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> October 31, 2002 > The New Leader of I.B.M. Explains His Strategic Course > By STEVE LOHR > THE NEW YORK TIMES > > http://www.nytimes.com/2002/10/31/business/media/31ADCO.html?todaysheadlin > es > WITH a speech in New York yesterday at the start of a costly and quirky > marketing campaign, Samuel J. Palmisano, I.B.M.'s chief executive, > declared his company was making a $10-billion bet on a strategic shift > toward what it calls "on-demand computing." > Mr. Palmisano told the business executives and industry analysts in > attendance that on-demand computing would allow corporate customers to > purchase computing resources as needed as a utility-style service, almost > like electricity. Beyond cost savings, Mr. Palmisano explained that the > utility model would help companies become more flexible and fast-moving by > integrating more closely internal operations like procurement, marketing > and manufacturing. The company also expects it to improve communications > with partners, suppliers and customers. > The new marketing push from the WPP Group's Ogilvy & Mather Worldwide will > account for most of I.B.M.'s $500 million-a-year advertising budget and is > the sequel to I.B.M.'s "e-business" campaign. That effort, though > initially derided by rivals when it began in 1997, proved quite > successful, by explaining the practical uses of the Internet to I.B.M.'s > mainstream corporate customers. > But the new I.B.M. initiative - called "e-business on demand" - faces a > tougher challenge. Unlike the late 1990's, today the economy is weak and > corporate technology spending has collapsed. The grand promises of > technology's benefits, made with such confidence a few years ago, remain > unfulfilled. > Yet Mr. Palmisano observed that he had seen "some encouraging signs" that > the worst of the technology slump may be over and that corporate customers > have not given up their faith in the productivity benefits of technology. > His mildly encouraging comments helped prop up the stock market yesterday, > and shares of I.B.M. rose $1.93 a share, to close at $78.67. > I.B.M's new campaign begins today with television advertisements and > eight-page ad inserts in The Wall Street Journal, The New York Times and > The San Jose Mercury News. The ads poke fun at fantastic gadgets - a time > machine, a "universal business adapter" and "magic business beans," for > example. > Chris Wall, head of the creative team at Ogilvy that developed the I.B.M. > campaign, said the use of the zany machines was meant to be a humorous > slap at the hype of the Internet bubble days. By contrast, I.B.M., the ads > say, has the technology, people and skills to solve the real-world > problems of company's grappling with the challenges in a turbulent > economy. > "Humor translates as confidence," Mr. Wall noted, "and that works well > with I.B.M. these days." > The campaign also has broader objectives. It gives I.B.M.'s work force, > and perhaps others in the industry, a goal to pursue and champion at a > time when the industry is in the doldrums. Mr. Palmisano announced > yesterday that Irving Wladawsky-Berger, an I.B.M. executive and scientist > who led the company's drive to embrace the Internet, will lead the > on-demand computing initiative. > I.B.M.'s competitors - Hewlett-Packard, Sun Microsystems, Microsoft - are > all working on utility computing, and some claim to be ahead in some > areas. Yet the campaign is also meant to present I.B.M., which has by far > the largest research budget in the industry, as the company with the most > ambitious, far-reaching vision of an emerging direction in computing. > The glue for the on-demand model will be clever hardware and software, > which I.B.M. hopes to supply. And helping corporate customers figure out > how to move to the lower cost, more flexible world of business could > generate a lot of new business for I.B.M.'s big services arm. > "What I.B.M. is doing is putting a big budget behind its effort and a > label on it that will appeal to a business audience," said Frank Gillett, > an analyst for Forrester Research. > The campaign also gives Mr. Palmisano, 51, who became chief executive in > March and chairman on Tuesday, a highly visible strategic plan to claim as > his own. His predecessor, Louis V. Gerstner Jr., who guided I.B.M. back > from deep troubles in the early 1990's, is regarded as a brilliant > business strategist. > Industry analysts view Mr. Palmisano, a 29-year I.B.M. veteran, as an > outstanding salesman and operations executive, though they were waiting to > see what strategic course he would set. > In his speech yesterday, Mr. Palmisano placed many of the moves that had > been made recently - opening an advanced semiconductor plant, the > acquisition of a string of software companies, the $3.5 billion purchase > of PwC Consulting, and the new marketing campaign - as all part of the > on-demand computing strategy. All those investments added up to the > $10-billion figure he used. > "It's a bold bet, no doubt about it," he said. "But I don't think it is a > risky bet. It's what our customers want." > ************************************************************************************ Distributed through Cyber-Society-Live [CSL]: CSL is a moderated discussion list made up of people who are interested in the interdisciplinary academic study of Cyber Society in all its manifestations.To join the list please visit: http://www.jiscmail.ac.uk/lists/cyber-society-live.html *************************************************************************************