Palmisano Has ‘Big Blue’ Shoes To Fill


In being named the next CEO of IBM, president Samuel J. Palmisano is finally staking claim to a throne that industry watchers have had him pegged for since 2000, running what is arguably the most successful high-tech corporation of all time.

But one thing is abundantly clear: The 29-year IBM veteran has some big shoes to fill.

IBM's board of directors on Tuesday elected Palmisano CEO, effective March 1. He will replace Louis V. Gerstner, who will retire on his 60th birthday (also March 1) and remain IBM chairman through the end of 2002.

It can be argued that no CEO in the high-tech industry has had as big an impact on their company's performance over the last 10 years than Lou Gerstner, the man considered to be responsible for IBM's transition into an IT solutions powerhouse.

Gerstner is widely credited for bringing IBM back from the edge of oblivion, transforming a struggling hardware manufacturer in the early 1990s into today's largest enterprise IT solution provider. (Since Gerstner's arrival to IBM in 1993, the company's stock price has increased by more than 800 percent, and its market value has grown by $180 billion.)

But for all of Gerstner's accomplishments, few can dismiss the role Palmisano played in that transition as well.

For one, Palmisano led IBM's mammoth IBM Global Services consulting and IT solutions division, which today employs more than 135,000 people and brings in close to $35 billion in revenue a year and remains one of the company's bright spots when it comes to financial performance. Under his watch, IBM Global Services grew its revenue by more than 30 percent, to just over $32 billion.

But beyond the numbers, the success of IBM Global Services can be seen in the fact that so many other technology manufacturers, including Hewlett-Packard and Compaq, have long eyed the operation as a model for how they want to grow their own services outfits. That services envy has become even more pronounced in recent years as tighter hardware margins and a Dell-led PC price war have put added pressure on technology manufacturers. While HP and Compaq have clearly been feeling the effects of that PC competition, IBM, for the most part, has been insulated because of its diverse portfolio of solutions.

Palmisano, 50, who has been with the company for almost three decades and held leadership positions in virtually all areas of IBM's business, has been considered the rightful heir to Gerstner's throne since July of 2000, when he was named Big Blue's president and COO. At that time, Gerstner spoke publicly about Palmisano's ascension as a company leader, basically paving the way for the transition.

In a statement Tuesday announcing the naming of Palmisano as new CEO, Gerstner credited his "mix of strategic vision, passion and discipline, combined with his intimate understanding of IBM" as the characteristics that make him the right executive to lead IBM.

Palmisano's career at IBM started in 1973 when he joined the company straight out of college as a sales representative in Baltimore. In addition to his IBM Global Services position, Palmisano held a number of senior leadership positions in Asia and spearheaded a three-year project to develop and launch IBM's eServer product line. As head of IBM's server and enterprise storage businesses, he oversaw the company's initiatives to embrace Linux across IBM's server line. Palmisano has also been a strong mouthpiece for Big Blue's billion-dollar-plus investment in the open-source operating system, and last year pledged to support solution providers to help them increase their expertise to make the most out of Linux-related opportunities.