IBM has reorganized its massive Global Services business, a roughly $50 billion-a-year business, the company said in a memo to employees on Tuesday, promoting several executives in their 40s to roles that could groom them for top management spots.
John Joyce, 51, the executive formerly in charge of Global Services, which accounted for more than half of IBM's revenues and its former chief financial officer, has left to join private equity firm Silver Lake Partners, both companies confirmed. Joyce was, in effect, the No. 2 most powerful IBM executive after Chairman and Chief Executive Sam Palmisano.
"When the services business became more than 50 percent of the company, it had to be managed in a different manner," said Frank Dzubeck, president of Communication Network Architects in Washington, D.C., and a strategy consultant to IBM.
"Professional services has become more and more divorced from technology services," Dzubeck said.
Armonk, New York-based IBM said it named a three-executive team made up of Ginni Rometty, 47, Mike Daniels, 51 and Bob Moffat, 48, to run the global services business, which generated half the $96.5 billion IBM reported during 2004.
All three will report directly to IBM CEO Palmisano.
On Monday, IBM reported second quarter revenue of $22.3 billion, down 4 percent from the same period last year, reflecting the sale of its PC business to China's Lenovo Group Ltd.. The report showed solid growth in services revenue and a surge in new contracts, marking a rebound from a sudden downturn in its services business in the first quarter.
In addition, Marc Lautenbach, 44, will be succeeded by Steve Solazzo, 49, a 27-year IBM sales executive, as general manager of IBM's small and medium business unit. Lautenbach is replacing Daniels as head of IBM Americas, the sales arm.
He is the son of former IBM sales head Ned Lautenbach, now a partner at private equity firm Clayton Dubilier & Rice.
In other executive moves, Janet Perna, general manager of IBM's Information Management Solutions, will retire after 31 years at IBM, and be replaced by Ambuj Goyal, 48, now the general manager of IBM Lotus.
Analysts said the promotions reflect an effort to broaden the experience of a generation of managers, now in their 40s, who could one day be in line to become top leaders. Palmisano, the current CEO, rose on similar track during the 1990s.
"The next generation is now being given more responsibility," Dzubeck said.
In a memo to employees, IBM said it plans to reorganize its services business into two arms.
One, called "technology services," includes information technology services, outsourcing and security, and a second, entitled "business value services," is made up of consulting, business strategy and asset management services, it said.
Rometty is promoted to senior vice president, enterprise business services, the consulting and strategy wing. She previously was general manager of IBM Business Consulting Services, a post she assumed after IBM's $3.5 billion acquisition of PricewaterhouseCoopers (PWC) in 2002.
Daniels, general manager of IBM Americas, the domestic sales arm, becomes the head of information technology services. Daniels once ran IBM's global services business in Asia.
Moffat was named senior vice president of integrated operations, a cross-organizational job.
Moffat, a kind of internal efficiency guru within the company credited with wringing billions in cost-savings from its global product supply chain, has always worked on the "classic" side of IBM -- its hardware business.
He is known for restructuring the loss-making PC business and then using those skills to cut-costs in its hardware businesses globally. Now Moffat is being asked to apply his cost-cutting and reorganization skills to the services side.
The move to restructure services comes on the heels of a May job-cut plan that will reduce IBM's workforce by 14,500.
Most of the cuts will fall on the services side of IBM's business, with 70 percent of the job cuts in Western Europe. The company is seeking to relocate its workforce in faster-growing, lower-cost emerging markets including China, India and Eastern Europe, analysts said.
