He'll need the big stick. One of his challenges will be keeping IBM's collection of independent businesses in line; they're a cohesive unit today, but a power vacuum could lead to rapid balkanization. "Lou casts a very big shadow," Ranadive says. "It will be very, very hard for some period of time to step in and do something different."
Some course corrections are going to be necessary, however. The zSeries launch sparked the best mainframe sales performance since 1998, but mainframe revenue still was down 12 percent in 2000 as the market slumped. Similarly, IBM's Unix servers have improved, but they have yet to occupy the hearts and minds of technology buyers the way Sun's do. In fact, Sun VP Shahim Kahn claims his top-of-the-line Starfire computers have displaced 50 IBM mainframes over the past 12 months.
Competitors charge that the company's supermarket approach can be a drawback to many potential clients. IBM tries to be "all things to all people," says Sun VP George Paolini, and this confuses customers and slows innovation. "I make a joke that they never met an operating system they didn't like, and they adopt them all," he says.
IBM's PC business is also struggling to maintain profitability after scaling back operations in 1999, and the company's new Shark storage gear has yet to measure up to offerings from market leader EMC.
Critics have also attacked IBM's accounting. The company decreased contributions to its pension plan, in effect boosting earnings, raising concerns that the plan may someday be underfunded. IBM has repeatedly defended its accounting methods.
The company's transformation hasn't come easily. It has, in fact, been hard work - the roll-up-your-sleeves, nose-to-the-grindstone, pencil-to-the-paper kind of work that a turnaround specialist like Gerstner understands and preaches.
When Gerstner talks of the company's due reward for its efforts, he gets positively visionary. There's been a dramatic change in industry leadership, he says. The era of the PC - and of Intel and Microsoft - is giving way to a networked world and a new high-tech leader. IBM, he says, is back on top.
Give the guy his due, but you don't have to look further than the history of Big Blue itself to know that success can be fleeting in high tech, where a company can quickly fall victim to the merciless whims of the marketplace.
A smooth management succession is a must if IBM wants to retain its new title as the leading implementer of cutting-edge technology. Palmisano will have to consolidate his position inside the company and spend more time on the road - after all, the one thing Fortune 1000 executives like more than saving money is pressing the flesh. And he'll have to make the 1,001 judgment calls that make or break a company.
If he's Gerstner's kind of man, then Palmisano's a get-it-done guy. And if the boss has picked right, he's also a guy who understands that the hard work of technology never ends.
