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IBM prepares one of its biggest corporate organization changes

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January 9, 2015

IBM CEO Ginny Rometty is preparing what looks to be the largest global corporate re-org in the history of the IT services giant in an effort for a clearer future in an increasingly competitive world.

Multiple sources told us that senior managers were this week informed about the complex changes that will see Big Blue try to shed a lot of hardware, software and services in its now outdated silo structure.

IBM's new main units will include:

  • Research
  • Sales & Delivery
  • Systems
  • Global Technology Services
  • Cloud
  • Watson
  • Security
  • Commerce
  • Analytics
  • For its part, mobility is expected to overlay some divisions but will still be a big part of the company.

    Meanwhile, the hardware and software channel teams will be rolled into the global Business Partner Group.

    “These are very, very big changes,” said one person close to the company. “The way IBM has worked for several years is that the P&L, the power, the budgets and headcount was owned by the three groups.”

    Operating so-called 'Chinese Walls' between the hardware and software groups was to minimise conflict where IBM worked with other software or hardware vendors, but this was becoming less important with more and more enterprise customers wanting to consume technology like a utility.

    All the technology old guards are trying to ramp up their cloud business to remain relevant in the 21st century, and not become the next Digital Equipment Corporation.

    “Longer term, IBM has to be a 'business center' that makes sense in the new era of computing consumption and be easier to work with,” he said.

    For example, IBM workers in Britain were offered voluntary retirement on attractive terms, and this week those that decided to accept did just that.

    The next phase will see IBM reassess whether it needs to cut costs further, forcing through compulsory redundancies.

    We have been told that this could be a significant program, with a well-placed source suggesting that the cost cuts could run to tens of thousands.

    Whether it will be similar in scope to HP (55,000 jobs cuts across the company) isn't clear at this time.

    The complete make-over comes a few months after IBM’s calendar Q3 numbers when sales slipped six per cent year-on-year to $22.4 billion and down more than 8 percent quarter-on-quarter.

    Rometty branded the numbers as 'disappointing' and decided to abandon her predecessor Sam Palmisano’s medium-term target of generating $20 earnings per share a year by 2015.

    Now she is also shelving the organizational structure that served her predecessors so well for decades, albeit while recently showing signs of strain.

    Whether all these changes will work remains to be seen. One thing is for sure: Wall Street will be carefully watching Rometty's numbers in the next two quarters and they better see some improvements.

    Source: IBM.

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