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Global Players

Global Players

November 2011

Virginia Rometty, CEO-designate, IBM


Virginia Rometty

Image Credit: International Business Machines Corp.

When Virginia ‘Ginni’ M. Rometty graduated with high honors from Northwestern University in 1979, it was rare for a young woman to major in computer science and electrical engineering. What she did after graduation did not conform to conventions either. She headed to Detroit in neighboring Michigan and joined the General Motors Institute, now Kettering University, where she was responsible for system development. Two years later, she joined IBM and began a career that would eventually take her to the pinnacle of corporate America. When the New Year dawns, Ginni Rometty will take over as the first woman, and only the ninth chief executive officer, in the 100-year history of one of the most storied corporations in the world.

It is not that other women have not led large technology companies before. Meg Whitman successfully led ebay for several years, while Carly Fiorina had been CEO of Hewlett Packard, a position now occupied by Whitman. But IBM is known for carefully choosing its chief executives most often from within its ranks, and giving them long reigns. So against this backdrop, it is indeed rare for a woman executive to climb up the ranks over three decades at IBM and lead the $100 billion corporate behemoth with more than 425,000 employees worldwide. Rometty didn’t need any special favor as a woman to reach the top either. As the current IBM CEO Sam Palmisano commented, Ginni deserves the honor after successfully tackling every challenge thrown at her.

Ironically, it was one of Carly Fiorina’s decisions at HP that inadvertently brought Ginni Rometty into the limelight. In 2002, PricewaterhouseCoopers (PwC) was under pressure to divest its Consulting Services business on concerns of a conflict of interest with its Auditing Division. HP was offered the opportunity to buy PwC Consulting, but Carly Fiorina decided against it. IBM scooped in and acquired PwC Consulting for $3.5 billion, one of its biggest acquisitions. Rometty, who was a general manager at that time, was given the charge of integrating PwC into IBM and not many thought she would succeed. Her biggest challenge was to convince the experienced PwC consultants to remain with IBM, essentially a technology services company with a very different business culture. To the surprise of many, Ginni adroitly assimilated PwC Consulting into the Global Services division of IBM and retained more than 90% of the senior consultants.

Rometty’s success at IBM Global Services did not go unnoticed by Sam Palmisano and his leadership team. She was soon made Managing Partner of the Business Consulting division and rose to head IBM global sales in 2008. A year later, she was given the additional responsibility of overall strategy and business development. By then, she was recognized as one of the most powerful women in business by Fortune magazine and a potential successor to Palmisano.

I learned to always take on things I’ve never done before. Growth and comfort do not coexist.

— Virginia Rometty, October 2011

Hard work comes easy to Ginni, the oldest daughter of a divorced single mother who raised four children herself. Though not much is known about her mother, it is said that she expected her children to be high achievers. None of them disappointed her. Ginni’s two sisters rose to senior positions at Accenture Consulting and Coca Cola, and their only brother is currently the CEO of Allenberg Cotton Co, one of the largest cotton traders in the world and part of the Louis Dreyfus commodities group. Ginni met her husband Mark at the General Motors Institute and they have been married for longer than she has been at IBM. Mark has always kept a very low profile as Ginni ran up the corporate ladder.

When she takes over the hotspot of CEO, Rometty is bound to attract intense scrutiny from the media and the army of Wall Street analysts who follow IBM. She will get only a short window to establish that she is up to the job and her past successes will be of little help if she fumbles. To make it more challenging for Rometty, IBM is in its best health in recent years. Under Palmisano, the company has consistently reported earnings growth every quarter for several years. Its business model is widely admired and the stock price is at the highest level in its history. Rometty’s task is to make an exemplary business even better.

However, many feel that some of the strategies that contributed to IBM’s success in recent years may not yield the same results in the future. Palmisano moved the company away from hardware, selling its large personal computer business, and enhancing its service offerings. Over the last decade, IBM has spent more than $25 billion to acquire technology service companies to expand into niche areas. Unlike other companies that acquired large competitors and struggled to integrate them, IBM went after smaller targets that are easier to manage. In the future, the company may find it more difficult to find attractively priced acquisition targets as its competitors try to follow IBM’s successful model. Further, to manage costs better, IBM moved thousands of jobs to cheaper locations like India. However, wages are rising in these overseas locations and the cost reductions may not be as significant as they were earlier.

History is littered with stories of technology companies wrong-footed by the rapid evolution of the technology landscape. Even IBM with all its legacy and dominance faced failure and oblivion in the early nineties. Rometty, who has never headed the larger technology services divisions at IBM, will likely have to keep the company ahead of the industry to ensure its long-term health. She will have to preserve the research and development core of the company that invests more than $6 billion annually to churn out more patents than any other company on earth. Still, to her advantage, in an hour of crisis, she can fall back on the experience of having been through several industry cycles, unharmed and always successful.

 

 

 

 

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