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IBM services chief and CEO contender Daniels retires

Other top brass may follow suit, letting others move up

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Mike Daniels, a career IBMer who has been running all or most of Big Blue's Global Services behemoth for the past several years, has said uncle and will be leaving the company.

IBM's current CEO, Ginni Rometty, beat Daniels and other graybeards for the top job in October 2011 and rearranged management appointments last year following the retirement of Frank Kern, another prominent services executive who was passed up for the CEO job.

Rometty replaced Sam Palmisano, who stepped down as CEO a year ago and relinquished the chairman position to Rometty last September. Like Palmisano and like Lou Gerstner before him, Rometty has the president, CEO, and chairman roles all locked up at the IT giant.

Daniels joined IBM in 1976 after graduating with a bachelor's degree in political science from Holy Cross College in Massachusetts.

He held a number of positions at the company over his 36-year career in sales, marketing, and services, and like many prominent top executives, had been cross-trained in different geographic regions and business groups to get a feel for the global and polymorphous nature of The IBM Company, as founder Tom Watson dubbed it and they still call it in the upper echelons to this day.

Rometty got her big break managing the $3.5bn acquisition of the IT consulting business of PriceWaterhouse Coopers in July 2002. She was put in charge of the integration of that unit and given control of the resulting Global Business Services unit, which accounts for about a third of Global Services' overall revenues each year.

Daniels ran Global Technology Services, which provides traditional outsourcing, system integration, and break-fix maintenance services for hardware and software. In July 2010, when Palmisano restructured IBM to prepare for his eventual retirement, Rometty was put in charge of IBM's Sales and Distribution organization, which controls its direct sales and channel distribution, and Daniels was given full control of Global Services.

But Daniels was not tapped to be Palmisano's successor, and it is probable that like Kern – who left IBM a year ago and is now CEO at another services company called Aricent Group – Daniels wants to run his own show.

The departure of Daniels now has many people thinking about what Steve Mills, who is close to the traditional retirement age of 60, will do. In that July 2010 reorganization, Mills was given control of both Software Group, which he has run for a long time, and Systems and Technology Group, which Bob Moffat ran until he got stung in an insider trading scandal in October 2009.

Moffat was considerably younger than Daniels or Mills and ran IBM's PC, printer, and server business, as well as being put in charge of the outsourcing and streamlining of its supply chain operations to India a decade ago.

It is a fair bet that he had the inside track on the CEO job and would have beat out Rometty. If he had not become involved in the Galleon Group insider trading scam, he night have done a stint in sales or services and then we would have known he was the heir apparent to Palmisano, much as it was obvious that Palmisano was the heir apparent to Gerstner because of his various appointments. But it didn't work out that way.

According to a report in the Wall Street Journal, Rometty notified employees of Daniels' departure by email on Friday, which is the same day that the company filed an 8K report with the US Securities and Exchange Commission that summed up Daniels in one sentence: "On January 2, 2013, IBM announced that Michael E. Daniels, Senior Vice President and Group Executive, Services, will retire on March 31, 2013, after a 36-year career with IBM."

A year ago, two executives were given control of the two parts of Global Services underneath Daniels: Bridget van Kralingen, who is now 49, was put in charge of Global Business Services, and Erich Clementi, who is now 56, was put in charge of Global Technology Services. With Daniels leaving, IBM is going to return Global Services to being a two-headed beast and have van Kralingen and Clementi reporting directly to Rometty.

So who is going to be the next IBM CEO when Rometty retires? Van Kralingen has not had enough cross training and has only been at IBM since 2004, but it is possible. She was born in the United Kingdom and spent 15 years with Deloitte Consulting in South Africa before joining Big Blue. She has run the financial services segment for IBM's GBS division in North America, then ran all of GBS in Northeast Europe, and most recently ran sales for all of North America. She has the international part down; now all she would need is the cross-group training.

Another possible contender – and there are many more than two – is Tom Rosamilia, who was appointed to run the combined Power Systems and System z mainframe businesses in the wake of the July 2010 reorganization.

Rosamilia, who is 51, graduated from Cornell University with dual bachelor's degrees in economics and computer science. He started out at IBM as an MVS mainframe operating system developer in 1983 and was appointed to head up System/390 software development in 1996. He brought Linux to the mainframe two years later, and then was made general manager of various software products within Software Group, including DB2, IMS, and Informix data management tools.

He eventually became general manager of the vast WebSphere portfolio, which includes middleware, transaction processing, e-commerce, and other stuff. He ran IBM's two most important server lines for several years, and was tapped by Rometty last May to directly report to her as vice president of corporate strategy and general manager of enterprise initiatives.

In that role, Rosamilia is mapping out IBM's technical and business future. He may well be the one who gets to execute it. ®

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