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  1. Technology
January 31, 1988


By CBR Staff Writer

We have never talked with so many irate investors who have thrown in the towel on IBM. The fourth quarter figures broke the camel’s back, Stephen Milunovich, computer industry analyst told the Wall Street Journal on Wednesday. Something clearly had to be done, and on Thursday last week, IBM did something. It instituted the most radical reorganisation in its history, and where in the past, it has reorganised by repainting all the signs and changing names on doors around, this time, it is shooing a whole level of responsibility out of Armonk and away into five semi-autonomous business groups. Chairman and chief executive John Akers doesn’t give himself a president to help him run the company – instead he takes on two vice-chairman, an executive vice-president and two senior vice-presidents who come together to create a new management committee. Kaspar Cassani, a transferee a couple of years back from IBM Europe adds review responsibility for worldwide marketing in addition to his role as head of the three big World Trade companies – Europe, Asia, and the Americas. Shunted Alongside him, the other new vice-chairman Jack Kuehler has review responsibility for two of the five new business groups, Enterprise Systems (370) and Technology Products (chips). He also has perhaps the biggest leaper, senior vice-president Terry Lautenbach, described as IBM’s toughest troubleshooter, who moves over from the Rolm end of the business to become General Manager of the new IBM United States, reporting to him. He is also responsible for the surviving Federal Systems Division – now the basis of IBM’s attempt to create its own Electronic Data Systems. Allen Krowe, shunted out of the finance post a year or so ago, becomes the review executive for the other three new business groups, as well as being in charge of property and construction staff. The other two members of the management committee are the two senior vice-presidents, Frank Metz, in charge of IBM Credit Corp and finance and planning staffs, and D McKinney, operating staffs. The new IBM United States – under Terry Lautenbach – is the umbrella body for the five new development, manufacturing and market planning groups, plus the US Marketing & Services group, formerly the Information Systems Group. Edward Lucente stays on as its group executive, but seems to drop a place or two further away from the pinnacle of the company. The other five divisions each has a general manager. Carl Conti gets Enterprise Systems, Stephen Schwartz Application Business Systems, George Conrades Personal Systems, Ellen Hancock, Communication Systems, and Patrick Toole, Technology Products. In taking on Communication Systems, Ms Hancock succeeds Terry Lautenbach and becomes IBM’s highest ever woman executive. Each of the five new divisions will take over from corporate headquarters in Armonk their own day-to-day operational decisions, supposedly shortening the lines of communication. That implies a major move of staff away from corporate headquarters, and no doubt many will leave the company rather than transfer, and IBM won’t be shedding any tears about the prospect of reducing its administrative headcount still further. Old-fashioned The first feature of the reorganisation that is noteworthy is that unlike most of IBM’s recent shake-ups, it does not immediately affect marketing. It also incidentally does not directly affect non-US activities at all. In the US, the existing regional marketing groups in the US remain in place – at least for now. The second is how remarkably old-fashioned it looks. The new Application Business Systems group, which will effectively be dedicated solely to Silverlake and the disks and tapes that will go with it, is effectively a rebirth of the core of the old General Systems Division. The new Personal Systems business takes in displays – including 3270s, which underlines the fact that the most important role in IBM’s eyes of the Personal System/2 is to take over all the desk space currently occupied by 3270s; the Personal Systems group also now takes in typewriters. The 9370 r

emains with the 4381 and the top-end 3090 in the Enterprise Systems group – but then 4300 was a Data Processing Division product. But communications software goes off into the Communication Systems division, alongside the Rolm switches – does that mean that responsibility for Systems Network Architecture passes out of the Enterprise Systems group? IBM has recognised that chips are chips whether they are used in the memory of a 3090 or a PS/2 by having a Technology Products group serve the whole company. Yet if customers are expected to believe that Systems Applications Architecture will really solve all the intractable portability problems created by IBM’s disparate product lines, wouldn’t it have been more convincing to create a separate software group that would stand side by side with Technology Products, and treat all processors simply as platforms? Indeed nearly all IBM’s problems come down to software and this reorganisation seems to do very little to address those problems. Dinosaur The other worry that is already being voiced is that all but one of the promotions appear to be of people who either came up through the old Data Processing Division or were in some way predominantly involved in some way with large systems – and it is the dinosaur thinking of DPD that is at the root of all the problems IBM has created for itself with the careless introduction of the Personal Computer, which when the history of the 1980s comes to be written will be recognised as the company’s biggest ever disaster. And despite the fact that the System 38, in the guise of Silverlake, finally gets its own champion, the predominance of DPD people – who never believed in the 38 in the first place, bodes ill for the prospects of Silverlake. Will this reorganisation really serve the desires and demands of IBM’s shareholders? It is difficult to see that it will. Now if IBM had decided instead to give holders shares in a Large Systems Inc, a Medium Systems Inc, a Personal Systems Inc and a Communications Systems Inc, and allowed the four to slug it out as independent companies in the market, so that the champions of System 38, the RT and the Personal Computer could argue their marketing case with unbridled enthusiasm and without constantly looking over their shoulders and wondering what the DPD alumni were thinking, Wall Street would quickly value the sum of the parts at substantially more than it presently does the soggy whole, and the entire computer market would be an altogether healthier and more exciting entity. John Akers regularly repeats that IBM still have confidence in the computer industry – but does the computer industry still have confidence in IBM?

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