Global CIO: An Open Letter To IBM CEO Sam Palmisano - InformationWeek

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09:32 AM
Bob Evans
Bob Evans

Global CIO: An Open Letter To IBM CEO Sam Palmisano

We ask IBM's chairman and CEO about analytics, competition, mobility, and how the pursuit of a Smarter Planet will extend the transformation of the world's most-influential IT company.

Roads, oil and gas, food, healthcare, power grids, retail, water, supply chains, public safety, weather forecasting, transportation, and cities. Clearly, IBM's going to have a hand in all of that intelligence enhancement, but along the way, what exactly does IBM become? Computers will be involved, but is IBM a computer company? Software will be involved, but does IBM become a software company? A services company? An electronics company? What's your vision, Sam, for what IBM becomes as it becomes the master contractor in raising the intelligence and engagement of cities and supply chains and weather forecasting and energy production and healthcare and water supplies? How will you define IBM as the Smarter Planet becomes less of a vision and more of a reality?

3) "We are NOT like other IT companies." About 18 months ago, at your Investor's Day meeting, you spoke with great passion about how and why IBM had transcended the established model of a big IT company and had become something else entirely. You chided the analysts and institutional investors—rather pointedly at time!—for having been blind to the fact that IBM had already transformed itself into the type of company it needed to become, while other big IT companies were still struggling to understand what their own transformations would entail. I sense that IBM and the tech industry are approaching a similar inflection point—particularly with the Smarter Planet initiatives outlined above—and the world probably needs to hear again on how or why you feel IBM has again begun separating itself from competitors.

As a reminder, here's a slice of what you said at that investor's briefing in May 2009:

"A lot of people have said to me, 'You guys are defying gravity.' We're not defying gravity – we had a record year in 2008. We got out ahead of it. It's not about defying gravity – we got out ahead of it.

"We took out a lot of stuff last year, and a lot of stuff earlier this year, to reduce our run rate of cost and expense by $3 billion. So we're not fighting physics. We just had the financial flexibility to get ahead of it—one might call it insight; call it whatever you want to call it, conclude whatever you'd like to conclude; we just didit; we're done. Most of it's done. . . .

"Now look: we got it all. Why? Since nobody's asking us why--'No one expects you to [make projections], so why would you do it?' Because you need to keep things in perspective: We are not like the other companies in the IT industry. We're not. We've completely transformed the IBM company. We're not.

"And we're not crazy kids. So we don't throw numbers out to throw numbers out. Y'know, we're not that short-term oriented. I'm an old guy—and Mark's [CFO Mark Loughridge] not getting any younger in his job—so, you've gotta reflect on that—this is IBM, this is not, y'know, we're not running around up here dressed in fads, and sunglasses, and whatever kinda designs, so, what is it?"

What is it, indeed—early 2011 would be a great time to revisit that discussion.

4) The state of R&D. You recently criticized HP for not spending enough on R&D. So closer to home, what are your thoughts on IBM's R&D investments—not just raw dollars, but ROI on those investments and how those billions are tying into the company's vision of the future? How is R&D today more or less of a competitive weapon than it was 3 years ago or 5 years ago? And what about in 2015—will R&D be more or less important then than now?

5) Competition, collaboration, and the spaces in between. More than perhaps any other company, IBM embodies the multifaceted dynamics of life in the 21st-century IT business whereby a ferocious competitor in one arena (e.g., Oracle in databases and middleware) is a very close partner in other areas (IBM's the #1 integrator of Oracle software). How do you manage to keep these relationships spinning harmoniously in a world where the sources of highest-level value are constricting into tighter confines into which everyone's trying to fit? You and SAP have a long and powerful history, yet you're both racing headlong to become world leaders in analytics. How will IBM address these strategic relationships that are becoming simultaneously more valuable and more volatile?

6) What's up with IBM's server share? No, I don't want to get in line for a tongue-lashing like you gave above to the analysts and institutional investors, so I want to be careful here: I know you and Steve Mills have been pushing IBM out of any product categories that even hint of commodities, and that includes some types of servers. HP has recently trumpeted the fact that they've overtaken you in worldwide server sales, and that the momentum is in their favor:

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