January 12, 1998 (Vol. 20, Issue 2)

IBM executive shuffling hints to the future

By Steven E. Brier

IBM last week made a series of changes in its senior management ranks, further preparing another group of leaders and filling a hole created the by illness of one its division managers.

Prompting the changes is Senior Vice President and Head of IBM Global Services Dennie M. Welsh, who is taking an open-ended medical leave. Samuel J. Palmisano takes his place as general manager of Global Services.

Palmisano, thought to be one of the potential candidates for Gerstner's job when it comes open, has been running the Personal Systems Group.

Palmisano is no stranger to his new job, having been president and CEO of the precursor to Global Services, the Integrated Systems Solutions, in 1993. Palmisano's move, although it is a lateral one, positions him well for a larger role at IBM. Like Welsh, Palmisano is a senior vice president and member of IBM CEO Lou Gerstner's executive committee.

Global Services is one of IBM's consistently bright spots. It employs more than half of IBM's 240,000 employees and has been growing rapidly. The amount of money generated by services has been growing at double-digit rates -- 19.7 percent in the latest quarterly report -- and analysts expect it to be responsible for as much as a third of IBM's revenue by 1999.

"This change puts [Palmisano] in charge of IBM's future revenue stream," said Sam Albert, an industry analyst in Scarsdale, N.Y. "But it is a natural move because he was Mr. Welsh's right-hand man when the group was started."

Also getting new jobs are David M. Thomas, who moves from general manager of Global Industries to the Personal Systems Group; Linda S. Sanford, who moves from general manager of the mainframe group to Global Industries; and David R. Carlucci, who moves from CIO to Sanford's former job as general manager of the S/390 group.