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An Anti-Oracle Play or IBM’s Succession Plan?

IBM reorganized its executive suite Monday

IBM reorganized its executive suite Monday in a move that an ex-IBM VP thinks signals that CEO Sam Palmisano, on the cusp of turning 59 later this month, “is planning to stick around for a while and just wants smaller staff meetings.”

Most everybody else sees it as the beginnings of a succession plan with the survivor of the obstacle course acceding to the throne.

See, IBM CEOs have this tradition of retiring and passing their swagger stick on to the next generation at 60. Sam got the job when he was 50. If he sticks around indefinitely, those in the newly ordained inner circle may be too old to succeed him. Some are already deemed too old. Ultimately IBM may look elsewhere.

Succession plans to one side – and one should remember that IBM CEOs are either sales guys or financial guys, not technologists – the leaked reorg concentrates power in four senior executives by collapsing units into one another.

Steve Mills (pictured above on the screen behind former Sun CEO Jonathan Schwartz), who has headed up software for the last 10 years and has turned the unit into IBM’s biggest revenue generator after services, will now be running both software and hardware, two operations that have never been united under one person before.

Hardware used to be the soul of IBM, and many still think it is, but it isn’t. Where it may have gone wrong is in largely ignoring software and selling servers, not systems. Mills has evidently been given the job of fixing that situation because the internal e-mail that Palmisano circulated Monday night announcing the changes – an e-mail that just happened to get to the New York Times and the Wall Street Journal – reportedly said that “computer systems must be ‘designed and brought to market as tightly integrated’ packages of hardware and software.”

Who better to see that happen than Mills, the guy who would likely be named CEO if Palmisano were run over by a streetcar tomorrow? At 58, the same age as Palmisano, it’s widely assumed Mills has known he would never get to be CEO otherwise. Good thing he likes power. As head of a combined hardware-software unit, he can ensure that IBM maintains parity with Oracle now that Oracle has Sun’s hardware, wants to take on IBM big time and is already preaching the integrated gospel.

Palmisano evidently timed his e-mail in anticipation of the company’s announcement Thursday of its new mainframe. Mills, who has never in his life run any kind of hardware unit, was already scheduled to be there along with Rod Adkins, 51, the head of IBM’s Systems and Technology Group since last fall when Palmisano’s reported confidant Robert Moffat, Adkins’ predecessor, got arrested for his ties to the Galleon insider trading scandal and literally screwed himself out of a career. We’ll never know whether Moffat ever had a shot at being CEO of IBM as widely reported. Adkins, 51 and black, will be working for Mills now and one might expect the hardware-software integration theme to be articulated at Thursday’s affair.

IBM Global Services has been divided into two parts for some time: Virginia Rometty, 52, ran Global Sales and Distribution and Michael Daniels, 56, ran the Global Technology Service. With the shuffle Daniels gets the whole kit and caboodle and Rometty, who seems to be everyone’s odds on favorite to be the next CEO of IBM, gets to run marketing, strategy and sales. (This we gotta see, a woman running IBM this side of the 100th anniversary of women’s suffrage. They say she’s a strong player and there may be some grooming going on here.)

Palmisano springboarded to the top of IBM off of Services but the world is changing and Services may conceivably decline in importance at IBM in the next few years. The emerging markets, for instance, now represent 20% of IBM’s revenues and IBM wants more.

The charter of IBM CFO Mark Loughridge, 57, is being enlarged to include the company’s finance unit and its internal IT.

More Stories By Maureen O'Gara

Maureen O'Gara the most read technology reporter for the past 20 years, is the Cloud Computing and Virtualization News Desk editor of SYS-CON Media. She is the publisher of famous "Billygrams" and the editor-in-chief of "Client/Server News" for more than a decade. One of the most respected technology reporters in the business, Maureen can be reached by email at maureen(at)sys-con.com or paperboy(at)g2news.com, and by phone at 516 759-7025. Twitter: @MaureenOGara

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