Why IBM's leadership change could usher in a Microsoft-like era
As Arvind Krishna prepares to step into the shoes of Ginny Rometty, Marian McHugh ponders IBM's future and whether it can replicate the shift at Microsoft led by Satya Nadella
IBM's recently announced shake-up at the top has prompted much speculation in the industry as to what cloud boss Arvind Krishna's imminent leadership as CEO could mean for the vendor's cloud strategy.
Long-serving CEO Ginny Rometty will be retiring before the year is out, with Krishna stepping into her shoes from 6 April. The company - which is known for promoting its top execs from within - surprised many with its choice of Red Hat CEO Jim Whitehurst as its new president.
The changes echo those of Microsoft when Steve Ballmer stood down in 2014 as chief exec and the company drafted in the head of its cloud business Satya Nadella. Not only did he right the ship, he completely remodelled it and sailed to a trillion-dollar valuation.
Whether IBM deliberately wants to replicate this success with Krishna's appointment is up for debate, but Alastair Edwards, analyst at Canalys, said that "fresh leadership" was needed at Big Blue to change its fortunes around.
"I think IBM's issue has been always that it's too far ahead of where the customers are and has always struggled to execute on the vision, partly because it's held up by the scale and size and the culture of the business," he explained.
"It needs to find a new way and a new leadership style to really try and make that vision a reality."
He cautioned that Krishna is still an IBM veteran of 30 years and so it might be premature to expect a massive shift in its strategy and that it is clear to him that this "succession path" has been in place for a while.
"Under Microsoft, Satya has brought that new leadership style and it is a personality-lead success as much as a technology-lead success.
"There is certainly no guarantee that IBM is going to be able to deliver a Microsoft-type turn around under Arvind because they still have that embedded IBM culture and approach which in some respects has acted as a barrier for them or certainly a hindrance for that change."
Scotty Morgan, chief sales officer at IBM and Microsoft partner CSI, said that Krishna needs to introduce more elements of the Red Hat culture to IBM's "old school" one.
"The model seems to have worked beautifully for Microsoft and they've reinvented themselves over that period of time from a consumption-based approach rather than the heavy-licencing approach," he noted.
"They've modernised their message and modernised their services to deliver fantastic value for clients.
"Having witnessed the Microsoft approach it can only be a fantastic outcome if we see that kind of pace and velocity and agility coming into the world of IBM as well."
Big Red
CEO-elect, and current head of IBM's cloud and cognitive software unit, Krishna was a "principal architect" of IBM's blockbuster $34bn acquisition of Red Hat last year, according to the vendor. Analyst Edwards said his appointment, combined with that of Whitehurst as incoming president of Big Blue, sends a "very clear signal" of its cloud priorities.
"My concern would be that having a new leader brings fresh blood and fresh thinking but actually he's still an IBM guy and there's no guarantee that under Krishna things are going to change dramatically," he elaborated.
"What's more encouraging is the fact that Jim Whitehurst is there as president because he brings a real operational skill and strength of leadership which the company needs and he's an external influence on the company. His appointment sends a clear signal that Red Hat is one of the critical components of its future strategy."
Edwards admitted that he initially struggled to understand the reasoning behind the purchase of Red Hat for such a large amount of money, but he now sees the differentiation and value it brings to IBM's hybrid cloud strategy.
"It's really trying to position itself as the enabler of hybrid and multi-cloud," he stated.
"I think it's the right path for IBM. I think it was never going to be able to compete with the hyperscalers and that was the wrong approach. Now with this platform technology within the organisation, it's got something which really sets it apart."
CSI's Morgan agreed with Edwards, saying that focusing on the hybrid cloud is a "smart play".
"They're competing with the hyperscalers in the sense that they're heavily in the market, however, they're not competing on a on a toe-to toe-basis," he said.
"They're bringing differentiation, their own credibility and their own capability to the table and focusing around those heavy workloads in those regulated environments, which IBM is incredibly good at."
Morgan is also excited to see what direction IBM takes with Krishna and Whitehurst at the helm, and expects the latter to "shake and rattle the cages of old BM".
"It's going to take a huge amount to shift cultures and him coming in and working with Arvind will be something that I'll enjoy sitting back and watching because within a short period of time when Satya came in at Microsoft, he made some fundamental shifts," he stated.
"He took out some of the old guard and he made his direction pretty clear. So I'm looking forward to seeing how these guys make an impact in a short period of time.
"I hope that they embrace the channel even more than they do today and that they support us as business partners."
Ginny's legacy
In spite of Rometty's long, stable stint at the head of Big Blue, IBM's share price jumped nearly 10 per cent within 24 hours of the news breaking that she was stepping down.
She has overseen some of the biggest transformational projects in IBM's ground-breaking Watson AI project, headed the biggest acquisition in its 10-year history with Red Hat and has managed to weather the company's stagnant growth in recent times.
Her departure also brings to an end the small cohort of women CEO's heading billion-dollar legacy companies, which included Carly Fiorina, Diane Green and Meg Whitman.
"There have been huge changes in their culture in comparison to the years before, huge changes in their channel friendliness and in their drive with clients," said Morgan.
"She was the one at the forefront of the organisation when they spent $34bn; if you only remember Ginny for one thing it should be that she had the guts and the smarts and the wherewithal to make an investment that fundamentally shifted IBM on its axis."
Despite overhauling the company and the direction it is moving in, Rometty lost the confidence of shareholders, investor and customers in failing to boost the top line figures or see the same massive cloud market gains that rivals Microsoft, Google Cloud and AWS have seen.
Canalys' Edwards said that her strategy was a long-term one which she was unlikely to see played out to its end.
"I think she has a lot of integrity and actually brought something new to IBM which it hadn't really had before," he explained.
"Unfortunately, that hasn't translated into the kind of results and turn around the business really needs.
"If they manage to achieve their ultimate strategy around some of these technology areas, then her legacy will be pretty strong - probably stronger than Ballmer's at Microsoft.
"Ginny has acquired Red Hat which is a reflection of what they want to do and how relevant they want to be in the cloud space. That's why they've invested so much money into that business and helps make it relevant in a way it wasn't before."