IBM is reorganizing its Global Services business, replacing John Joyce as the group's head with a pair of executives.
Joyce, 51, who spent 30 years at IBM and once served as the company's chief financial officer, is leaving IBM to join private technology investment firm Silver Lake Partners. Taking charge of IBM Global Services will be Ginni Rometty, 47, who gains the title senior vice president of enterprise business services, and Mike Daniels, 51, senior vice president of IT services. The two will report directly to IBM Chief Executive Officer Sam Palmisano. The company announced the changes in a memo to employees on Tuesday.
IBM spokesman Edward Barbini said the changes are not a consequence of problems in the services business. When IBM fell short of expectations in the first quarter of this year, executives attributed some of the shortfall to trouble closing Global Services deals. The unit appears to have righted itself, however: In the second-quarter results IBM announced Monday, Global Services showed growth from last year and boosted its contracted backlog by US$3 billion from last quarter's end. Global Services is IBM's biggest moneymaker, bringing in 54 percent of the company's revenue last quarter.
"This is a natural evolution of the services business that we've been looking at for a while," Barbini said. "It reflects our clients' needs. Some choose to buy IT services, some choose to buy business transformation services."
The realigned services group will focus more heavily on "high-value" skills, Barbini said, like those represented in the Business Consulting Services (BCS) group IBM formed around its acquired PricewaterhouseCoopers Consulting (PwCC) practice. Rometty previously ran BCS and oversaw PwCC's integration with IBM.
IBM's new structure also spotlights executive Bob Moffat, who gained new responsibilities and a title tweak. Formerly IBM's senior vice president of integrated supply chain, Moffat, 49, will now be senior vice president of integrated operations.
Moffat's wonky title camouflages the vital role played by the 27-year IBM veteran. By working with the company's vast network of suppliers to improve procurement and manufacturing, he's developed more streamlined systems that IBM estimates save it billions of dollars each year. Moffat will now work on bringing similar efficiencies to IBM Global Services' worldwide operations, Barbini said.
IBM likes to rotate top-management candidates through its various divisions, and its executive shuffles tend to have a domino-chain effect. This one is no exception. Daniels, who now joins Rometty at the head of global services, previously ran sales for IBM Americas. He will be replaced in that role by Marc Lautenbach, 44, who had served as general manager of IBM's SMB (small and medium-business) efforts.
In a separate executive move, IBM promoted Nicholas Donofrio, 59, to executive vice president of technology and innovation. The 40-year company veteran (including a college stint working for IBM) oversees a number of areas, including IBM's famed research group.
Keeping IBM Global Services running smoothly is a priority for Big Blue, which has radically reshaped itself in the past decade around the services business. Following IBM's recent quarterly earnings announcement, Prudential Equity Group analyst Steve Fortuna praised Global Services as a gem under-appreciated by Wall Street, with "unbelievable" margins of more than 9 percent (excluding non-cash expenses related to stock options).
"The services division posted the most impressive performance in the quarter," Fortuna wrote in a research note. "Operational improvements have clearly started to pay big dividends, and we are hugely impressed at how effectively John Joyce has turned around the entire business."