How Will Palmisano Bring back IBM to Greatness - Essay Example

Sam Palmisano Sam Palmisano, the outspoken career IBM salesman nick d 'The Closer', has climbed to the topspot at the world's most recognizable technology giant. He took over the leadership roll while the company had been through some turbulent times. Palmisano had seen the aging dinosaur resurrected and was now in the position to lead it into the next millennium. His vision of the future for IBM was dramatically different from the inflexible mega-corporation of years earlier, and Palmisano understood that to keep pace with the technology available the company would need to be more innovative, responsive, and customer oriented than it had been in the past. His vision for IBM and the sweeping changes he has made to the business of IBM have been met with optimism as well as cynicism. Some are succeeding while some are lackluster. His ideas, taken one at a time, seem to be all over the road, but when taken in context of his broader plans, they are indeed focused and revolutionary. The capstone of Palmisano's business plan is On Demand Computing. In the world of high technology Palmisano believes, "IBM can create and win high-margin opportunities in everything from Web-site management software to corporate technology services to mainframe computers" (Bergstein). His on demand vision creates the environment for the company to provide consulting, storage, computing, and management all from a single source. Palmisano has eagerly pushed for increased research and development while promoting the exploration of new communication methods to make on demand possible. His on demand process has been met favorably as businesses realize they need additional expertise outside their own walls to grow. The client can use what they want, when they need it, and without huge up-front outlays. It has also helped, if not required, the successful implementation of another Palmisano pet project, the IBM Partner Program. IBM's partner program is an integrated technology network that provides technology solutions throughout dissimilar business environments. It enables small to medium sized businesses to take advantage of IBM's expertise. In return, IBM gets access to their markets and clients. The expanding server market, where IBM has been gaining market share from HP, has attributed its rapid growth to the partner network. Palmisano reports, "It would be impossible for us to be that effective without them, so that works very well" (Palmisano Interview). Horizontal integration is another area that Palmisano has stressed with success. Palmisano believes the future lies in the ability to provide across the board, integrated solutions to increase the efficiency of the workflow process. Integration can connect supply-chain management, business modeling, streamlined production, employee management, and scientific research. His vision will offer IBM's customers the ability to view, in real time, every aspect of their product, schedule, and clients' needs. He has thrown the old concept of services out the window and replaced it with his new idea of integration. In his words,"... people should not think of 'services' as only a labor-intensive business." (Schlender). Integration has not just been a marketing tool for Palmisano. He has worked to guide IBM through a period of what he calls internal reintegration, the reassembling of his own company to make it more responsive and versatile. IBM has traditionally been plagued with complaints of the overwhelming bureaucracy that was confronted when attempting to do business with IBM. Palmisano acknowledges that they have a long way to go, but has taken steps to consolidate corporate entities and eliminate the need for their clients to deal with multiple business units. It's this attitude that has led to closing regional sales offices so the customer can deal directly with IBM, and encouraging his 35000 member sales staff to share information. Having an integrated philosophy removes any question about whether the numbers are correct or not. Palmisano says this alone saves the average salesperson 4 hours a week. He lauds the increased productivity and claims it gives the sales staff more time to talk to customers instead of discussing data. IBM's CEO has taken other measures to help enhance customer response as well as enable employees to service the customer as easily as possible. He initiated a program that set aside $100 million to be used by first tier management to solve customer problems and resolve complaints as quickly as possible (Bergstein). He routinely takes input from the lowest level workers in an effort to empower them with some of the success of the company and the responsibility to improve it. Other dramatic innovations have been met with initial surprise followed by an 'Oh yeah, now I get it' response from the marketplace. His early adoption of Linux was initially called Sam's Bet. He went out on a limb to promote Linux as the premier open source platform for enterprise systems. The world soon followed. Palmisano trimmed IBM away from low margin endeavors allowing them to concentrate on their core business. The PC division was sold and IBM opted out of the consumer market. He has conceded the low end to HP but counters, "We are enterprise, and we make no bones about what we are" (Palmisano: IBM Will Steer Clear). Yet, with all Palmisano's success, not all has been green at Big Blue. Global Services has stalled and fallen on hard times. IBM's overestimation of the growth rate was compounded by the economic situation in Europe. Slow sales in Europe in 2005, led to the announcement of 13000 layoffs, primarily in Europe. Though IBM claims that its the economy in Europe that slowed, their competitors have not seen the weakness or the dramatic turndown (Vance). Analysts have begun to question whether IBM is yet renewed enough to compete in the fast paced market of global change. IBM, under Palmisano's rule, has also come under increased criticism in the handling of employee and retired worker complaints about benefits. Outsourcing and shrinking health coverage has been an ongoing thorn in the side of many workers. Recently, IBM announced plans to freeze pension benefits, which has caused concern among the workforce and looms over IBM's wish to reinvent themselves as a more people friendly organization. In 2004, IBM settled a $320 million lawsuit filed on behalf of 140,000 employees. The case, which was filed before Palmisano's reign, claimed workers had been shorted on retirement benefits (Krishnan). Shareholders, fairly or unfairly, are quick to praise or blame the CEO based on the stock's performance. The stock has been rather lackluster since it suffered a major downturn in 2002. Palmisano, playing his strength as the salesman, has been nonstop in his promotion of IBM and spends countless hours reassuring the market, company CEOs, and staff that IBM is on the right track and the rewards are just around the corner. The approach seems to work for him as the stock has stabilized lately even in the face of some disappointing quarters. Sam Palmisano has not only brought a new vision and innovation to IBM, but his idea of the future of technology has spread to other businesses. His belief in an integrated one stop shop for a cradle to grave solution provider may be visionary, but Palmisano has a personality that infects his audience with the same zeal he feels for the issue. His major fault may be that he's too ambitious, too optimistic. These downsides, however, are well balanced by the meaning in his message and the timing of his execution. The major change at IBM is the newfound respect that they have gained. When Sam Palmisano speaks, people listen. Works Cited Bergstein, Brian. "Palmisano Era in Full Swing At IBM." InformationWeek 23 Aug. 2004. 24 Mar. 2006 . Krishnan, Ann. "Big Blue's Workers Sing the Blues as IBM Moves to Freeze Pensions." News & Observer 7 Jan. 2006. Academic. LexisNexis. 24 Mar. 2006 . "Palmisano: IBM Will Steer Clear of Consumer-Electronics Market." Computer Reseller News 1 Mar. 2004: 24. InfoTrac. 24 Mar. 2006. Palmisano, Sam. Interview with Robert C. DeMarzo and Robert Faletra. ChannelWEB. 27 Feb. 2004. 24 Mar. 2006 . Schlender, Brent. "How Big Blue is Turning Geeks Into Gold: Can Consultants and Scientists Mix" Fortune 9 June 2003: 132+. InfoTrac. 24 Mar. 2006 . Vance, Ashlee. "IBM to Fix Bad Quarter by Axing 13,000 Jobs." The Register 4 May 2005. 24 Mar. 2006 . Read More