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New IBM CEO Rometty Faces Treacherous Cloud Computing Services Transformation

New IBM CEO Ginni Rometty faces the tough task of moving the $100 billion company from traditional outsourcing to low-priced cloud computing services.

Virginia "Ginni" Rometty, who will take the IBM CEO reins effective January 1, faces the tough task of transitioning IBM's $100 billion business into the cloud computing services era.

That was the assessment of top solution provider executives and industry analysts attending the BoB (Best of Breed) conference aimed at setting new business models for channel partners in a rapidly changing cloud computing services market.

Rometty faces the Herculean task of moving IBM from a traditional outsourcing services model to an operating expense-based cloud computing services model where "price points are vastly below what they are today for [traditional] outsourcing," said David Tapper, vice president of outsourcing and offshore services for IDC, a market researcher headquartered in Framingham, Mass.

The challenges Rometty faces are every bit as treacherous as the ones IBM faced as it transitioned from the mainframe computing era to the PC era, said Tapper.

"Systems integration technology consulting is becoming more embedded in delivery of operations through a SaaS (Software-as-a-Service) model so customers may not need as much system integration services anymore and IBM has a very big systems integration technology consulting service," he said. "IBM is dealing with a huge set of challenges."

Rometty, a 30-year IBM veteran who succeeds current IBM CEO Sam Palmisano, who will remain as chairman, probably has a five- to seven-year window to make significant changes to transition IBM into the cloud computing services era, said Tapper.

"She has got ramp up time, but at the end of the day, she has to tackle these issues head on," said Tapper. "My belief is IBM has to build a distinct business unit like a cloud unit that pulls it altogether and moves the old business model to the new business model."

Tiffani Bova, vice president of research focusing on IT marketing and channel strategies at Gartner, a market research firm headquartered in Stamford, Conn., said Rometty's current role as senior vice president and group executive for sales, marketing and strategy gives her an edge in helping bring IBM into the cloud computing services era.

Next: Rometty Must Define IBM's Cloud Computing Services Strategy


"She really understands how IBM's services and solutions around cloud, [IBM] CloudBurst [a family of preintegrated IBM service delivery platforms for cloud computing], Smarter Planet and business intelligence all need to weave together," said Bova. "It will be great to have a CEO who is market-driven and sales and marketing driven rather than technology driven. Coming out of sales and marketing is really helpful when you look at businesses that have been successful over time."

Bova said Rometty's appointment makes her the 17th Fortune 500 female CEO. "Out of 500, we don't have many," said Bova. "She joins a very elite group of woman at Xerox and HP now. Women and channel now have one more example with hard work and lots of time, energy and efforts directed the right way you can achieve great goals."

Christian Schilling, director of business development for SoftClouds, a San Diego, Calif. cloud CRM services provider who partners with companies such as Salesforce.com and Oracle, said Rometty must do a better job of defining IBM's cloud computing services strategy. "IBM needs to truly define what cloud means to IBM and what is their offering," he said.

Tony Jimenez, founder, president and CEO of MicroTech, Vienna, Va., No. 67 on the VAR500, said Rometty also faces the prospect of tougher competition from competitors like Hewlett Packard and Dell.

"Everyone looks at IBM as being cutting edge and cream of the crop and now a lot of their competitors are starting to look a heckuva lot like them," he said. "Dell and HP are starting to look a little bit more like IBM where they have got a services component to go with the products and solutions. IBM is going to have to continue to be cutting edge and looking around for partners that can take them to the next level."

Chris Gerhardt, the president of Denali Advanced Integration, one of the top solution providers in the country headquartered in Redmond, Wash., praised the appointment of Rometty. "It's a good decision," he said of Rometty's appointment.

Gerhardt sees IBM playing an increasingly strategic role in the cloud computing services era because of its deep legacy in centralized mainframe computing. "IBM is a sleeper [in the cloud market]," he said. "IBM has the software for managing cloud given their legacy in centralized management of mainframe computing platforms."

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