IBM's Rometty to Take Big Blue Into Next 100 Years as New CEO

By Channel Insider Staff  |  Print this article Print

IBM names Virginia "Ginni" Rometty as president and CEO of IBM to succeed Sam Palmisano, who remains onboard as chairman. Palmisano has displayed his legacy. What will Rometty's be?

Virginia "Ginni" Rometty taking the helm of IBM is no surprise.

IBM held out that there were three to four front runners for the position, but Rometty was the clear leader. In fact, at IBM's recent THINK Forum in New York, Sam Palmisano, IBM's outgoing president and CEO, practically thrust Rometty on the scene as his successor, playing her up and playfully chiding her about a $300 million deal she completed without any input from him.

Effective Jan. 1, 2012, Rometty becomes the boss at IBM. Palmisano will remain in office as chairman of the company's board of directors. But the day-to-day decisions move on to Rometty.

Rometty, who also held a prominent position in IBM's internal Centennial celebration to commemorate its 100 years in business, represents a major step in the history of IBM, in that she is the first woman to lead the company. IBM has a history of switching CEOs out after they turn 60. Palmisano is 60 and has ceded the president and CEO roles to Rometty while retaining the chairmanship.

Palmisano has been hugely successful at IBM. Known for his execution, he initially executed on many of the ideas put forth by former IBM CEO Lou Gerstner, and then he set his own path and began to execute on it.

Palmisano reflects on IBM's first 100 years. Read more here.

Palmisano has seen IBM through times of adversity, such as economic slumps and layoffs. Yet the company is currently the second most valuable technology company behind Apple, beating out rival Microsoft for that position.

Palmisano's insistence on focusing on higher margin technologies and investing in initiatives such as growth markets, Smarter Planet, cloud computing and analytics have paid off.

Palmisano also committed to preserving the notion of an IBMer. He even revisited that notion and came up with a series of new values for the company and the IBMer: "dedication to every client's success; innovation that matters for our company and for the world; and trust and personal responsibility in all relationships."

What remains to be seen is what mark Rometty will put on the company.


Industry analyst Rob Enderle said, "What is interesting is that many of us thought Steve Mills was positioned and the heir apparent. Rometty is actually a better choice because she has moved around the corporation more and therefore has a greater breadth of knowledge on IBM's various businesses. She'd be weakest on software but Mills remains as her lieutenant and his is one of the most stable and well-managed groups. Her choice was consistent with the century-long strategy of putting people in the job with the strongest breadth and therefore the best chance to do it well."

Charles King, an analyst with Pund-IT, said, "Her immediate challenges will be to keep executing on the strategy currently in place (not always as easy as it sounds in a $100B company), and to prepare IBM, its customers and partners for evolutionary market and IT changes ahead. She's taking on the CEO responsibilities at a time when many of IBM's biggest competitors (HP and Oracle, particularly) are either in some disarray or transitioning to new business models. That should provide some breathing room in the short term, but you can't expect them to be fumble-footed for long.

"IBM follows a far more structured and sustainable path in training its executives for higher position, including president and CEO," King added. "Rometty worked in roles and business units across the company, and has deep insight and responsibilities related to virtually every major IBM strategic effort of the past decade or more. Along with being a terrific choice to replace Sam Palmisano, Rometty is a great example of IBM's managerial excellence and the company's deep executive bench."

Long known for its bench, IBM has had a tradition of rotating top executives into and out of different positions in the various company business units to immerse them in the company.

mospagebreak title=Rometty's Resume  

As global sales leader for IBM, Rometty, 54, has been accountable for revenue, profit and client satisfaction in the 170 global markets in which IBM does business. She is responsible for IBM's worldwide results, which exceeded $99 billion in 2010. She also is responsible for leading IBM's global strategy, marketing and communications functions. Previously, Rometty was senior vice president of IBM Global Business Services. In that role, she led the successful integration of PricewaterhouseCoopers Consulting the largest acquisition in professional services history, building a global team of more than 100,000 business consultants and services experts. She has also served as general manager of IBM Global Services, Americas, and of IBM's Global Insurance and Financial Services Sector.

Judith Hurwitz, an industry analyst who has watched IBM for a long time, said: "Ginny is a sophisticated executive who has managed strategy, sales, and consulting services for IBM for a number of years. She is the best choice in terms of her ability to continue Palmisano's directions with software, solutions, strategy. I think that she is a superb operational executive as well. The continuity is important. IBM is on the right path for the future, and Ginny will continue this direction."

Comparing Apple's situation with Steve Jobs and IBM's, King said:

"Apple was incredibly dependent on Steve Jobs, who made himself indispensable, and his executive office was made up of a team of people who together covered the critical skill set. He actually worked against training a replacement because he was afraid of being prematurely replaced, so Apple is now left with a huge hole where Jobs used to be. IBM, on the other hand, begins grooming executives early for the CEO slot and actively assuring they are trained to take it. Those that are good at breadth, which isn't often common, and are sequentially successful and demonstrate an ability to build consensus rise to the top. It is a rigorous process, and it includes detailed training from recognized leaders in various disciplines in a variety of industries for breadth. The combination of experience and very unique training builds an executive with the capabilities and tested skills to run a company like IBM. While this doesn't assure success, the CEO job is unique, it makes it very likely and over a century IBM has generally proven the process works."


View Palmisano's top 15 moves here.

Since Palmisano became CEO, IBM has set records in pretax earnings, earnings per share and free cash flow. During Palmisano's tenure, IBM increased EPS by almost five times, generated over $100 billion in free cash flow, and invested more than $50 billion in research and development creating over $100 billion of shareholder value since 2002 through an increase in market capitalization and dividends paid.


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