IBM Announces New Organizations, Operational Changes Under Plan for Increased Autonomy of Business Units

IBM Announces New Organizations, Operational Changes Under Plan for Increased Autonomy of Business Units

Armonk, N.Y. -- December 5, 1991 -- IBM (NYSE: IBM) Chairman John F. Akers today announced changes that will begin to redefine IBM as an organization of increasingly independent businesses and companies.

The changes include the formation of new business units representing IBM's worldwide storage and printer product lines and certain personnel operations in the U.S. In addition, IBM announced organizational and management system changes involving its personal systems, mid-range, large systems and technology products businesses.

IBM also announced details of new management and measurement systems for all IBM business units. These details were discussed Wednesday at a meeting of IBM's senior management team from throughout the world.

"The new organizations will be on the leading edge of the changes," Akers said, "but the new management and measurement systems will apply to all of IBM's businesses, making each one more autonomous.

"As a result, each business will be increasingly competitive by being more sharply focused and faster paced, with highly skilled employees and a continuing, relentless pursuit of our market-driven quality goals."

New Organizations

IBM today announced the following new companies, business units, and organizational and management system changes:

Pennant Systems Company, responsible for the development and manufacture of IBM's worldwide advanced function printers and related software and for advanced printing services. IBM intends to make this organization a wholly owned subsidiary. It is currently a $2 billion business in a $30 billion industry. IBM Vice President James T. Vanderslice was named president, reporting to IBM Senior Vice President Terry R. Lautenbach. Vanderslice was senior managing director, manufacturing and development, IBM Asia-Pacific, Tokyo. The company's headquarters will be in Norwalk, Conn.
Storage Products line of business, responsible for the development and manufacture of IBM's disk, tape and optical storage products and related software. This currently is an $11 billion business in a $53 billion industry. IBM Vice President Ray S. AbuZayyad was named general manager, reporting to IBM Senior Vice President Terry R. Lautenbach. AbuZayyad also was named to IBM's corporate management board. AbuZayyad was IBM vice president and president, Storage Systems Products Division, Enterprise Systems line of business. The Storage Products line of business headquarters will be in San Jose, Calif.
Employment Solutions Corporation, a wholly owned subsidiary that will provide selected hiring and recruiting services to IBM in the U.S. It also intends to market these services to other companies. Employment Solutions will have personnel policies and practices consistent with its industry and will be staffed through selective, voluntary recruitment of IBM employees and non-IBM employees. Kenneth R. Lay was named president, reporting to William J. Colucci, assistant general manager, personnel, IBM United States. Lay was IBM director of education, corporate personnel staff. A headquarters location for Employment Solutions has not been chosen.

IBM also announced organizational and management system changes involving its:

Personal Systems line of business, which formed the Entry Systems Technology organization. The new organization was formed to increase efficiency in developing future subsystems and technologies. Personal Systems also formed an executive board, made up of marketing executives from IBM's major geographic units, who will be responsible for PC business results within their areas. The executive board will be headed by James A. Cannavino, IBM vice president and general manager, personal systems.
Application Business Systems line of business, which will have AS/400 brand managers in each of IBM's key geographies. Many countries also will implement a specialized, dedicated general business marketing organization to focus on growing intermediate and small business opportunities.
Technology Products line of business, which now reports to IBM President Jack D. Kuehler. Technology Products formerly reported to IBM Senior Vice President Terry R. Lautenbach.

IBM also announced the establishment of an executive steering committee to ensure a continued effective working relationship among the various parts of IBM's large systems business, including the Enterprise Systems, Storage Products, Networking Products, Programming Systems and Technology Products lines of business. The committee will be headed by IBM Senior Vice President Terry R. Lautenbach.

New Management and Measurement Systems

Throughout the company, there will be new management and measurement systems designed to give individual businesses new independence and accountability to optimize their respective markets. As each market is different, the management and measurement systems applied to the individual businesses will vary.

However, certain principles will apply to all, including individual reporting of financial results from IBM's major businesses, compensation tied more directly to each unit's performance, and operational changes that will inject more market discipline into the relationships between IBM's business units.

The new management and measurement systems also will have specific implications for the marketing and services companies, manufacturing and development businesses, and the IBM Corporation, as follows:

Focused Marketing and Services Companies

"IBM's marketing and services companies increasingly will become service companies in the true sense of the word," Akers said, "creating value for customers through their knowledge and skills, and depending less, over time, on product cycles and hardware volumes for their prosperity."

The marketing and services companies will:

Remain the focal point for managing customer relationships. This means they will hold the exclusive franchise for products with the IBM logo, with few exceptions.
Provide integrated offerings from among the best products, services and technologies from across the industry, including non-IBM products if required.
Segment their markets based on a number of factors, including customer size, industry, product or application, based on the companies' assessment of the market opportunity and potential returns.
In most cases, be responsible for field inventory they buy from IBM manufacturing and development businesses. This change will improve demand forecasting and overall business efficiencies.
Create and manage alliances and partnerships to enhance business results.
Set resource levels.
And be measured on revenue, margins, cash and returns.

More Autonomous Manufacturing and Development Businesses

"As each manufacturing and development business is different, the degrees of independence will differ," Akers said. "We expect these more independent businesses will make better investment decisions because they are more agile, faster and closer to the markets they choose to serve."

The manufacturing and development businesses will:

Gain responsibility for managing manufacturing and development investments, capacity and assets worldwide, working closely with country general managers, who will continue to be responsible for personnel, legal, and other local matters. IBM's country general managers will continue to be the principal executives in their countries.
To varying degrees, be free to maximize sales through the original equipment manufacturer and other distribution channels.
Create and manage alliances and partnerships to enhance business results.
Set resource levels.
And be measured on revenue, margins, cash and returns.

Increased Flexibility for the IBM Corporation

"The IBM Corporation will have increased flexibility to manage the portfolio of businesses and focus on pursuing promising growth markets, investing or divesting to maximize IBM's overall financial results," Akers said.

The IBM Corporation will:

Set the financial objectives for its various businesses, and review and approve individual business investment and operating plans. The IBM Management Committee will resolve operational issues only when necessary.
Manage development and equity investments among current businesses, alliances, partnerships and new ventures, based on results and prospective growth opportunities. Individual companies or businesses may have a variable amount of IBM ownership at any time.
Establish a new process to select and invest in strategic business opportunities worldwide.
Manage other corporate responsibilities, including IBM's basic beliefs, image and brand identity, corporate citizenship, and corporate financing matters.

CONTACT: Rob Wilson of IBM, 914-765-6565