IBM Shakes Up Leadership in Strategic Pivot

Executive changes on tap as IBM sheds spotlight on cloud enablement apps and services

Leadership changes are coming at IBM as it transitions into a cloud enablement provider. Big Blue announced that Arvind Krishna will assume the CEO role and Red Hat CEO James Whitehurst will become president. Longtime CEO Ginni Rometty will become the executive chairman of the IBM board through 2020 as she transitions into retirement.

The Lowdown:  IBM announced the leadership changes after trading hours this afternoon and less than a week after it announced strong quarterly earnings that ended five consecutive quarters of sales decline. Under the transition plan, Rometty will continue to serve on the IBM board through the end of the year, while Krishna and Whitehurst move into their new roles in April.

The Details:  Krishna was a strong candidate for the IBM CEO post. He’s a longtime IBM executive who currently serves as the senior vice president of Cloud and Cognitive Computing, which includes all of IBM’s cloud, security, and artificial intelligence business. Previously, he served as the general manager of IBM’s Systems and Technology Group, and ran several of IBM’s businesses over his career.

Whitehurst is the current senior vice president of IBM and CEO of Red Hat, the open-source software company Big Blue bought last year for $36 billion.

The Impact:  The bifurcation of Rometty’s leadership role and the elevation of Krishna and Whitehurst is a clear signal that IBM plans to focus on cloud enablement applications and services. Analysts questioned the wisdom of the Red Hat acquisition, saying it may be too big and too late. IBM, though, is betting that Red Hat will become the catalyst for making IBM the company that makes cloud adoption and operations through container technologies. Krishna and Whitehurst are the two executives that can make that vision become reality.

Background:  Rometty became CEO in 2012 following the retirement of Sam Palmisano. During her tenure, Rometty oversaw the acquisition of 65 companies, the divestiture of several assets, including the server business unit, and the development of new capabilities, such as hybrid cloud, security, artificial intelligence, and data analytics.

While Rometty gets credit for “reinventing” more than half of IBM’s business, turbulence marked her tenure. Over the past eight years, IBM’s gross revenue fell continuously, sales suffered strings of consecutive quarterly losses, and the company lost market share to rivals and upstarts.

The Buzz:  “Arvind thinks and executes squarely at the intersection of business and technology,” said Alex Gorsky, chairman of the board’s Executive Compensation and Management Resources Committee. “He is an ideal leader to succeed Ginni and take IBM and its clients into the next chapter of the cloud and cognitive era. Jim has been a great addition to IBM’s leadership team. His considerable business and leadership skills will help IBM grow and flourish, and as president he will help Arvind and IBM continue to accelerate and scale the benefits of Red Hat, while ensuring that Red Hat also preserves its unique culture and commitment to open source innovation.”

“I am thrilled and humbled to be elected as the next [CEO] of IBM, and appreciate the confidence that Ginni and the board have placed in me,” said Krishna. “IBM has such talented people and technology that we can bring together to help our clients solve their toughest problems.  I am looking forward to working with IBMers, Red Hatters, and clients around the world at this unique time of fast-paced change in the IT industry.  We have great opportunities ahead to help our clients advance the transformation of their business while also remaining the global leader in the trusted stewardship of technology.  Jim will be a great partner in the next step of this journey.”

“Ginni has provided outstanding leadership for IBM, substantially transforming the company and ushering in a new cloud and cognitive era,” said Michael Eskew, lead director of the IBM board of directors.  “She has taken bold strategic actions to reposition IBM for the future, shedding businesses and growing new units organically and through acquisition, all while achieving record diversity and employee engagement and setting the industry standard for responsible technology ethics and data stewardship.”

“I am truly honored to be elected as IBM’s president,” said James Whitehurst.  “I look forward to working with Arvind, and with IBMers and Red Hatters alike, to continue to bring together the best of our companies and cultures.  I’ve had the opportunity to interact with IBMers across the company over the past few months, and I have been so impressed with the talented and dedicated team we have. When I first joined, I said that I believe we have the opportunity to be the defining technology company of the 21st century. After working with our clients, IBMers, and Red Hatters over the past months, I am even more convinced of that opportunity today.”