Major Changes Ordered in IBM’s Organization : Computers: Independent software developers praise the restructuring. Two key executives are forced out.
After 18 months devoted to stanching a financial hemorrhaging, International Business Machines Corp. Chairman Louis V. Gerstner Jr. has begun taking steps aimed at getting the patient up and walking again.
In a sweeping reorganization, Gerstner on Monday merged the computer maker’s fragmented sales and marketing operations into a single organization and created a new division with responsibility for all software operations.
Two powerful executives were pushed aside and will leave the company, and some said the shake-up indicates that IBM is finally allocating jobs on merit rather than corporate political imperatives. But other analysts were disappointed that Gerstner did not reach outside the company for new managerial blood.
IBM’s sales force has traditionally been considered one of the company’s crown jewels, and the powerful regional sales operations will now be consolidated into a single global unit. The group will be headed by Ned Lautenbach, a longtime IBM executive who is coming off a successful year as head of the international sales division.
The main casualty of the move was another IBM veteran, Robert LaBant, who was U.S. sales chief and had once been considered a candidate for the top job at IBM.
In software, where IBM has been badly embarrassed by one-time business partner Microsoft Corp., Gerstner has moved a number of disparate software development groups into a single organization headed by marketing ace John Thompson.
IBM sold $11.5 billion worth of software last year--dwarfing even Microsoft--but very little of that revenue has come from the fast-growing personal computer sector. Sources say IBM has spent $2 billion on its OS/2 PC operating system software, but that product has been trounced in the marketplace by Microsoft’s enormously popular Windows program.
The reorganization was praised by independent software developers, who write the applications that make an operating system useful and thus are key to any operating system’s success.
“This is long overdue,” said one developer, who requested anonymity.
IBM’s software business had been combined with its networking products in a division overseen by Senior Vice President Ellen M. Hancock, the highest-ranking woman at IBM. Sources close to IBM said Hancock wanted to take over the new software unit but was beaten out by Thompson and that she chose to resign. Hancock began her career as a programmer, while Thomson rose through the sales and marketing organization.
Gerstner raised some eyebrows by giving the key jobs to IBM veterans. “Gerstner apparently decided there was some talent within IBM,” said Sam Albert, a consultant and IBM alumnus. In a company where “fast-trackers” were often promoted within 18 months--often before they could be evaluated on how well they had performed at the last job--judging talent can be difficult.
Lautenbach, for example, is widely considered to have failed at an important job he held in the late 1980s: head of IBM’s application software division, where he was charged with creating software for specific industries. Said one source close to IBM: “Lautenbach has been great at figuring out the political landscape. He’s not one to go left if the higher-ups want to go right.”
Even with a super-software organization, though, it seems unlikely that IBM will be able to catch up with Windows.
“We did some early work with OS/2,” said Ronan McGrath, vice president of information systems and accounting for Canadian National Railway in Montreal. “What we look for is developer support, and when you ask developers what they’re creating software for, the answer is overwhelmingly Windows.”
