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A classic of self-justification
on 22 November 2002
Gerstner was the man who, in the space of eight painful years, transformed an extraordinary company into just any old company. His revenue growth record was the worst of any IBM CEO, and that is despite the massive acquisitions of Lotus, Tivoli and Sequent. In 1993, IBM was an extraordinary force in the computer industry, albeit a loss-making one. Now it owns very few technologies which influence the rest of the IT world -- I would imagine that a scan of the Top 100 IT books sold at amazon would confirm this. IBM is now little different from HP or Dell or any of the other vendors that believes commoditised industry-standard computers are the only way forward. The key players who do believe in proprietary innovation -- Microsoft and Sun -- simply don't need to reckon with IBM's architectures any more.
The story of 1993 to 2001 is really the story of a very small number of executives hollowing out the company in order to make as much for themselves as possible, and be blowed to everyone else, such as the employee. Gerstner and his cronies realised very early on that IBM was a soft target for corporate raiding because of its previous good citizenship policy. So he changed the compensation scheme so it was strongly linked to the stock price, and then proceeded to raid every asset he could. IBM buildings were quickly sold off and leased back. The pension funds in many countries were raided, or at least corporate contributions to pension funds in surplus were halted. IBM's practice of putting a manufacturing plant in nearly every country it sold to, in order to balance imports and exports, was also quickly stopped, so that production could be switched to the lowest-cost countries with the lowest tax rates.
This book covers only Gerstner's self-interested view of this. There is no reference to the case Churchhouse v IBM here. There is no pointer in the index to 'pensions'. Gerstner skates over his greed-driven ploy of pretending not to be interested in the job, in order to bump up his compensation offer. As one would expect, there are no references to England's AMIPP or the American ibmemployees Web sites.
Gerstner is pretty frank in this book about goings-on around him, but he was always obsessed with his own grandeur and status, too much to notice the damage he was doing to others further away. There are still people in IBM who believe Gerstner is a saint, the man who saved the company. But in truth, as the former chief exec of IBM UK, Barrie Morgans, said of Gerstner's reign: "Well, anyone can slash and burn." Building revenues is much harder, despite what Gerstner says in his book. Not a natural salesman, Gerstner's only means of boosting revenues was the acquisition of companies, but there he often failed to boost the top line by as much as expected. Sequent withered almost as soon as IBM bought it,and one can't help but feel that IBM bought it to stop it falling into the hands of Sun, as a part of Cray had previously done.
His other strategy was the organic growth of IBM's services division. One cannot deny this was a success, but it took IBM's focus off the product ball, which let Sun and Microsoft in to dominate their segments in the 1990s. Furthermore, in order to win business, IBM's services reps often recommended competitive products rather than IBM ones. This was done partly to imply independence and partly because there was often more service effort and therefore more billable hours required on rival products.
This is a fascinating book to read, not just for a former insider like myself. On page 12, Gerstner quotes from 1992's 'Computer Wars': "there is a serious possibility that IBM is finished as a force in the industry." IBM has survived as a name because of Gerstner, but is it still a dominant force?