Last week, IBM announced a few significant leadership changes that put a lot of things in play. First, is IBM’s sheer leadership challenge as it pertains to culture. Second, is the impact to customers including existing IBM customers, Red Hat customers and potential net-new customers. And third, if IBM could potentially regain a significant position as a technology innovation leader.
IBM announced that Ginni Rometty, CEO, will step down in April 2020. She will remain in the Chairman role until her retirement at the end of the year. Rometty is a long-time IBM employee and will celebrate 40-years with the company when she retires at the end of the year.
At the same time, the company announced that Arvind Krishna would take over the CEO role in April. Krishna is also a long-time employee of the company that has spent time in IBM’s Research group and most recently leading their Cloud and Cognitive Software organization.
While many will celebrate the leadership Rometty brought to IBM, privately, many questioned how a CEO in such a prominent organization could survive 22 consecutive quarters of declining revenue. That fact may have influenced decisions the board made in their next leadership move. IBM has been known to play a very long game and their leadership decisions fit into that strategy.
The Red Hat Impact
One of those leadership options came with the $34 billion acquisition of Red Hat in 2019. It is widely believed that IBM overpaid for Red Hat. There are a lot of great things that Red Hat brings to IBM. However, it got two particularly interesting things as part of the deal: 1) A potential CEO-in-waiting. 2) A fresh culture that understands enterprise and could positively influence IBM through a more modern approach.
For Red Hat customers, the IBM acquisition gave many a moment of pause as they fully understood the public persona of IBM compared with Red Hat. It was also unclear what role their CEO would have in the IBM leadership team long-term. We are now starting to see how this is playing out.
The Leadership Chess Game
There was talk that Red Hat CEO Jim Whitehurst could be the next CEO for IBM. But that was a bridge too far for IBM and would have created too much of a shock to the IBM culture and their existing customers. Today, IBM relies heavily on their existing customer base.
Moving Krishna into the CEO role to succeed Rometty while moving Whitehurst into the President role makes a lot of sense. It elevates Whitehurst’s status within the executive team and provides a vehicle for him to influence the team while exposing him to the IBM culture from the top down.
The move for Krishna to CEO appeases long-time IBM customers that are used to a long game with little upheaval. Krishna has been with the company for almost 30 years and knows the IBM culture well. But he also comes from an area of innovation and research for IBM.
Mapping IBM Technology Strategy
Putting the leader of cloud and cognitive software in charge as CEO signals a marked change for IBM’s strategy as these two areas are significant potential growth areas. Similarly, the industry saw this model play out once before with wildly successful outcomes when the leader of a cloud group was installed as CEO. That company was Microsoft and their CEO Satya Nadella. Could Krishna take a page out of Nadella’s book?
IBM’s core is their enterprise business. Cloud and data services are at the forefront of innovation with their impact to enterprise customers huge. It is no mystery that IBM would love to regain footing as a leading innovator in this space. They made a significant splash several years ago with SoftLayer and Watson. Since then, both have fallen into the background. The same goes with IBM’s cloud business. Krishna may be the right leader to turn that around and make those gems shine.
Impact to Customers
Times are changing and so are customers. IBM cannot rely only on their existing base of customers for growth. They need to re-establish themselves as an innovative leader in the broader market. Cloud and cognitive would be two great places for them to start. Bring Red Hat into the mix and IBM has some powerful ingredients.
But how will this play out for customers? For existing customers, they will likely continue their close partnership with IBM. They have challenges with cloud and data just like every other enterprise on the planet.
For enterprises that are not IBM customers, they have similar needs. But they also need to know that their industry partner is able to deliver innovation that helps drive their business.
The opportunity is that IBM could play a significant role in leading the enterprise with both cloud and data. Sprinkle in Red Hat and the outcome could be spectacular.
What to Watch For
In the second half of 2020, Krishna will need to demonstrate his plan that charts a new path for IBM and includes Red Hat. Look for cloud and data services to play central roles. It would not be surprising to see a renewed interest in spinning up the IBM research machine once again. Further afield, look for Whitehurst to become more involved in IBM’s long-term strategy both culturally and technology-wise.
There is a lot at stake for IBM, their customer and shareholders. The recent leadership changes signal a potential change in the winds that could be very favorable. At the same time, Microsoft, Amazon, Google, Oracle and SAP all want to be at the top. There is a lot of opportunity for all involved.
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