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When Sam Palmisano became CEO of IBM in 2002, he was, in many respects, a predictable choice to run a major company. His pedigree included stints running a number of IBMs key divisions, including the Enterprise Systems Group and IBM Global Services.
Its a background Palmisano shares with a number of technologys heaviest hitters, including CEOs John W. Thompson of Symantec Corp., Michael Lawrie of Siebel Systems Inc. and John Swainson of Computer Associates International Inc. While Palmisano rose through the ranks to the ultimate IBM post, the others chose to take their talents and experience on the road. All, however, are evidence of a growing industry phenomenon: the Big Blue boss.
The steady stream in recent years of top IBM executives—many of them veterans of 25 years or more with the company—leaving for the corner office at other major technology companies is not the result of coincidence. Industry observers and former IBM employees say its the direct result of a corporate culture that emphasizes experience; loyalty; initiative; and, above all, focus on customer needs.
Many companies, both in the IT industry and other markets, profess similar values. But beginning with IBM founder Thomas Watson and continuing for the nearly 100-year history of the company, it has consistently pushed these tenets on its hires, resulting in a cohesive employee base around the world. In recent years, that system has developed into what amounts to a Triple-A system for aspiring CEOs, analysts say.
The result is an industrywide distribution not only of IBMs corporate culture but also of its business thought processes. For good or ill, the IBM penchant for partnership, appetite for acquisition and intolerance for sluggish performance are all becoming the norm in executive suites well beyond Armonk, N.Y.
Swainson, IBMs former vice president of Worldwide Software Sales, took the helm of scandal-ridden CA last month with the goal of restoring credibility to the embattled Islandia, N.Y., company. Early on, Swainson said, he became aware of the stark contrast between IBMs well-defined culture and the lack thereof at CA.
“Its a function of being built by acquisition over the course of a relatively short period,” Swainson said of his new employer. “IBM had a chance over 100 years to build a strong culture.
“Im not consciously trying to bring any parts of IBM culture to CA. Unconsciously, I cant avoid it, I suppose. I certainly was heavily indoctrinated with it,” said Swainson, who ran a unit in IBM with more employees and higher annual revenues than CAs.
“IBM does a lot of good things around process and focus on customers and making sure the customers are satisfied,” Swainson said. “Those are clearly messages I would bring to CA. They are not unique to IBM. Every successful company has a view of what it takes to satisfy customers.”
As successful as IBM alumni such as Swainson, Thompson and others have been, there was a time, not so long ago, when other companies wanted little to do with hiring an IBM executive as CEO. The problem, observers say, was IBMs rigid hierarchical culture that prevented all but the top tier of executives from gaining any meaningful management experience.
“Things have changed now, but the culture was extremely rigid under [former CEO John Akers]. They literally had people carrying the bags of senior executives,” said Frank Dzubeck, president of Communications Networks Architects Inc., in Washington, and a longtime IBM observer. “The result was that the lower-level guys couldnt manage their way out of a paper bag. That changed under [Louis] Gerstner [Palmisanos predecessor]. Executives have become more involved and hands-on.”
Next Page: IBM as a training ground.
IBM as a Training
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Part of that cultural shift involved moving senior executives among the various business units within IBM as a way to give them experience with all the companys assets. Palmisano, as well as Swainson, Thompson, Lawrie and other prominent IBM alumni, have traveled this route. Thompson, for example, worked in sales, marketing and software development and, at the end of his IBM career, was running IBM Americas.
“Everybody has passed through various parts of the business, and all of these guys understand development and sales,” Dzubeck said. “If you can be successful at a certain level at IBM, the feeling is you can be successful anywhere.”
Lawrie said he took the job at Siebel because he wanted to test that theory for himself. “The reason I left IBM was I wanted the challenge of taking what I learned and [applying] that to a company that was in need of a turnaround,” he said in an interview at Siebels San Mateo, Calif., headquarters.
“Siebel was a turnaround situation. I felt before I hung up the cleats, I wanted a chance to take that knowledge and go test it myself in a challenging, vigorous environment, which is certainly what Siebel and the marketplace that Siebel competes in could be characterized as.
“I found IBM to be a great training program and training for everything. Not only leadership skills [but also] technology skills, how to deal with customers. I think in the IT industry you couldnt hope for a better place to learn about the industry from every dimension than working for a company like IBM. I was global, I lived in Asia Pacific, I ran our EMEA [Europe, Middle East, Asia] operation and then I ran our worldwide operation. So from every dimension—global, financial, technology—I think IBM was a tremendous training ground.”
Lawrie has modeled himself after Gerstner, under whose tutelage he worked for eight years during Gerstners own successful turnaround effort at IBM in the 1990s. Lawrie spent more than 26 years at IBM in management positions, most recently as the companys top sales executive. He has also headed IBMs Personal Software and Network Computing Software groups and managed various overseas operations.
“I learned a lot of important lessons and insights from Lou,” said Lawrie. “When you work with someone that is turning around a company, I paid very close attention to what he did. How you approach strategy, how we build a new financial model, how we thought about acquisitions, how we thought about divestitures within our portfolio. So how we repositioned the portfolio of IBM.”
Perhaps the most high-profile opening in the industry currently is the CEO spot at Hewlett-Packard Co., and many observers have speculated it could be filled by an IBM executive.
Swainsons former boss, Steve Mills, senior vice president and group executive of IBM Software, declined to comment on offers that hes received, especially recent rumblings that he was on a shortlist of candidates to replace the ousted Carly Fiorina at HP.
“No comment,” Mills said with a laugh when asked if hed consider the HP job. “That will be a unique challenge for somebody.”
The division that Mills runs is larger than most software companies in the world. Many of IBMs businesses, including Global Services, are the largest of their kind. The opportunity to run businesses of that size is one of the main reasons many observers believe it is difficult to attract Mills or most other current IBM senior managers. There just arent many other jobs left at IBM that would be a step up.
But Mills said he did note that the biggest job openings in the tech industry frequently turn into opportunities for IBM executives.
“We have a responsible, mature management team,” Mills said. “In the information technology area, if you asked where do people get a good education and a solid grounding in business operations, youd put IBM high on the list. You get great training early in your career and a customer-centric attitude.”
Next page: IBM alums upward mobility.
IBM Alums Upward Mobility
Even well-placed IBM executives with no designs on a corner office elsewhere see the upward mobility of IBM alumni as an endorsement. “It shows the strength of IBM as a company that develops people,” said Janet Perna, general manager of IBMs information management business. “It shows the talent of IBMers and the experience and level of maturity of the people. Its a tribute to IBM.
“Theres a certain set of values that IBMers share,” Perna said. “A lot has been written about IBM values. About our commitment to our clients, our respect for each other and for people we do business with. About our culture of innovation that matters to the world. Longtime IBMers cant be here very long and not espouse these values.”
Perna wouldnt comment on the calls shes received trying to woo her from her job in Armonk. “I love being here,” she said. “Everyone is motivated by different things. I couldnt think of a better place to be doing what Im doing. Im here, and I stay because my personal values map to IBMs values.”
But does the strong IBM culture follow those who leave the fold?
“One person does not a culture make,” Perna said. “I dont know the effect. Culture comes from within the body of the company, so its not clear how much influence any one person can have.”
Still, it is impossible not to see the influence IBMs culture and business model have had on some of the companys more famous and successful alumni. A prime example is CEO John W. Thompson of Symantec, which recently merged with storage and backup leader Veritas Software Corp.
Since his arrival at Symantec in 1999, Thompson has been reshaping the Cupertino, Calif., vendor into a pure-play, vertically integrated security company. When Thompson took the reins, Symantec was known as a consumer-focused company with a widely scattered product portfolio that included anti-virus offerings, utilities, scanners and sundry other products, none of which was considered a leader.
By selling or killing underperforming or noncore assets and adding other pieces he saw as key to building an enterprise security leader—including managed services and consulting—Thompson has turned Symantec into not just the leader in the security market but also one of the top five software companies in the world.
Symantecs resemblance to IBM is no mistake. In fact, Thompson has imported so many aspects of the IBM way—efficient, no-nonsense leadership; broad product lines with leading offerings in a number of categories; and a trained army of consultants to help customers use it all—that many industry observers call Symantec “Big Yellow.”
Even so, Thompson said he is not necessarily interested in following the IBM game plan to the letter. “There are plenty of businesses theyre in that were not. Even with the similarities in managed services, Im not interested in the disaster recovery and backup business like IBM Global Services,” Thompson said. “Thats not a business we want to be in.”