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IBM ushers in BIGGEST EVER re-org for the cloud era, say insiders

CEO Ginni Rometty making her mark...(it has been 3+ years)

IBM CEO Ginni Rometty

IBM CEO Ginni Rometty is instigating the biggest global re-org in the history of the corporation in a bid to carve out a clearer future in a cloudy world.

Multiple sources told us senior managers were this week informed about the changes that will see IBM try to shed the dusty hardware, software and services silo structure.

The main units will include Research, Sales & Delivery, Systems, Global Technology Services, Cloud, Watson, Security, Commerce, Analytics. Mobility is expected to overlay some divisions.

At the same time, the hardware and software channel teams will be rolled into the global Business Partner Group.

“This is a very major change,” said one person close to IBM. “The way IBM has worked for years is that the P&L, the power, the budgets and headcount was owned by the three groups.”

Operating Chinese walls between the hardware and software groups was to minimise conflict where IBM worked with other software or hardware vendors, but this was becoming less important with more and more customers wanting to consume technology like a utility.

All the technology old guard are trying to ramp up their cloud business to remain relevant in the 21st century, and not become the next Digital Equipment Corporation.

“Longer term, IBM has to be a business that makes sense in the new era [of computing consumption] and be easier to work with,” he said.

As revealed by us before Christmas, IBM’ers in the UK were offered voluntary redundancy on attractive terms, and this week those that decided to leap did just that.

The next phase will see IBM reassess whether it needs to cut costs further, forcing through compulsory redundancies. We have been told this could be a significant programme, with a well-placed source suggesting the cuts could run to tens of thousands. Whether it will be similar in scope to HP - 55k jobs cut - is not clear at this stage.

The complete make-over comes months after IBM’s calendar Q3 numbers when sales slipped six per cent year-on-year to $22.4bn and down more than eight per cent quarter-on-quarter.

Rometty branded the numbers as disappointing and decided to abandon her predecessor Sam Palmisano’s medium-term target of generating $20 earnings per share a year by 2015.

Now she is also shelving the organisational structure that served her predecessors so well for decades, albeit while recently showing signs of strain.

An IBM spokeswoman said she'd get back to us. ®

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