Gerstner and Palmisano - IBM past and present head-to-head

After nine years in the IBM hot seat Lou Gerstner today hands over to Sam Palmisano. Instead of the lumbering, lacklustre business that greeted Gerstner, Palmisano inherits an IBM on top of its game. Here Suzi Kerridge compares the two men and asks what the transition means for Big Blue's future direction?

Background and style

Gerstner

He came to IBM with a reputation as a business leader, having been a young and successful McKinsey consultant before spending 11 years at American Express and then four as Nabisco's CEO.

He is a no-nonsense New Yorker, wary of the media and the cult of the celebrity CEO. But that's not to say he isn't gregarious. He sits on numerous boards - The New York Times, the Lincoln Centre for the Performing Arts and the Memorial Sloan-Kettering Cancer Centre to name a few - and has won awards such as an honorary British Knighthood for work on behalf of public education and business accomplishments.

He is fond of a good cigar. Not so fond of suffering fools.

Palmisano

Long considered the smoother, more personable face of IBM - even a match in public for Oracle's Larry Ellison or Microsoft's Steve Ballmer.

Where Gerstner is gruff, Palmisano is breezy, open and renowned for his hearty laugh. He comes across more as a professor of technology than the CEO of a multibillion dollar business.

An IBM veteran of almost 30 years and most recently president and COO, he is credited with IBM's push into services, the growth - and simplification - of its server business, and even the Big Blue Linux gambit.

Willing to fly half-way around the world to keep a customer happy he is also a bon viveur, cigar smoker and friend of the Bush family.

IBM on the day they became CEO

Gerstner

Named CEO and chairman on April Fool's Day 1993 at a time when the company was a sick giant, reporting $5bn in record corporate losses the previous year and unable to predict technology trends - let alone catch up with them.

IBM had been late with minicomputers, bungled the transition to client/server computing, watched helplessly as IP passed it by and frittered away billions of dollars on R&D that failed to produce any notable market share or revenue.

Gerstner was cast as IBM's knight in shining armour. He didn't disappoint, quickly shaking up the dispirited, disorganised business. Personnel and costs were slashed, assets consolidated, key technologies and staff identified and one big new idea introduced: customer focus.

Indeed, this is the man who told his workforce not to get so focused on the technology that they lost sight of the customer. Gerstner soon became known as a cost cutter and executor - the ultimate SAS man dropping in to save the day.

Palmisano

The heir is a livewire who may be tempted to carry out wholesale changes - but are they necessary? The turn around has been completed. IBM last year reported profits of $7.7bn on $86bn worth of revenue. By sales, Big Blue is simply the biggest vendor in IT.

Palmisano is the straight-talking technologist who, due in no small part to his own efforts, will head a company with the most ambitious Linux programme, strong sales of servers and software, and of course the high-margin unit the whole industry envies - IBM Global Services.

There are blots on the landscape. Is there really a need for so many servers, albeit re-named servers? Is the PC market - the same market IBM pretty much enabled - worth continued losses? And what's the company's mobile play?

But perhaps most notably, while Gerstner took over in an abyss but at the start of the nineties growth spurt Palmisano finds a company in the middle of an economic downturn. IBM stock may have performed well in the recent bear market but how long can the company remain solid? Another reason why eyes are on the new boy.

The future

The Gerstner story is now history. Sure he'll help during 'the transition' but his tenure is now the subject of business school syllabuses not analyst conference calls. (Though maybe the odd media piece.)

His nine years will place him in the IBM hall of fame and he can retire to the Jack Welch institute for respected bosses.

Who said there is pressure on Palmisano? He might be the ultimate salesman but he must now ensure the engines of technological innovation keep chugging while and the sales keep growing.

Gerstner's autocratic approach helped create his image as the Big Boss of Big Blue. Palmisano, on the other hand, likes to be perceived as one of the boys. It remains to be seen whether he has the ability to make the transition to ruler.

One characteristic likely to serve Palmisano well is his ability to handle the media. While Gerstner was never one for the sound bite, Palmisano has the knack of distilling complex problems into simple, blunt terms delivered with a smile.

At IBM's recent PartnerWorld conference, his first public speaking event as the anointed CEO, he came across as witty and open but attendees left in no doubt about his ambitions for the company.

He spoke of his strong belief in open standards, his disdain for Sun and his non-communication with Microsoft. He even found a moment to dismiss the significance of the HP-Compaq deal, starting with the subtle line: "There is no reason for me to comment."

In short, Palmisano's principles are closely aligned with Gerstner's - one huge reason why he got the nod. He recently claimed IBM is above all customer and market driven and second a core technology company. Sounds familiar.

And although it is unlikely he will suddenly change the direction of the IBM battleship, it is said he keeps hit lists of rivals' largest customers and monitors how well his employees are doing in poaching them. This is not a man who will remain happy just keeping the company ticking over.

His sights are set on trying to match Dell in the PC business, continuing to be the number one services provider and promoting open standards.

The industry will be watching to see how it goes. Maybe Lou Gerstner will be too.