IBM Makes a Leadership Shift

Amy Larsen DeCarlo – Principal Analyst, Security and Data Center Services

Summary Bullets:

• Rometty, IBM’s first female CEO, is retiring after four decades at the company

• Her retirement was widely anticipated: the company’s previous two CEOs retired at age 60; Rometty is 62.

Ginni Rometty is ending her eight-year tenure as IBM’s chief executive this year. IBM named Arvind Krishna, currently senior vice president of cloud and cognitive software, as the new CEO. Jim Whitehurst, formerly the CEO of IBM’s newly acquired Red Hat, will take over as president. Rometty will stay on as executive chairman until the end of 2020.

The current IBM executive chairman, president, and CEO spearheaded the company’s efforts to pivot toward cloud and away from some of its more traditional technology areas including the server business the company sold to Lenovo for $2.3 billion in 2014. At the same time, Rometty’s IBM clung to its legacy mainframe unit.

Many in the industry welcome the CEO change. Rometty has come under fire for ceding ground in the burgeoning cloud arena to rivals Microsoft and Amazon Web Services while the company’s overall earnings have consistently disappointed Wall Street. In the years in which Rometty was at the helm, the technology industry grew at a rapid rate while IBM’s share price declined 25% and its market cap plummeted almost $100 million.

That said, Rometty led Big Blue through a period of sweeping change to transform the company to a more cloud-centric business. To this end, IBM acquired open source software vendor Red Hat last year for $34 billion. After posting revenue gains in its most recent quarter IBM raised its earnings guidance for 2020.

Krishna has his work cut out for him. While IBM reported a modest uptick in revenues due largely to strong earnings from its new Red Hat subsidiary, the company needs to make sweeping operational changes to become a more agile competitor.

Krishna has spent his entire career at IBM, joining the technology giant after earning his PhD in engineering from the University of Illinois in 1990. The hope is that Krishna’s deep technical expertise picked up over decades working first in IT management and storage and later overseeing the cloud and cognitive software development and as head of IBM’s overall research and development efforts, will help him steer the company to a more competitive position.

Krishna has won good marks for his work integrating Red Hat into the IBM fold. Only time will tell if he has the managerial skill set to make the right operational adjustments and technology decisions to guide IBM to return to form.