Gerstner: IBM Will Never Be Services-Only Entity

"I don't believe IBM should be or ever will be purely a services company," Gerstner said in a question-and-answer session at Harvard University's John F. Kennedy School of Government.

IBM Global Services is often a bone of contention for third-party integrators and other partners who work with IBM technology but see the huge IBM services arm as a competitive threat. And software rival Microsoft is quick to point out that potential conflict, especially as IBM launches an aggressive channel-led push into the SMB market.

The consulting issue is even more pertinent now that the computing giant is diverting $1 billion of its technology R and D budget to research targeted at consulting and services.

Gerstner, questioned on stage by David Gergen, political advisor to Presidents Bill Clinton and Ronald Reagan, covered a wide range of topics in what was part of a publicity tour for his book, "Who Says Elephants Can't Dance?"

Taking the reins of a staggering IBM in April 1993, Gerstner's key decision was to reverse his predecessor's course and keep the company intact. One major benefit of that move was the continued existence of the company's widely envied research division.

Had IBM been broken up, Gertsner said, "IBM Research would have disappeared. Which little IBM [faction would fund that $6 billion" effort? IBM fields more Nobel laureates than many countries, he said.

Gerstner's bet was validated by the Internet boom of the mid-1990s. "[Our goal was we would be the company that integrated technologies together for customers instead of throwing stuff over the wall. We not only would create technology but implement it," he said.

As has been widely recounted, Gerstner had to convince some IBMers they'd already lost the PC war and that it was time to move on to a new field where the company could lead. The Internet became that field. IBM built itself a power base with its e-business push. The Web absolutely required that diverse remote systems running complex technology stacks work together.

Questioned on how to restore people's faith in corporate America in the wake of scandals, Gerstner said allegations in the Enron and Tyco cases, if true, are "absolutely shameful. ... To me, this is a breakdown of morality and ethics."

But he cautioned against ill-considered or hasty legislation. "We have a very very powerful and successful economic system in the United States. It's the envy of the world ... and it funds the support we give people. The problem is it gets a little crazy every now and then."

The question is whether regulations should be changed in a way that risks breaking the whole system, Gerstner said. The alternative is to target individual misbehavior, he added. "There are something like 14,000 public companies in the United States and about 14 or 15 really egregious cases," he said.

At which point one attendee muttered audibly: "That we know about."