188) deal she completed without any input from him.
Effective January 1, 2012, Rometty is the boss at IBM. Palmisano will remain in office as chairman of the company’s board of directors. But the day to day moves on to Rometty.
One small step for women
Rometty also held a prominent position in IBM’s internal Centennial celebration to commemorate its 100 years in business. She represents a major step in the history of IBM, in that she is the first woman to lead the company. IBM has a history of switching CEOs out after they turn 60. Palmisano is 60 and has seceded the president and CEO roles to Rometty but retained the chairmanship.
Palmisano has been hugely successful at IBM. He has been known for his business execution. He initially executed on many of the ideas put forth by former IBM CEO Lou Gerstner, and then he set his own path and began to execute on it.
Palmisano has seen IBM through times of adversity with economic slumps and redundancies. Yet the company was recently shown to be the second most valuable technology company behind Apple, beating out rival Microsoft for that position.
Palmisano also committed to preserving the notion of an IBMer. He even revisited that notion and came up with a series of new values for the company and the IBMer: “dedication to every client’s success; innovation that matters-for our company and for the world; and trust and personal responsibility in all relationships.”
What remains to be seen is what mark Rometty will put on the company.
“Ginni Rometty has successfully led several of IBM’s most important businesses over the past decade; from the formation of IBM Global Business Services to the build-out of our Growth Markets Unit,” Palmisano said in a statement. “But she is more than a superb operational executive. With every leadership role, she has strengthened our ability to integrate IBM’s capabilities for our clients. She has spurred us to keep pace with the needs and aspirations of our clients by deepening our expertise and industry knowledge.
“Ginni’s long-term strategic thinking and client focus are seen in our growth initiatives, from cloud computing and analytics to the commercialisation of Watson. She brings to the role of CEO a unique combination of vision, client focus, unrelenting drive, and passion for IBMers and the company’s future. I know the board agrees with me that Ginni is the ideal CEO to lead IBM into its second century,” he added.
Industry analyst Rob Enderle said, “What is interesting is that many of us thought Steve Mills was positioned and the heir apparent. Rometty is actually a better choice because she has moved around the corporation more and therefore has a greater breadth of knowledge on IBM’s various businesses. She’d be weakest on software but Mills remains as her lieutenant and his is one of the most stable and well managed groups. Her choice was consistent with the century long strategy of putting people in the job with the strongest breadth and therefore the best chance to do it well.”
Meanwhile, Charles King, an analyst with Pund-IT, said, “Her immediate challenges will be to keep executing on the strategy currently in place (not always as easy as it sounds in a $100 billion (£63bn) company), and to prepare IBM, its customers and partners for evolutionary market and IT changes ahead. She’s taking on the CEO responsibilities at a time when many of IBM’s biggest competitors (HP and Oracle, particularly) are either in some disarray or transitioning to new business models. That should provide some breathing room in the short term but you can’t expect them to be fumble-footed for long.”
King added “IBM follows a far more structured and sustainable path in training its executives for higher position, including president and CEO. Rometty worked in roles and business units across the company, and has deep insight and responsibilities related to virtually every major IBM strategic effort of the past decade or more. Along with being a terrific choice to replace Sam Palmisano, Rometty is a great example of IBM’s managerial excellence and the company’s deep executive bench.”
Long known for its executive bench, IBM has had a tradition of rotating top executives into and out of different positions in the various company business units to immerse them in the company.
Client satisfaction in 170 markets
As global sales leader for IBM, Rometty, 54, has been accountable for revenue, profit, and client satisfaction in the 170 global markets in which IBM does business. She is responsible for IBM’s worldwide results, which exceeded $99 billion (£62bn) in 2010. She also is responsible for leading IBM’s global strategy, marketing and communications functions.
Previously, Rometty was senior vice president of IBM Global Business Services. In that role, she led the successful integration of PricewaterhouseCoopers Consulting, the largest acquisition in professional services history, building a global team of more than 100,000 business consultants and services experts. She has also served as general manager of IBM Global Services, Americas, and of IBM’s Global Insurance and Financial Services Sector.
Rometty joined IBM in 1981 as a systems engineer. She holds a Bachelor of Science degree with high honors in computer science and electrical engineering from Northwestern University.
Judith Hurwitz, an industry analyst that has watched IBM for a long time, said “Ginny is a sophisticated executive who has managed strategy, sales, and consulting services for IBM for a number of years. She is the best choice in terms of her ability to continue Palmisano’s directions with software, solutions, strategy. I think that she is a superb operational executive as well. The continuity is important. IBM’s is on the right path for the future and Ginny will continue this direction.”
Comparing Apple’s situation with Steve Jobs and IBM’s, King said, “Apple was incredibly dependent on Steve Jobs who made himself indispensable and his executive office was made up of a team of people who together covered the critical skill set. He actually worked against training a replacement because he was afraid of being prematurely replaced, so Apple is now left with a huge hole where Jobs used to be.
“IBM, on the other hand, begins grooming executives early for the CEO slot and actively assuring they are trained to take it. Those that are good at breadth, which isn’t often common, and are sequentially successful and demonstrate an ability to build consensus, rise to the top,” he continued. “It is a rigorous process and it includes detailed training from recognised leaders in various disciplines in a variety of industries for breadth. The combination of experience and very unique training builds an executive with the capabilities and tested skills to run a company like IBM. While this doesn’t assure success, the CEO job is unique, it makes it very likely and over a century IBM has generally proven the process works.”
Meanwhile, Palmisano became IBM chief executive officer in 2002 and chairman of the board in 2003. During his tenure, IBM exited commoditising businesses, including PCs, printers and hard disk drives, and greatly increased investments in high-value businesses and technologies. He has overseen the significant expansion of IBM in the emerging markets of China, India, Brazil, Russia and dozens of other developing countries, transforming IBM from a multinational into a globally integrated enterprise.
In 2008, he launched IBM’s Smarter Planet strategy, which describes the company’s view of the next era of information technology and its impact on business and society.
Since Palmisano became CEO, IBM has set records in pre-tax earnings, earnings per share, and free cash flow. During Mr. Palmisano’s tenure, IBM increased EPS by almost five times, generated over $100 billion (£63bn) in free cash flow, and invested more than $50 billion (£31bn) in research and development – creating over $100 billion of shareholder value since 2002 through an increase in market capitalisation and dividends paid.