29
Fri, Nov
0 New Articles

Out of the Blue: New CEO at IBM

Commentary
Typography
  • Smaller Small Medium Big Bigger
  • Default Helvetica Segoe Georgia Times

The final Jeopardy answer is: "Crackers!" If your question was, "What will IBM be serving at its next board meeting?" you're a winner. With the announcement of Louis V. Gerstner Jr., formerly chairman of RJR Nabisco Holdings Corporation, as the Akers replacement and new chief executive of IBM, the age of the Triscuit dawns over Armonk.

IBM's three-month search for a CEO was conducted with military secrecy, complete with code names for the candidates. Gerstner was dubbed Able, a wishful projection, perhaps, and an indication that IBM's board has a scant sense of humor since Baker is clearly the consummate handle for someone from Nabisco.

One hundred twenty-five candidates were supposedly considered, in what the Wall Street Journal (WSJ) called "the biggest corporate beauty contest ever." The volume of candidates may reflect the difficulty IBM had in finding a successor. Early in the search process, to the embarrassment of the board, the heads of Apple, Motorola, NCR, Allied-Signal and HP publicly withdrew their names from consideration. Newsweek remarked: "In happier days it would have been one of the crown jewels of American business. But by the time IBM named a successor to chairman John Akers, the question was not who would get the job of running the embattled company but who would take it."

But IBM insists that there was only one offer and Gerstner was its man. The board certainly made it worth Gerstner's while with a base salary of $2 million, incentive bonuses for this year totaling $1.5 million more, and a $5 million signing bonus compensating Gerstner for stock options and other benefits he abandoned at Nabisco.

But the board wasn't through yet. With a munificence reminiscent of a Ginzu knife commercial (if you call now), Gerstner will also receive options to buy 500,000 shares of IBM stock, and another $500,000 in bonus pay in three years if he reaches some undisclosed goals. Deemed "an unfortunate juxtaposition" in the WSJ, IBM employees in the Hudson valley were being given their walking papers while this princely compensation package was announced.

Still, Gerstner brings some impressive credentials and at least one glaring deficiency. On the plus side, if you look up the word "manager" in the dictionary, you may find Gerstner's picture. He was a whiz kid at the management consulting firm of McKinsey & Co. where he became the youngest partner at 27 and was instrumental in overhauling the bankrupt Penn Central. In 1978, he moved to American Express where he restructured the credit-card business and assumed the presidency in just eight years. Finally, in 1989 he was hired as CEO of troubled Nabisco. Gerstner recalls, "I came on board a $17 billion company where, in effect, there were no rules anymore." Not a problem plaguing IBM. "Instinctively, and maybe even dangerously, I imposed my view of how a modern corporation should be run." That included bringing in a new executive team, slashing costs, selling off $6 billion in assets, and cutting the company's debt in half.

Regardless, the WSJ called Gerstner's appointment "an audacious gamble" primarily because, as you have no doubt noted, Gerstner has no background in computing. The WSJ concluded: "The selection of the 50-year-old Mr. Gerstner [culminates] the most high-stakes contest in corporate history with a controversial choice. IBM, suffering desperately from misreading breakneck changes in high technology, [is] handing its future to an executive with superb management credentials but no computer-industry experience."

Thus, the first outsider in IBM's history to assume the chairman's mantle inherits a business of acro-nymic complexity with which he has scant familiarity. But the hiring of a generalist as opposed to an industry visionary tells us where IBM's board thought the problems were: squarely in management's court.

One could safely assume that, ideally, the board hoped to find a CEO with some combination of management ability, technical skill, and vision. Failing to find all three presents some decided challenges, not the least of which is how an industry outsider can stay ahead of a highly technical, immensely specialized, and constantly mutating industry.

People who are primarily managers believe they can apply the same basic set of business principles to any enterprise and make it profitable. One-size-fits- all. But unless Gerstner finds the vision that can transform the IBM Saint Bernard back into a greyhound, the company may end up fiscally stable but flat and uninspired. Moving IBM into the twenty-first century will be difficult without an almost cellular connection to the computer industry.

IBM apparently felt uneasy enough about the announcement to ignore its own army of in-house PR people and hire a public relations firm, Burson- Marsteller, to orchestrate the event in a Manhattan ballroom. John Akers was reportedly sullen, and Gerstner seemed eager to get on with it. He declared that he had no turn-around strategy in mind, but added: "If we're going to err, we're going to err in the direction of moving too fast. We don't have the luxury to sort of sit around and study the problem."

And which way is IBM likely to move? The WSJ predicts: more cuts(!?), sharpening financial controls, and a shakeup of the entrenched IBM culture. If this sounds a lot like the Akers plan, well, it is. "There are few obvious actions a new CEO can take that haven't already been taken," an industry analyst observed.

Great. So where does that leave Gerstner? During the last year, a who's who of ailing corporations have searched for new leadership. At a time when there appears to be a crisis of command in American industry (the same six or seven guys are mentioned for every chairmanship), turning IBM around would be the stuff of pin-stripe legend; the second coming of The Iacocca.

In retrospect, the outgoing generation of industrial leaders often functioned as caretakers, inheriting corporations from the people who built them. The rapid demise of so many major enterprises (Sears, GM, Boeing, the airlines, IBM) suggests that men at the helm could sail their corporate vessels in calmer waters, but were unable to negotiate the tough seas of change. Gerstner will have the opportunity to chart his own course, to prove the skeptics wrong, to be a hero. A hero perhaps, but certainly not an altruist. While IBM's financial future may be in doubt, Gerstner's is secure.

So, how did investors react to the Gerstner appointment? They trashed IBM's stock, knocking another 6 percent off its market value. But as an unnamed source close to the board observed: "He may be the best they could get."

Victor Rozek has 17 years of experience in the data processing industry, including seven years with IBM in the Operations Management and Systems Engineering areas.

What We Meant Was...

Perhaps you thought we were testing you with an April Fool's joke in "Out of the Blue". The sentence stating "...a half million new pages of AS/400 technical information are produced each minute" is incorrect. The half million pages estimate refers to all technical information.

BLOG COMMENTS POWERED BY DISQUS

LATEST COMMENTS

Support MC Press Online

$

Book Reviews

Resource Center

  • SB Profound WC 5536 Have you been wondering about Node.js? Our free Node.js Webinar Series takes you from total beginner to creating a fully-functional IBM i Node.js business application. You can find Part 1 here. In Part 2 of our free Node.js Webinar Series, Brian May teaches you the different tooling options available for writing code, debugging, and using Git for version control. Brian will briefly discuss the different tools available, and demonstrate his preferred setup for Node development on IBM i or any platform. Attend this webinar to learn:

  • SB Profound WP 5539More than ever, there is a demand for IT to deliver innovation. Your IBM i has been an essential part of your business operations for years. However, your organization may struggle to maintain the current system and implement new projects. The thousands of customers we've worked with and surveyed state that expectations regarding the digital footprint and vision of the company are not aligned with the current IT environment.

  • SB HelpSystems ROBOT Generic IBM announced the E1080 servers using the latest Power10 processor in September 2021. The most powerful processor from IBM to date, Power10 is designed to handle the demands of doing business in today’s high-tech atmosphere, including running cloud applications, supporting big data, and managing AI workloads. But what does Power10 mean for your data center? In this recorded webinar, IBMers Dan Sundt and Dylan Boday join IBM Power Champion Tom Huntington for a discussion on why Power10 technology is the right strategic investment if you run IBM i, AIX, or Linux. In this action-packed hour, Tom will share trends from the IBM i and AIX user communities while Dan and Dylan dive into the tech specs for key hardware, including:

  • Magic MarkTRY the one package that solves all your document design and printing challenges on all your platforms. Produce bar code labels, electronic forms, ad hoc reports, and RFID tags – without programming! MarkMagic is the only document design and print solution that combines report writing, WYSIWYG label and forms design, and conditional printing in one integrated product. Make sure your data survives when catastrophe hits. Request your trial now!  Request Now.

  • SB HelpSystems ROBOT GenericForms of ransomware has been around for over 30 years, and with more and more organizations suffering attacks each year, it continues to endure. What has made ransomware such a durable threat and what is the best way to combat it? In order to prevent ransomware, organizations must first understand how it works.

  • SB HelpSystems ROBOT GenericIT security is a top priority for businesses around the world, but most IBM i pros don’t know where to begin—and most cybersecurity experts don’t know IBM i. In this session, Robin Tatam explores the business impact of lax IBM i security, the top vulnerabilities putting IBM i at risk, and the steps you can take to protect your organization. If you’re looking to avoid unexpected downtime or corrupted data, you don’t want to miss this session.

  • SB HelpSystems ROBOT GenericCan you trust all of your users all of the time? A typical end user receives 16 malicious emails each month, but only 17 percent of these phishing campaigns are reported to IT. Once an attack is underway, most organizations won’t discover the breach until six months later. A staggering amount of damage can occur in that time. Despite these risks, 93 percent of organizations are leaving their IBM i systems vulnerable to cybercrime. In this on-demand webinar, IBM i security experts Robin Tatam and Sandi Moore will reveal:

  • FORTRA Disaster protection is vital to every business. Yet, it often consists of patched together procedures that are prone to error. From automatic backups to data encryption to media management, Robot automates the routine (yet often complex) tasks of iSeries backup and recovery, saving you time and money and making the process safer and more reliable. Automate your backups with the Robot Backup and Recovery Solution. Key features include:

  • FORTRAManaging messages on your IBM i can be more than a full-time job if you have to do it manually. Messages need a response and resources must be monitored—often over multiple systems and across platforms. How can you be sure you won’t miss important system events? Automate your message center with the Robot Message Management Solution. Key features include:

  • FORTRAThe thought of printing, distributing, and storing iSeries reports manually may reduce you to tears. Paper and labor costs associated with report generation can spiral out of control. Mountains of paper threaten to swamp your files. Robot automates report bursting, distribution, bundling, and archiving, and offers secure, selective online report viewing. Manage your reports with the Robot Report Management Solution. Key features include:

  • FORTRAFor over 30 years, Robot has been a leader in systems management for IBM i. With batch job creation and scheduling at its core, the Robot Job Scheduling Solution reduces the opportunity for human error and helps you maintain service levels, automating even the biggest, most complex runbooks. Manage your job schedule with the Robot Job Scheduling Solution. Key features include:

  • LANSA Business users want new applications now. Market and regulatory pressures require faster application updates and delivery into production. Your IBM i developers may be approaching retirement, and you see no sure way to fill their positions with experienced developers. In addition, you may be caught between maintaining your existing applications and the uncertainty of moving to something new.

  • LANSAWhen it comes to creating your business applications, there are hundreds of coding platforms and programming languages to choose from. These options range from very complex traditional programming languages to Low-Code platforms where sometimes no traditional coding experience is needed. Download our whitepaper, The Power of Writing Code in a Low-Code Solution, and:

  • LANSASupply Chain is becoming increasingly complex and unpredictable. From raw materials for manufacturing to food supply chains, the journey from source to production to delivery to consumers is marred with inefficiencies, manual processes, shortages, recalls, counterfeits, and scandals. In this webinar, we discuss how:

  • The MC Resource Centers bring you the widest selection of white papers, trial software, and on-demand webcasts for you to choose from. >> Review the list of White Papers, Trial Software or On-Demand Webcast at the MC Press Resource Center. >> Add the items to yru Cart and complet he checkout process and submit

  • Profound Logic Have you been wondering about Node.js? Our free Node.js Webinar Series takes you from total beginner to creating a fully-functional IBM i Node.js business application.

  • SB Profound WC 5536Join us for this hour-long webcast that will explore:

  • Fortra IT managers hoping to find new IBM i talent are discovering that the pool of experienced RPG programmers and operators or administrators with intimate knowledge of the operating system and the applications that run on it is small. This begs the question: How will you manage the platform that supports such a big part of your business? This guide offers strategies and software suggestions to help you plan IT staffing and resources and smooth the transition after your AS/400 talent retires. Read on to learn: