A New Captain at the Helm of IBM

by Brenda J. Christie

In his January 31, 2020 article, "IBM Follows Microsoft Best Practice with New CEO", Bob Enderle gives a rather brutal assessment of IBM's prior CEOs.  To his credit, there is merit in his statement that a technology company needs a CEO with both a technical background and an ability to have and execute a strategic vision of where the company needs to go.  Although he alludes to the turbulent, often dire conditions under which a CEO takes the position, that aspect seems downplayed in this writer's opinion.  The occasion for Bob Enderle's article was the announcement of Ginni Rometty's retirement from IBM.

Challenging Times

For example, the article does point out that the IBM Ginni Rometty inherited had been decimated by cost-cutting moves perpetrated by her predecessor, Sam Palmisano, but then faults her for not having a vision.  Probably the largest challenge Ms. Rometty faced in 2012 as she took over as CEO was the changing landscape of computing.  That landscape largely included movement to cloud computing and away from the mainframe.  With cloud computing, companies no longer needed costly investments in mainframe and related infrastructure.  Instead, companies could hand over the maintenance of hardware and software updates and related human-resource cost to an external company.  Companies could reduce their expenses by outsourcing to a Cloud Service Provider, as well as improve their ability to react to changes in the market more quickly.

Quite frankly, I am amazed that IBM did not have a larger footprint in cloud computing by 2012.  As early as the late 1990's they had already incorporated Java into its core application software, COBOL, indicating an acknowledgement of the existence of and need for connectivity outside its own mainframe environment.  That they had not by 2012 may be symptomatic of what Bob Enderle refers to as "siloed."

The New York Times January 30, 2020 article, "Ginni Rometty to Step Down as CEO of IBM", writes "Wall Street analysts who were often critical of IBM's performance during her leadership acknowledged that she had inherited key challenges."  In spite of, or perhaps concurrent with those challenges, in 2019 IBM purchased Red Hat at a cost of $34 billion.  Red Hat distributes the popular open-source operating system, Linux, which is used in enterprise desktops, supercomputers, phones, thermostats, refrigerators and more.  Red Hat is also used when migrating to the Cloud.  From a licensing revenue perspective, this looks like a good move given the trend to move to the Cloud.

Did IBM's Gamble Pay Off?

With IBM reporting a strong Q4 2019 earnings, Ms. Rometty leaves IBM in a much stronger position than the one she inherited.  Its Cloud and Cognitive Software segment, of which Red Hat is a part, contributed $7.24 billion in revenue during the 4th quarter of 2019.  IBM is better positioned to benefit from $411 billion Cloud Industry market than when Ms. Rometty became CEO.

In summary, I would say Ms. Rometty attained her vision of steering IBM in the direction it needs to take.  She turns the helm of IBM over to Arvind Krishna as CEO in April of 2020.  Perhaps Bob Enderle's brutal assessment is correct when he points out the flaws in the choice of CEO IBM has made in the past.  Ginni Rometty spent much of her 40 years in sales, despite having a background in computer science.  Her successor, Arvind Krishna holds a Ph.D in Electrical Engineering and has held several research and business management roles since arriving at IBM in 1990.  Not quite a 'technologist' in this writer's mind, but he is the Chosen One.