As I See It: Sam I Am

by Victor Rozek

The board then took a great risk by hiring Gerstner, the first outsider in the company's history, to assume chief executive responsibilities. Since he had no computer-industry experience, the Journal called Gerstner's appointment "an audacious gamble," which in the clotted jargon of business journalism is a civilized way of saying it was a stupid mistake. Just goes to show what the Journal knows.

Gerstner turned out to be the stuff of pinstripe legend, the second coming of The Iacocca. So this time there was no need for secret searches and audacious gambles. Gerstner handpicked his successor, Sam Palmisano, who, coincidentally, had previously been an executive assistant to Akers. But, unlike Gerstner, Palmisano is inheriting a flagship rather than the Titanic.

Palmisano is a lifer. Twenty-eight years of wearing conservative business suits, beginning--as almost all of IBM's top management do--as a marketing trainee. Readers may remember Palmisano as one of the brains behind the AS/400 rollout, in 1988. Palmisano was astute enough to understand that from a customer's perspective computers were primarily vehicles for running software. Without adequate applications, the box, no matter how speedy and efficient, was little more than an expensive plant stand. So, rather than dangle the system like bait and hope that some hungry developers bite, Palmisano courted the development community before the system's release, and by the time the AS/400 was finally announced there were already over 1,000 business applications available.

What's curious, however, is not Palmisano's success but the fact that he ever applied for a job at IBM in the first place. As a high-school kid, he had enough musical talent to play backup sax for the Temptations. But the status and notoriety of a career in popular music apparently wasn't enough temptation for Palmisano to pursue the uncertain life of a musician.

So he went on to college, where he played football, apparently well enough to be offered a tryout with the Oakland Raiders. But he turned it down. For whatever reasons, Palmisano was seemingly immune to the youthful allure of sex, drugs, rock and roll, and athletic adulation. He chose IBM instead.

In a recent write up, Business Week characterized Palmisano as a risk-taking, customer-obsessed man of the people, a depiction as safe as it is probably accurate. You don't ascend to the corporate pantheon by being timid and disregarding your customers. But it is instructive to note the standards by which corporate divinity is judged to be of the people.

As Business Week recounts, "When IBM shipped its mainframe and storage devices two weeks early in the fourth quarter, [Palmisano] visited the Poughkeepsie plant, spending hours walking the shop floor, buying employees coffee, and shaking their hands." He told them they were heros and had saved the quarter. Thus we can conclude that in Business Week's view politeness and gratitude are virtues of the people, so rarely practiced by corporate hierarchy as to rate a special mention.

Palmisano also evidently eschews many of the trappings of his office, preferring small staffs to entourages, and electing not to employ an executive assistant. (Then again, even his reportedly capable executive assistance couldn't save John Akers.) And, at least until he assumed the presidency, Palmisano actually drove his own car to and from work. Truly a man of the masses.

While such un-Kenneth-Lay-like deportment is certainly welcome and rightfully applauded, perhaps of more significance to the people of Poughkeepsie--indeed all IBMers--is whether today's heros will have jobs tomorrow if the economy does not rebound. It's old history now, but I would love to know if Palmisano fought to keep some of the jobs John Akers was cutting when nearly half of IBM's work force was jettisoned. There is a significant difference between being of the people and being for the people. It is the difference between preference and policy.

One thing Palmisano is expected to do for the people is shake them up. That's what every new CEO is expected to do, of course; otherwise what would be the point of new leadership? But Palmisano is not timid about adding pressure to the pressure cooker. Sales and marketing people already have very aggressive quotas and many have to scramble to make their monthly numbers. Dissatisfied with traditional monthly sales forecasts, Business Week reports that Palmisano instituted weekly forecasts. Sales data is now collected each day, and Palmisano is fond of putting his sales managers on the spot by asking what deals they plan to close in the upcoming week. He then checks to make sure that they have. This strategy will doubtless afflict the comfortable. But over time, the increased sales induced by fear of weekly scrutiny will likely be offset by burnout.

Palmisano, Business Week reveals, also has a penchant for micromanaging. When customer demand for new servers outstripped parts availability, Palmisano held daily morning meetings "to review the status of every single component--part number by part number."

Such attention to detail has some analysts concerned that Palmisano is too heavily operations-oriented and may lack the strategic vision of a Lou Gerstner. They forget that when Gerstner first took the reigns he announced he had no vision and that vision was the last thing the company needed at the moment.

If anything, Palmisano's vision for the near term is already evident. About half of IBM's business is now derived from services, and it is a segment of the company that is expected to grow. Specifically, IBM wants to supply e-business on-demand over the Internet, and is working to create a self-managing infrastructure to make it possible. Grid computing promises to deliver applications, services, and technology on a platform with near-limitless resources. The grid would essentially act as an immense virtual computer, built on open protocols, where applications, data, and storage can be shared. Access would be available to anyone with an Internet connection and the clearance to use it. Since Internet-based commerce has unlimited service potential, Palmisano will continue to invest resources in support of on-demand e-business.

His other major obsession is courting The Penguin. The man of the people was the first high-level IBM manager to embrace what is arguably the operating system of the people. Palmisano championed IBM's surprising $1 billion investment in Linux, which is now available on everything from servers to ThinkPads. Not long ago, the idea of supplanting proprietary operating systems would have been as heretical as proposing an accurate audit at Enron. But times change and Palmisano's vision seems firmly grounded in the realities of the emerging marketplace.

His improbable journey began nearly three decades ago. During that time, hundreds of thousands of IBM employees have come and gone. Many were talented, many more were ambitious, yet today Palmisano stands alone at the helm of America's preeminent corporation. He is entering a game where the stakes are high and the triumphs fleeting. He inherits an $86 billion-a-year juggernaut, and great things will be expected of him--on a quarterly basis. But in his victory he will find no respite. His customers, his employees, his investors will have but one concern: What have you done for us lately? The inability to rest on past laurels is, perhaps, the hallmark of his position. As Walter Winchell concluded after chronicling the careers of many notable people, "Nothing recedes like success."