IBM's new CEO, Virginia Rometty, has a plan

Outgoing CEO Sam Palmisano changed IBM, set a path that will outlast him

IBM doesn't like drama -- and it proved that with its appointment Tuesday of Virginia Rometty as its new CEO.

In taking the job, Rometty replaces a somewhat reserved figure, CEO Sam Palmisano, who did not seek the stage in Washington or Silicon Valley. But when it came to strategy, Palmisano brought big changes to IBM and set clear directions for the company through 2015.

Samuel J. Palmisano and his successor Virginia M.
IBM CEO Samuel J. Palmisano and his successor Virginia M. "Ginni" Rometty at IBM's corporate headquarters in Armonk, N.Y. (Photo courtesy of IBM)

Palmisano's influence on IBM's future will outlast his tenure by years, which helps to explain why IBM saw Rometty as an ideal candidate for the job.

Rometty, senior vice president and group executive for sales, marketing and strategy, is following a tough act. She will take over the company on Jan. 1, while Palmisano will continue as board chairman and remain a powerful presence.

Chris Ambrose, an analyst at Gartner, believes that IBM takes a different view of leadership roles than some of its competitors, and that it puts the IBM brand -- not any one individual -- on center stage. With Rometty, IBM is tapping someone who understands where the company is moving, someone who "understands and accepts that strategy," said Ambrose.

Rometty has been at IBM since 1981, when she was a systems engineer.

Palmisano, appointed CEO in 2002, redefined IBM as a "globally integrated enterprise," meaning a company that "that locates operations and functions anywhere in the world based on the right cost, the right skills, and the right business environment" and is completely integrated.

Palmisano increased IBM's overseas hiring, at the expense of North American jobs, and he put a lot of attention on what the company calls "growth markets." It considers those markets to be every place in the world but North America and western Europe.

In 2006, IBM said 16% of its revenue came from growth markets, By last year, that figure had reached 21%. By 2015, the percentage of revenue the company expects to earn in growth markets will approach 30%.

Under Palmisano, IBM has already outlined a corporate strategy through 2015 that also calls for continued development of "higher-value" services and software, and an entirely new category of services and software it calls Smarter Planet.

Last year, IBM announced a plan to spend $20 billion to buy companies through 2015. That's more money than it spent in the previous 10 years. Many of those acquisitions will involve business analytics, cloud services and related software.

Rometty has played a role in shaping those strategies, say analysts.

"I would not expect to see a huge amount of change in the short term. But she is an intelligent executive, and I would expect to see her put her own stamp on the company," said Charles King, an analyst at Pund-IT.

The fact that, under Palmisano, IBM's workforce grew overseas and decreased in the U.S. says something about the world today.

In 2006, IBM employed 127,000 people in the U.S., a figure that had dropped to 105,000 by 2010, the last time the company publicly reported its U.S.-based employment.

Lee Conrad, the national coordinator of Alliance@IBM, which is part of the Communications Workers of America union, said he expects "IBM U.S. employees will continue losing jobs as work is shifted offshore." Alliance@IBM estimates that the company's U.S. workforce is now at about 98,000.

"The decline in U.S. IBM employee population has been steep under Palmisano and Rometty," said Conrad.

Worldwide, it's a different story: IBM's employment has been growing and is now at about 436,000 people.

Patrick Thibodeau covers cloud computing and enterprise applications, outsourcing, government IT policies, data centers and IT workforce issues for Computerworld. Follow Patrick on Twitter at @DCgov, or subscribe to Patrick's RSS feed . His email address is pthibodeau@computerworld.com.

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