By Carol Hymowitz

(Updates with Rometty’s background from fifth paragraph.)

 

Oct. 25 (Bloomberg) — International Business Machines Corp. said Virginia “Ginni” Rometty will succeed Sam Palmisano as chief executive officer, becoming the first female CEO in the company’s 100-year history.

Rometty, IBM’s head of sales and marketing, will take the president and CEO posts effective Jan. 1, the Armonk, New York- based company said in a statement today. Palmisano, who’s been CEO since 2002, will remain chairman.

Rometty, 54, takes the reins after IBM celebrated its centennial and as steady profit growth pushed the shares this year to the highest level since the company went public in 1915. Her experience in sales, services and acquisitions fits with the strategic direction set by Palmisano, who said last year the company will add $20 billion to revenue between 2010 and 2015 by expanding in markets such as cloud computing and analytics.

“She is more than a superb operational executive,” Palmisano said in the statement. “With every leadership role, she has strengthened our ability to integrate IBM’s capabilities for our clients.”

The 30-year IBM veteran caught Palmisano’s attention in 2002 when she helped integrate the $3.9 billion acquisition of PwC Consulting, IBM’s largest deal ever at the time.

Rometty, then a general manager of the consulting unit, is credited with helping to retain PwC’s principal consultants, who didn’t always mesh with IBM’s cost-cutting culture. When Palmisano wanted to cut travel budgets, making consultants stay at Holiday Inns, she helped them fight — and win, said Ric Andersen, a former PwC consultant who joined IBM with the acquisition.

Sales Promotion

Palmisano promoted her to senior vice president of the group in 2005, and she boosted profit at the unit 42 percent in her first two years on the job. During her three decades at IBM, she became known as a polished executive who can close a sale, expanding relationships with companies from State Farm Insurance Co. to Prudential Financial Inc.

“She’s an engaging woman — great with customers,” said Fred Amoroso, who was her boss in the financial-services consulting division during the 1990s. “Customers just love Ginni.”

Amid the recession, Palmisano put her in charge of running the company’s almost $100 billion in sales. Last year, she added marketing and strategy to her responsibilities.

 

 

Succeeding Palmisano would make IBM the largest company with a woman at the helm, surpassing PepsiCo Inc., headed by Indra Nooyi.

 

 

Palmisano turned 60 in July, the age at which three of the past four IBM chiefs have stepped down. He’s IBM’s longest- serving CEO who doesn’t share the surname of the company’s founder, Thomas J. Watson.

Vastly Different Business

He will leave a business vastly different than the one he took over. In his first year at the helm, he bought PwC Consulting, and two years later, he sold off the PC business. Those moves coupled with more than $25 billion in software acquisitions helped Palmisano realign what was once the largest computer company into a services and software powerhouse.

The maneuvers made the company predictably profitable, boosting per-share profit for more than 30 straight quarters. Since 2001, Palmisano’s boosted sales by 20 percent, while keeping costs of the 426,000-employee behemoth little changed.

Closest Rival

Rometty grew up in a Chicago suburb, the oldest of four children. In 1979, she got a degree in computer science and electrical engineering from Northwestern University and headed to an internship with General Motors in Detroit, where she met her husband, Mark. After her internship, she joined IBM. She now splits her time between homes in White Plains, New York, and Bonita Springs, Florida, where she and Mark are avid scuba divers.

This month at Fortune magazine’s Power Women Summit, Rometty said she learned shortly after beginning to work that she needed to take risks to advance.

“Really early, early in my career, I can remember being offered a big job,” she said. “Right away I said, ‘You know what? I’m not ready for this job.”

That night “as I’m telling my husband about this, he just looked at me and he said, ‘Do you think a man would have ever answered that question that way?” she said. “What that taught me was you have to be very confident even though you’re so self- critical inside. Growth and comfort do not coexist.”

Commencement Speech

In a commencement speech at her alma mater last year, she explained why she has stayed at IBM as she encouraged the graduating students to seek the largest challenges.

“You have the skills that can be applied to some of the world’s most significant challenges,” she said. “I know that is what has always drawn me to, and kept me at IBM. IBM’s long- standing mantra is ‘Think.’ What has always made IBM a fascinating and compelling place for me, is the passion of the company, and its people, to apply technology and scientific thinking to major societal issues.”

“Every day I get to “Think” and work on everything from digitizing electric grids so they can accommodate renewable energy and enable mass adoption of electric cars, helping major cities reduce congestion and pollution, to developing new micro- finance programs that help tiny businesses get started in markets such as Brazil, India, Africa,” she said. “After 30 years, I’m genuinely excited to get up and apply those problem- solving skills in ways I would never have imagined when I was sitting where you are.”

–Editors: Peter Elstrom, Ville Heiskanen

To contact the reporter on this story: Carol Hymowitz in New York at chymowitz1@bloomberg.net

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net.

 

 

By Timothy Prickett Morgan • Get more from this author

Posted in Business, 25th October 2011 21:58 GMT

Free whitepaper – King’s College LondonUses IBM BNTRackSwitch for HPC

The suspense over who is going to run Big Blue after Sam Palmisano retires has ended.

In fact, even before he retires, Ginni Rometty – a systems engineer who has worked her way up through the ranks since joining IBM three decades ago – has been named president and CEO, effective January 1, 2012.

Rometty, 54, currently runs IBM’s worldwide sales and marketing group. She was one of a handful of potential candidates to take over the president and CEO role as Palmisano started moving toward the door in the Armonk, New York former apple orchard where Big Blue is headquartered.

Steve Mills, who has run Software Group and now runs Systems and Technology Group, too, since these two groups were converged back in July 2010, was another choice. But he is 58, and therefore close to retirement himself. Mike Daniels, who now runs the converged Global Services behemoth (Rometty used to run a third of it before taking over sales and marketing), was also a contender, but he is 56.

It looks like IBM decided to leave Mills and Daniels running their groups and put the chief sales person in charge of running the day-to-day operations of the company.

 

Palmisano, who turned 60 this year, ran IBM’s PC, services, and server groups earlier in his career. He was named president and chief operating officer in July 2000, when Lou Gerstner – the outsider who saved Big Blue from itself – was getting close to the 60-year traditional retirement age. Gerstner gave up the CEO title to Palmisano in March 2002, and in January 2003 Palmisano took over the chairman role, as well, and Gerstner retired.

El Reg had been speculating back in June, when succession rumors at IBM were going around, that Palmisano might name a president or CEO and keep the chairman job until 2014 or 2015. But Palmisano’s letter to IBMers announcing Rometty as the new prez and CEO sure doesn’t make it sound like he plans on sticking around for another two or three years:

 

Dear IBMer,

I have exciting and important news to share with you.

The IBM Board of Directors has elected Ginni Rometty president and chief executive officer of IBM, and a member of the board, effective January 1, 2012.

Starting with the new year, Ginni is our leader. At the Board’s request, as well as Ginni’s, I will remain as chairman. My job will be to help her in whatever ways I can, wherever and whenever she seeks my time and counsel.

The time is right for this transition, given the success of our transformation over the past decade, the soundness of our strategy and the strong performance of our business. And Ginni is ready. Together with the board, we have worked closely to ensure a seamless leadership transition.

I don’t need to tell you that Ginni is an exceptional leader – a forward-thinker, passionate about our business, steeped in our values, and expert in the disciplines that are critical to our future success. Throughout her career – and especially as leader of Global Business Services and in her current role, Ginni has been a driving force behind the integration of the IBM company – from the integration of PricewaterhouseCoopers Consulting, to the integration of our solutions for clients, to the largest-scale integration of all, the global integration of IBM. She has spurred us to deepen our relationships with clients, bringing them unique expertise from IBM and greater knowledge of their businesses and industries. We see this not only in our near-term results, but also in the speed and agility with which we are executing our GMU strategy and other growth initiatives. These initiatives – from Smarter Planet and cloud computing to analytics, which Ginni identified as a growth area when she led GBS – are, of course, key to our 2015 roadmap.

Beyond that record of leadership, Ginni understands the character of our company at a deep and personal level. She knows it is unlike any other company in its capacity to change the world. She also knows that a company committed to moving to the future must never stop changing. She shares my belief that IBM is positioned for a second century even more remarkable than our first. I cannot think of a better leader to launch that journey than Ginni Rometty. I know you will give her all the support you have so generously provided me over many years.

As for me, ten years as CEO are plenty. I have always seen myself as the temporary steward of a great institution, and my goal has been to hand over to a future generation a better IBM than the one I entered. When I think about the privilege of spending my career here, with the remarkable women and men with whom it has been my honor to work – and to turn over the CEO role at the conclusion of our centennial – I feel like the luckiest guy in the world.

My charge to you, as fellow IBMers, is never to forget what this company is, what it can be, and what our world can be as a result. We have been at the heart of one of the most extraordinary eras of change in human history – and what lies ahead promises to be even more radical, and even more transformative. We have witnessed the emergence of a truly global economy and society. We have seen the flowering of a new age in science and technology. We have seen the dawn of an era in which intelligence is being infused into all the ways our planet works. And we have watched, and are helping, billions of people better their lot in life by entering the middle class and modernizing their nations.

People everywhere are living through this time, but very few are blessed with the chance to shape it. I have seen how important that is as I’ve traveled around the world this year, sharing perspectives on our centennial. I have learned from students in Beijing, venture capitalists in Silicon Valley, scientists in India and leaders of business, government and academia in many countries that there is intense curiosity about IBM, not only as a story of business success, but as an emblem of something deeper.

What I have seen is a widespread hunger to fill a vacuum that I think we all feel now – the need for leadership, the need for hope. Hope that we still have institutions and enterprises, leaders and employees, scientists and global citizens who keep moving to the future, who keep reinventing themselves, who keep driving progress – and who do so while preserving those fundamental values that must be preserved. I believe that IBM’s history offers people everywhere a credible basis for this hope. It’s an object lesson in the hard work of progress. And I believe IBM’s future, under Ginni Rometty’s leadership, will deliver richly on that promise.

As I said, after January 1, I will be available to help Ginni and the entire leadership team in any way I can. And long after I step aside as chairman, I’m sure you know that IBM and IBMers will always own my heart.

 

Rometty has been named a member of the IBM board, effective January 1. It is not yet clear who will be named to replace her as general manager of sales, marketing, and strategy.

"There is no greater privilege in business than to be asked to lead IBM, especially at this moment," Rometty said in a statement. "Sam had the courage to transform the company based on his belief that computing technology, our industry, even world economies would shift in historic ways. All of that has come to pass. Today, IBM’s strategies and business model are correct. Our ability to execute and deliver consistent results for clients and shareholders is strong. This is due to Sam’s leadership, his discipline, and his unshakable belief in the ability of IBM and IBMers to lead into the future. Sam taught us, above all, that we must never stop reinventing IBM."

There was no way Rometty was ever going to take the top job at HP. But it is interesting to speculate whether she was asked. ®

 

 

Virginia M. Rometty, a senior vice president at I.B.M., will be the company’s next chief executive, the directors announced on Tuesday. She will succeed Samuel J. Palmisano, 60, who will remain as chairman, at the start of next year.

Ms. Rometty, 54, is well known within the technology industry, but not widely beyond. She has led strategically important divisions of the company as it has shifted to services and products with high profit margins, like software that mines vast troves of corporate and online data for sales and cost-saving opportunities.

The directors’ choice of Ms. Rometty, who managed a crucial merger as well as sales in fast-growing new markets, ends a competition that has been under way for years. The leading candidates were always from within the company’s executive ranks.

A leading rival to succeed Mr. Palmisano, analysts say, was Steven A. Mills, the senior vice president who led I.B.M.’s highly profitable and growing software division. But his age, analysts note, was probably an obstacle. Mr. Mills has just turned 60, the traditional retirement age for I.B.M. chief executives.

 Mr. Palmisano, in an interview Tuesday, singled out Mr. Mills for praise, saying “he’s done a phenomenal job.”

The selection of Ms. Rometty for the top job at I.B.M. will make her one of the most prominent women executives in corporate America, joining a small group of chiefs that includes Ursula Burns of Xerox, Indra Nooyi of PepsiCo, Ellen J. Kullman of DuPont and Meg Whitman of Hewlett-Packard. Gender, according to Mr. Palmisano, did not figure into Ms. Rometty’s selection.

“Ginni got it because she deserved it,” Mr. Palmisano said, using the informal first name by which she is known to friends and colleagues. “It’s got zero to do with progressive social policies,” Mr. Palmisano added.

Ms. Rometty has led the growth and development of I.B.M.’s huge services business for more than a decade. The services strategy, analysts say, is partly a marketing tactic. But, they add, it also represents a different approach to the technology business, with less emphasis on selling hardware and software products. Instead, I.B.M. puts together bundles of technology to help business streamline operations, find customers and develop new products.

“I.B.M. is selling business solutions, not just products,” said Frank Gens, chief analyst for the technology market research firm IDC. “Rometty has been at the forefront of that effort.”

Ms. Rometty, who graduated from Northwestern University with an undergraduate degree in computer science, joined I.B.M. in 1981 as a systems engineer. She quickly moved up to a series of management jobs, working with clients in industries including banking, insurance, telecommunications, manufacturing and health care.

In 2002, Ms. Rometty championed the purchase of the big business consulting firm, PricewaterhouseCoopers Consulting, for $3.5 billion.

The deal was made shortly after Mr. Palmisano became chief executive and it was seen as a big risk. The PricewaterhouseCoopers consultants were used to operating fairly independently, in a very different culture from the more regimented I.B.M. style of the time. The danger, analysts say, was that the business consultants would flee in droves, leaving the business a shell.

Ms. Rometty was put in charge of coordinating the work of the acquired firm’s consultants with I.B.M.’s technologists, to tailor services and software offering for specific industries. Ms. Rometty, analysts say, worked tirelessly and effectively to win over the consultants. “She did the deal, and she made it work,” Mr. Palmisano said.

“Ginni Rometty combines performance and charisma,” said George F. Colony, chairman of Forrester Research. “She orchestrated a massive charm campaign to bring the PricewaterhouseCoopers people into the fold. That was the trial by fire for her.”

In 2009, Ms. Rometty became senior vice president and group executive for sales, marketing and strategy. Part of the job is leading the I.B.M. drive to sharply increase its business in overseas growth markets, like China, India, Brazil and dozens of emerging markets, including several African nations. Such markets now account for 23 percent of I.B.M.’s revenue, up from 20 percent when she took over. It should reach 30 percent by 2015, the company projects.

The top marketing job also includes spotting opportunities to use the science coming out of I.B.M.’s labs in new products and services. In that perch, Ms. Rometty has pushed to expand the company’s fast-growing analytics unit, which blends data-mining software with services expertise. “It’s not about capturing markets, it’s about making new markets,” Ms. Rometty said in a brief interview after the announcement.

Mr. Palmisano succeeded Louis V. Gerstner Jr., an outsider who became chief executive in 1993, and led a historic turnaround of I.B.M., an endangered corporate icon. Mr. Palmisano inherited a company that had returned to health, but he set about transforming it once again. Under Mr. Palmisano, I.B.M. sold its personal computer and some other hardware lines, and focused increasingly on services and software. I.B.M. sells mainly to business and governments, leaving consumer technology to others.

His strategy for driving the company behind big services projects to use technology to tackle big business and societal challenges, like energy, traffic and water management, had a catchy title, “Smarter Planet.” But such grand themes were initially met with skepticism on Wall Street. “The challenge is that you have to bring investors with you,” Mr. Palmisano explained.

That led to the development of a “financial roadmap,” setting out five-year plans for its growth initiatives and profit targets for the company as a whole. This year, I.B.M. is completing the first five-year roadmap, with the numbers running ahead of the plan, despite the 2007-2009 recession.

I.B.M.’s profits have increased sharply since Mr. Palmisano took over, and its stock price climbed. Earlier this year, I.B.M. passed Microsoft to become the second most valuable technology company, measured by market capitalization, trailing only Apple, the consumer technology powerhouse.

I.B.M. must steadily evolve, Ms. Rometty said, but she does not anticipate changing course abruptly. “What you’ll see is an unfolding of the strategy we have in place,” Ms. Rometty said, noting that she had a hand in creating it.

 

 

By CLAIRE CAIN MILLER

Early in her career, Virginia M. Rometty, I.B.M.’s next chief executive, was offered a big job, but she felt she did not have enough experience. So she told the recruiter she needed time to think about it.

 

That night, her husband asked her, “Do you think a man would have ever answered that question that way?”

“What it taught me was you have to be very confident, even though you’re so self-critical inside about what it is you may or may not know,” she said at Fortune’s Most Powerful Women Summit this month. “And that, to me, leads to taking risks.”

Her 30-year ascent through the ranks at I.B.M. happened during an era in which women entered corporate America in droves — with some of them, including Ms. Rometty, climbing their way to the top.

“The age group of women becoming C.E.O.’s started their careers in the early ’80s, when the huge tsunami of women were really building professional lives,” said Ilene H. Lang, chief executive of Catalyst, a research firm on women and business. Yet the fact that Ms. Rometty’s gender remains newsworthy also exposes the lengths that businesses still need to go to before women who invest their careers in companies have a shot at the corner office, or even equal representation.

“So we should be seeing more of this,” Ms. Lang said.

Ms. Rometty’s promotion also reveals something about I.B.M. and how it has developed a corporate culture that values diversity. The notable companies with women chief executives — like I.B.M., Hewlett-Packard, PepsiCo, Kraft Foods, DuPont and Xerox — are also some of the country’s oldest. Surprisingly, newer companies lag, said Jeffrey A. Sonnenfeld, founder of the Chief Executive Leadership Institute at the Yale School of Management.

“The really longstanding, traditional companies are the ones who’ve been able to unblock the once-clogged pipelines that used to atrophy the meritocracy because of bias,” he said. “These are traditional major pillars of the U.S. economy, as opposed to upstarts or professional services or finance firms with a highly fluid work force.”

The promotion of Ms. Rometty is all the more significant because she spent her career at I.B.M., in technical, strategy and sales roles, said Rosabeth Moss Kanter, a professor at Harvard Business School who studies women in business.

When she began studying these issues three decades ago, senior women were in “the three Ps,” she said — personnel, purchasing and public relations. Even recently, Anne M. Mulcahy, former chief executive of Xerox, had been vice president of human resources.

Ms. Rometty started at I.B.M. as a systems engineer in 1981 with a degree in computer science and electrical engineering from Northwestern University and is currently senior vice president for sales, marketing and strategy.

“The way she’s become C.E.O. is emblematic of a change that means women can have access to every opportunity, coming up the standard route instead of being hired from unusual places,” Ms. Kanter said.

A Catalyst research report this month found that women who build their careers inside a single company are more successful because they can prove themselves and develop sponsors to give them critical assignments.

“Earning this within the company, with your colleagues, is a little different from parachuting in Carly Fiorina or Meg Whitman from outside, where maybe they only look good because no one knows them,” Ms. Kanter said, referring to a former chief executive at Hewlett-Packard and its current chief executive.

It also gives Ms. Rometty added legitimacy, Mr. Sonnenfeld said. “There’s no cynic who can say there’s some demographic window-dressing here.”

Her career trajectory mirrors the successes of modern-day I.B.M.. An early producer of personal computers, I.B.M. has since sold off much of its hardware business to focus on higher-value software and services. Ms. Rometty’s career has been largely on the fast-growing services side, selling I.B.M. expertise to insurance and finance companies and overseeing the $3.5 billion acquisition of PricewaterhouseCoopers Consulting in 2002.

But for most companies, Mr. Sonnenfeld said, particularly finance, consulting and law firms, the biggest barrier for women remains the leaky pipeline — companies lose women before they ever near the top.

I.B.M., however, has a reputation for promoting diversity, said analysts who study the field.

I.B.M., 100 years old, hired its first professional women, 25 college seniors working in systems service, in 1935. In 1943, it named its first woman vice president. It instituted a three-month family leave policy in 1956, 37 years before the federal government made it law. And it runs the I.B.M. Women Inventors Community for filing patents.

“They see their ability to compete in today’s marketplace, to approach new markets and to make money as being tied to diversity,” said Caroline Simard, vice president of research at the Anita Borg Institute for Women and Technology, which this year named I.B.M. the top company for technical women. “It really is a business imperative and not just a responsibility of H.R.”

Analysts said that perhaps the most important strategy at I.B.M., which also had early inclusion programs for minorities, disabled and gay employees, is its formal mentorship program. “I really never felt there was a constraint about being a woman,” Ms. Rometty said at the Fortune conference. “I was always surrounded by people that wanted to mentor you.”

Ms. Kanter at Harvard said that Samuel J. Palmisano, whom Ms. Rometty will replace as chief executive, should be named “mentor of the century.”

Still, women are not equally represented at I.B.M., accounting for 28 percent of the work force and just 21 percent of executives. I.B.M. does not break out engineers by gender, but tech companies have traditionally lagged in recruiting women.

Girls are discouraged from pursuing technical education and companies have trouble retaining technical women because they are often isolated from influential social networks inside companies, Ms. Simard said. “Research shows that the majority of people have an implicit bias that associates science and technology with gender, so from a very young age, girls are not encouraged to pursue these careers,” she said.

“Women like Ginni Rometty are a powerful antidote against the stereotype.”