IBM Reorg Consolidates Power at the Top

 
 
By Darryl K. Taft  |  Posted 2010-07-20
 
 
 

IBM has reorganized some of its top-level management, giving more power and responsibility to four senior executives in a move that helps the company better integrate its software, hardware and services solutions for customers.

In a July 19 memo to IBM staff, IBM CEO Samuel J. Palmisano said the changes are needed to enable IBM to better deliver "tightly integrated" systems and solutions.

The moves in IBM's upper ranks include bringing the company's software and hardware businesses together under senior vice president Steve Mills, who has run IBM Software for the last decade. In another move, Michael Daniels, another IBM senior vice president who has headed one half of IBM's Global Services organization, is now in charge of the entire services group. Up to now, IBM Global Technology Services and IBM Global Business Services each had separate leadership, but they come together under Daniels.

In addition, IBM senior vice president Virginia Rometty gains responsibility for IBM's overall marketing and strategy in addition to the global sales and distribution organization she has been leading. And IBM's chief financial officer (CFO), Mark Loughridge, will add oversight of IBM's finance operation as well as oversight of IBM's internal IT.

Analysts and industry observers have speculated that the moves will help simplify the process of naming a successor to Palmisano, who will turn 60 next year. IBM has had a tradition of having its CEOs step down at age 60. If age is a factor, then Rometty may have the best chance at succeeding Palmisano, as she is 52. However, Mills is 58, Loughridge is 57, and Daniels is 56.

Charles King, principal analyst at Pund-IT, said of Rometty, "Her age makes that [her succession to CEO] a strong possibility. The board likes to see people stay seven to 10 years at CEO."

However, King added that he is not so sure Palmisano will be stepping down at age 60. "I'm not sure that will be the case for Palmisano or not," King said. "Given the economy and his track record, he may be given leave to stay longer. He's done a terrific job."

Moreover, King said he is not convinced the reorganization moves have anything to do with appointing a successor to Palmisano or that any of the four executives involved would necessarily be selected to lead IBM in the future. Though each of them is capable, he added.

"It's not like this is really unusual," King said. "IBM does high-level executive reorgs like this all the time. It usually happens in ones and twos. I think these moves offer evidence of the way the company has consolidated its products and services. Steve Mills being head of hardware and software is a pretty natural move."

Indeed, in January, IBM's Mill announced a reorganization of the company's software business into two groups: IBM Software Solutions group, headed by Mike Rhodin; and the IBM Software Middleware Group, headed by Robert LeBlanc. Mills told eWEEK that move was aimed at evolving the organization and freeing him up to do other things.

In an interview in March, Mills told eWEEK:

"We've reached a point in terms of size and in the different things we're trying to get accomplished that I thought it was time to spread the organization a little bit. It's sort of the classic challenge of as things get bigger and bigger you have to come up with practical division of labor. And I thought we had reached that point where some of the things we were trying to get done were not getting quite as much time and attention. My own personal scalability has its limits."

King added that this reorganization supports IBM's ongoing strategy of delivering "workload optimized systems" consisting of hardware and middleware at minimum.

In an interview with eWEEK, Tom Rosamilia, general manager of IBM's System z business, said IBM is simply continuing on a path the company has been following for some time - that of delivering integrated systems. "I think that's a good way to look at this," Rosamilia said. "We've been doing this kind of work for some time," optimizing and integrating DB2, WebSphere and other IBM software with IBM hardware, he said.

King cited IBM's recent data center in a box offerings and its business analytics appliances as further examples of this trend.

Meanwhile, Alan Krans, senior analyst at Technology Business Research (TBR), said, "Although IBM has been tightly integrating its software and hardware product together for quite some time, the formal realignment signals the integration is a long-term strategy, not a short term initiative."

Moreover, rating IBM's ability to deliver value and functionality for its customers following this reorganization, Krans said:

"With a broad portfolio of offerings that spans professional services, hardware, and software, IBM is well-positioned to deliver software functionality any way its customers so choose, and the company is aligning its portfolio to do just that. IBM's breadth is a strong competitive advantage in this respect, and the company is grouping its software offerings into four delivery categories - public cloud, private cloud, purpose-built device delivered, and traditional on-site software delivery. As opposed to pure-play cloud vendors such as Google or Salesforce.com, TBR believes IBM's multifaceted delivery approach will most closely match actual customer adoption patterns. Few customers will fall cleanly into a single delivery method, and the vast majority will employ multiple software delivery methods depending on their specific requirements and existing IT assets."

"I think we'll see the traditional walls between hardware platforms will be removed" at IBM, King said. Indeed, the reorganization "is more of an indication of a broader strategic shift that we've been seeing at IBM and delivered in efforts like the Smarter Planet initiative."

 

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