Incoming IBM CEO Reiterates IBM's Strategy

ByDoug Bartholomew In his first major address, incoming IBM Corp. CEO Sam Palmisano, who takes over the reins at Big Blue from Lou Gerstner on March 1, said the biggest challenge facing companies today is the integration of digitized information across the supply chain. "To link together the business processes and get this digital transaction flow across companies is a lot harder to do than just have a great ERP system," Palmisano told an audience of the high-tech giant's business partners at IBM's PartnerWorld 2002 conference in San Francisco. Palmisano said IBM had executed a dramatic and successful transformation over the past decade, and that as a result, competitors were trying to emulate the IBM model, with its focus on services and solutions. "We have made a phenomenal transition in our business model over the past 10 years," Palmisano said. Even so, he appeared to lament the fact that IBM has only a fraction of the vast and fragmented IT services market. "We have only about 10% of the services business," he said. Regarding the competition, Palmisano had laudatory words for Dell Computer Corp. -- "a very formidable model we all have to adapt to, not just those in the computer industry" -- and Electronic Data Systems, which he commended for its recent acquisition of Sabre, the former American Airlines IT and travel services unit. But he chided Sun Microsystems Inc., not only for its recent acceptance of Linux and open standards despite Sun's longtime adherence to its proprietary server operating system, but also for its slippage in the server market. "We gained eight points share in servers last year, and we've passed Sun by a few points now." Palmisano also viewed the proposed Hewlett-Packard-Compaq Computer merger as having "the strategic intent of becoming much more of a service-based solutions company." Like IBM. "Others are trying to copy what we've done," Palmisano added.