Palmisano’s Top 15 Moves to Keep IBM Growing

In the last decade, IBM has focused its growth strategy on faster-growing, higher-profit operations. IBM named Sam Palmisano president and chief operating officer in 2000 before he became Louis Gerstner’s successor as CEO of IBM in 2002. Here’s a snapshot of some of Sam Palmisano’s big moves that continue to make IBM a bellwether in the technology industry. A recent announcement of massive layoffs shook the tech giant … but it could a be calculated move in IBM’s ongoing mission to not only survive, but thrive.

In July 2002, IBM announced plans to acquire PwC Consulting, PricewaterhouseCoopers’ global business consulting and technology services unit, for $3.5 billion in cash and stock. The combination created a new global business unit, IBM Business Consulting Services, comprising more than 30,000 IBM and 30,000 transferring PwC Consulting professionals.

2003 – IBM introduces an ultrafast high-end eServer p690 system that provides a 65 percent performance boost over its predecessor. Each Power4 chip contains 174 million transistors – about 10 times more than are used in today’s PCs – and the chips are interconnected by 1 mile of microscopic copper wiring.

Since 2003, Palmisano has ushered in 77 acquisitions. In February 2003, Rational Software was integrated into IBM as the fifth brand of IBM Software Group, which was formed in 1995 and now contributes $22 billion of IBM’s revenue and 43 percent of IBM’s profit. IBM’s middleware products provide business integration infrastructure that powers more than 100,000 enterprises around the world.

2004 – In December, IBM announced it would sell its Personal Computing Division to Lenovo Group Limited, the leading personal computer brand in China and across Asia, making Lenovo the world’s third-largest PC business. This move reinforced IBM’s strategy of focusing on the high-growth, higher-profit segments of the IT industry.

Beginning in 2005, IBM put a renewed focus on the mainframe, and began shipping the IBM System z9 mainframe, which performs as the hub in a new era of collaborative computing. The new mainframe system can process 1 billion transactions a day, more than double the performance of its predecessor, run five operating systems and process up to 6,000 secure online transactions per second.

In 2005, the Cell microprocessor emerges as a collaboration between engineering teams from IBM, Sony and Toshiba. Essentially a supercomputer on a chip, the Cell microprocessor is expected to transform consumer electronics and digital entertainment. IBM microprocessors power the three most popular game consoles-the Cell powers the Sony PlayStation and other IBM processors power the Nintendo Wii and Microsoft Xbox.

IBM unleashed in June 2006 the next-generation DB2 9 data server, “Viper,” to deliver significant database technology enhancements. Viper marks the culmination of a five-year IBM development project involving more than 750 software developers in eight countries.

Also, beginning in 2006, Palmisano took steps to ensure that IBM software was open and at a welcome price point for the industry and emerging markets. The availability of IBM Lotus Notes on Linux provided millions of users worldwide with an open desktop alternative to proprietary desktop operating systems. In 2007, IBM introduced Lotus Symphony, a free office desktop suite that has attracted more than 3 million downloads.

2006 – Palmisano embraces new media. IBM announced a $100 million initiative to incubate new businesses and invest in ideas garnered during IBM’s InnovationJam, a 72-hour online brainstorming session conducted among IBM’s clients, partners and employees worldwide.

2007 – Palmisano introduced the Global Citizen Portfolio, a suite of $60 million in investments over three years and new programs to help IBM employees enhance their skills and expertise in order to become global leaders, professionals and citizens. One aspect of this, IBM Corporate Services – a corporate version of the Peace Corps – has already sent IBM teams to Tanzania, Ghana, Turkey, and other emerging and developing countries.

2007 – IBM introduced Blue Cloud, a series of cloud computing offerings that will link together computers to deliver Web 2.0 capabilities and allow corporate data centers to operate more like the Internet. Cloud computing fits squarely in IBM’s overall model for rapid business innovation as discussed in IBM’s On Demand initiative.

2008 – IBM completed its largest acquisition to date: Cognos, for $4.9 billion. This was IBM’s 25th acquisition in support of its Information On Demand effort, and with it IBM became the leading provider of technology and services for business intelligence and performance management.

In May 2008, IBM’s Roadrunner – the world’s first hybrid supercomputer – broke through the “petaflop barrier” of 1,000 trillion operations per second. Roadrunner is twice as fast as the world-leading IBM Blue Gene, which is itself three times more powerful than the remaining contenders on the industry’s Top500 list of supercomputers.

At a speech to the Council on Foreign Relations in November 2008, Palmisano proposed a technology-fueled economic recovery plan that called for public and private investment in more efficient systems for utility grids, traffic management, food distribution, water conservation and health care.

As we enter 2009 amid a global recession, IBM is still poised for stability and continues to weather the storm under Palmisano’s tutelage. Palmisano has advised the Obama administration that a $30 billion investment could lead to 900,000 new U.S. jobs. However, IBM has begun 2009 by cutting several jobs from its Software, Sales and Distribution, and Systems and Technology Groups.