Gerstner positions Tivoli as key to e-business

IBM chairman and chief executive officer Lou Gerstner doesn't have buyer's remorse. His company's acquisition of Tivoli Systems in 1995 has proven to serve IBM well, and will continue to as IBM stretches its e-business strategy to include pervasive computing, Gerstner said.

The Tivoli acquisition, which cost IBM $US750 million, has turned into a $1.5 billion enterprise in a little over three years, said Gerstner during a rare appearance at the Planet Tivoli conference here Thursday. Tivoli's headcount has grown from 250 to 4,000 in that span of time.

IBM saw the acquisition of Tivoli as a way for Big Blue to become a true software company, and Tivoli's forte in systems management would be key to that initiative.

"I had been listening to CIOs, and first on their list was systems management," Gerstner said.

Today, IBM has reinvented itself as an e-business provider, and Tivoli continues to play a significant role in its parent company's strategy going forward.

Having successfully helped many customers implement e-commerce strategies that are server-centric, the next challenge for IBM will be to tie in the myriad devices that people rely on every day, Gerstner said.

"The next step in e-business is the natural extension of the connected world -- pervasive computing. Everything of value becomes a computing device," Gerstner said. He pointed to beverage giant Coca-Cola's use of embedded chips in vending machines that will help monitor sales and alert technicians of malfunctions.

"IBM won't build Dick Tracy watches, but [it will build] the chips, storage, and network management software to power them," Gerstner said. "When we think of the world of embedded devices, we see a world of Tivoli-ready devices."

To that end, IBM has a version of Tivoli's management agent for 3Com's handheld Palm Pilot device running in its labs, Gerstner said.

In addition to managing the smallest devices, Tivoli's software will also be used on some of the largest computers. Gerstner said that Tivoli's software will run on IBM's new G6 System 390 mainframes, and starting next month every IBM server will ship "Tivoli ready."

Despite the success of this acquisition, Gerstner admitted to some "modest apprehension" when IBM decided to buy Tivoli. Employees with the Austin, Texas-based software company wanted to know if shorts and sandals fit into IBM's definition of "business casual" attire, he said, and wanted assurances that the Tivoli Friday afternoon beer parties would continue -- both questions pointing out the corporate-culture differences between the two.

The IBM chief said that he put aside his concerns when he heard about one particular party. When the acquisition happened in 1995, Tivoli rival Computer Associates (CA) launched a campaign to woo Tivoli engineers by telling them that they had lost their independence. CA went so far as to rent an Austin hotel room to conduct interviews with Tivoli employees. Gerstner said that Tivoli engineers lined the street to the hotel holding signs that read "CA -- No way," and held a party in the same hotel. That party convinced Gerstner that the beer bashes should continue.

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