IBM’s board decided on Tuesday that while Palmisano, 60, will remain chairman of the board it is time for a new hand at the wheel. The company has an unofficial policy of making changes when the chief executive hits that age.
Rometty was one of four executives who were given more responsibilities last summer in a move that was seen as a preparatory step for a leadership change.
“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 commercialization of Watson [IBM’s supercomputer]. 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.”
Industry analysts expect Rometty, 54, will continue Palmisano’s strategy of pushing IBM to integrate its hardware, software and services to businesses and not overhaul the company. Not, they added, that it needs to considering IBM’s stature in the information technology industry.
Bobby Cameron, vice-president and principal analyst at Forrester Research, who has met her several times, described her as “accessible, sharp, engaging, she is curious and has a pretty consistent business orientation.”
“My belief is that company will excel when it really does what Palmisano was trying to get done, and I think Ginny is fully equipped to make that happen. So more of the same.” On the other hand, he added, “under Palmisano there were less than aggressive moves in some aspects of the business, and I think Ginny understand the opportunity and will therefore drive a level of investment.” For example, not making the compensation of IBM’s sales force parallel the company’s business strategy. “That’s a basic tenent for being able to make a gigantuan company like that respond to the market. And I think Rometty won’t even ask the question because she’s not an IBM-er, she’s a business woman.”
“I wouldn’t expect a lot of change,” said Zeus Kerravala of ZK Research. “She worked for Sam and has a history of finding new markets to move into and doing it successfully. So we’ll see more continued good execution.”
Rometty becomes the second woman to head a major IT company after the appointment last month of Meg Whitman at Hewlett-Packard Co. But to Kerravala the similarity ends there. “This hire seems to me to fit the culture and consistency of IBM much more than, say, Meg Whitman’s did at HP.”
Palmisano leaves a legacy of overhauling IBM. Eight months after he was appointed CEO in 2002 he architected the purchase of PriceWaterhouseCoopers consulting, a deal reinforced IBM’s shift from a hardware manufacturing business to a services company. That accelerated when he sold the company’s personal computer division to Lenovo in 2004, its hard disk manufacturing operations to Hitachi in 2005 and its printing division to Ricoh in 2007.
After the PWC takeover Rometty was named senior vice-president in charge of what became IBM Global Services and led the integration of PWC with IBM. In her most recent post she was effectively in charge of IBM’s world-wide sales.
In the news release announcing the appointment, she paid credit to Palmisano’s leadership. But she also said “Sam taught us, above all, that we must never stop reinventing IBM.”
At an IBM conference in Las Vegas, ComputerWorld Canada reporter Ryan Patrick asked Doug Hunt, the company’s vice-president of business performance and service optimization, about the appointment. “She will be a wonderful continuity point with the chairman (Palmisano),” he said. “Sam has done so much for this business to drive us to a higher plateau; by all measure he’s shifted this business to a higher value play. There’s no one better to build on that higher value play than Ginny. It’s what she’s represented on the consultative side of the business; her sales and distribution side of the business is all about driving value propositions for our clients. She’s spent her career driving value propositions higher and higher. It puts a tremendous amount of pressure on us to build a compelling value proposition for clients. So there’s nobody better to pick up the baton on the fundamental strategy of the business and have the vision, the creativity and the operational excellence of this business.”
Last week IBM announced increases in sales and profit for the quarter ending in September, though revenue fell slightly short of analyst expectations. Quarterly profit rose year over year by seven per cent to US$3.8 billion, while sales were up eight per cent to US$26.16 billion. Bright spots included software revenue, up by 13 per cent to US$5.8 billion; Power Systems revenue, up by 15 per cent; and cloud-oriented technology sales, which doubled from last year.
(With files from Marc Ferranti IDG News Service)