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Commentary: New leader, new directions

Gartner says companies can expect to major changes at IBM under new CEO Samuel Palmisano, including new technology investments and marketing changes.

By Thomas Bittman, Gartner Analyst

IBM's new chief executive officer, Samuel Palmisano, promises to be a very different type of a leader from his much-admired predecessor--a leader who will move the company in new technology and marketing directions.

When he took the helm in 1993, Louis Gerstner made critical and far-reaching changes to a deeply troubled company. Palmisano's role will be to take IBM to the next level, increasing the company's role as an aggressive technology leader and providing a highly visible and personal leadership image in the industry. Both elements are critical for IBM's corporate growth--especially in the critical market for small to midsize businesses.

See news story:
IBM appoints Palmisano CEO
Gerstner's achievements are highly impressive. He took over a highly fragmented company that had suffered record operating losses two years in a row, had a large number of redundant personnel, was supporting lines of business that often conflicted with one another, and had serious fiscal management problems.

During his tenure, Gerstner set IBM on a new course, building a lean, synergistic, solutions-oriented business. Perhaps most important, he dramatically changed IBM's corporate culture. Executives and businesses that couldn't keep cost and revenue commitments were removed, with the result that IBM is now sharply focused on corporate synergy and fiscal responsibility.

Under Gerstner, IBM established itself as a market driver, but not a technology leader--it invested heavily in initiatives invented by others, such as Java and Linux, and shifted from IBM-only to industry-standard technology. In many ways, IBM now takes fewer financial and technology risks than in the pre-Gerstner days. This approach has improved the company's short-term profits and helped shift the business model toward services, but it has also reduced its growth potential and increased the risk of competitors, particularly Microsoft, passing IBM by.

Gartner believes that enterprises can expect two fundamental changes in IBM under Palmisano's leadership:

• A gradual increase in new technology investment--including strategic investments that may take several years to mature

• A change in IBM marketing--making the company's CEO a much more public figure and a visible industry leader

The challenge for Palmisano will be to balance new market-changing innovation with continued support for standards and partnered solutions. While Gerstner was the right CEO for IBM in the 1990s, Palmisano appears to be the right CEO to take IBM through the decade ahead.

(For a commentary on what IBM is doing with Linux, see Gartner.com.)

Entire contents, Copyright © 2002 Gartner, Inc. All rights reserved. The information contained herein represents Gartner's initial commentary and analysis and has been obtained from sources believed to be reliable. Positions taken are subject to change as more information becomes available and further analysis is undertaken. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of the information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof.