If you're wondering why any top IBM exec would need to get motivated to make this kind of trek, look no further than this: The company derived some $29 billion in revenue, or roughly one-third of its total sales, from third-party deals last year. Palmisano's message du jour to the attendees was understandably full of the warm-fuzzies: I love you, you love me, we're all one (Big Blue) happy family.
But compared with the reclusive Lou Gerstner--rumored to be up for the male lead in a made-for-TV rendition of "Where's Waldo?"--Palmisano's likely to be a far more public CEO after officially becoming IBM's eighth boss of bosses next Friday.
"He can be expected to be out there a lot," one company insider told me, signaling a coming change of style, if not substance. "If he can help sell products, he's going to be available."
Gerstner, who grooved on delivering scripted, big-picture pitches to CEOs, wasn't part of the ongoing road show conversation about where to steer the computer industry. Once in a while, he'd do Comdex, but that was it--and he wouldn't be caught dead at a product launch. The reason was simple: Gerstner was a smart enough guy, but he didn't know jack about technology before coming to IBM and probably couldn't have cared less about it even after he had arrived.
In all fairness, understanding the minutiae of the technology was less urgent than fixing the mess he had inherited from predecessor John Akers. Gerstner, a hotshot whose background included top spots at American Express and RJR Nabisco, knew strategy and management and how to scare the stuffing out of recalcitrant middle-management weasels who got in his way.
Palmisano is also an overachiever who can do all that. Plus, he knows technology; he grew up in that world, which is why IBM needs him to be out there, actively waving the flag.
For all the "wins" claimed by Big Blue's PR machine in the past 12 months, a cursory review of the record suggests that the company's near-term outlook ain't looking all that hot.
On the low end, IBM is getting its clock cleaned by Dell Computer--a fact Palmisano candidly acknowledges. "Dell's business model has a lot of power associated with it," he says, adding that IBM will have to "adjust" accordingly.
Translation: It's time to fish or cut bait.
Even though IBM outsources desktop manufacturing, it's not at all clear whether the company has what it takes to turn this into a more cost-efficient, profitably run business. In addition to the potent challenge posed by Dell, there's Compaq Computer, which has revamped its distribution process so that it now sells some 65 percent of its commercial desktop computers directly to customers.
Elsewhere, IBM's 1995 acquisition of Lotus can be judged a $3 billion-plus bust, since Microsoft owns the applications market and Lotus Notes failed to set the corporate world on fire. To its credit, IBM has registered advances in other areas of the software business, but it remains only a strong No. 2--good, but hardly the stuff that gets framed by the pages of Harvard Business Review.
The company's only consistent bright spots have been in mainframes and services, though revenue in the latter category fell in the fourth quarter. In fact, revenue for the entire company was down 3 percent last year.
Though things are tough, Palmisano can't blame the economy and Sept. 11. He knows that excuse won't cut it with Wall Street anymore. This is gut-check time.
Despite the slowdown, IT managers are still writing big checks. Indeed, IT's share of U.S. capital assets has been on the upswing for the past four decades. So there's business out there. The difference now is that budgets are tight, and there's extraordinary pressure to make the right investment.
Up against the competition, IBM will play up its history as an infrastructure supplier, from mainframe to client-server to e-commerce. I saw Palmisano deliver a 40-minute pitch to that effect, without recourse to notes or a teleprompter. That's the advantage of having somebody with serious technology chops as CEO of one of the world's leading technology companies.
Truth be told, though, isn't it about time IBM had a CEO who knows how to talk the talk in technology circles?
With the proliferation of sundry e-commerce and services approaches, royal headaches await IT managers who need to make sense of the competing alphabet-soup claims and counterclaims.
The fact that Palmisano represents IBM already gives him a foot in the door. The fact he can talk their language may get help him get a lot more.