03:53 AM

Lessons For HP From Outgoing IBM CEO

Sam Palmisano, the departing CEO of IBM, told Steve Lohr, of the New York Times his game plan for the company can be captured in answering four questions:

- “Why would someone spend their money with you — so what is unique about you?”

- “Why would somebody work for you?”

- “Why would society allow you to operate in their defined geography — their country?”

- “And why would somebody invest their money with you?”

This led to some bold decisions, such as selling the IBM PC business to Lenovo despite strong push back within IBM.

Internal arguments against a sell-off were intense: PCs pulled in sales of other I.B.M. products in corporate accounts, the cost of electronic parts for its larger computers would jump without the purchasing power of its big PC division, and the corporate brand and its reputation would suffer without PCs, the one I.B.M. product touched by millions of people.

It's an interesting read. I used to cover IBM for the Financial Times, and a simpler explanation for IBM's strategy is: move out of commodity markets and keep moving up the stack.

IBM needs to charge premium prices for its products and services and its challenge is finding new premium markets.

It's now mostly an IT services and software company which means its services growth is constrained by the number of people it can put to work. And its software business faces challenges from cloud computing based services -- ironically the cloud is a concept that it helped to popularize.

These are the challenges that IBM's first woman CEO Virginia Rometty will have to answer.

It's a good read for HP too, as it tries to emulate some of the IBM strategy in IT services group.