IBM Loses Two Key Executives to Retirement–Really

May 12, 2008 Timothy Prickett Morgan

The deck chairs are changing once again at the good ship Big Blue, and this time, not only are the top brass moving into new roles at the company, but some heavy hitters at IBM are trading in their office chairs for Adirondack chairs at their vacation hangouts as they retire from the company. It is hard to get any bluer than Bill Zeitler and Nick Donofrio, but a new team of managers is now being given a chance to try now that these two are retiring from the company in the wake of their impending 60th birthdays.

I know what you are thinking. “Retirement” is just a euphemism for “being fired,” right? Not in this case. Since Tom Watson founded IBM nine decades ago, it has been a tradition for the top executives of the company to retire around their 60th birthdays. Even Louis Gerstner, IBM’s much-celebrated former chairman and chief executive, and John Thompson, its former vice chairman, retired in 2002 when they were heading toward their 60th birthdays, leaving Sam Palmisano, then the company’s president and chief operating officer, at 50, the heir apparent to run the company. Being retired from IBM doesn’t mean executives necessarily stop working. Gerstner took a few days off and then became chairman of the defense contractor private equity firm The Carlyle Group after leaving IBM.

Now, it is six years later. Palmisano himself is only four years away from his retirement, and IBM has to start figuring out who is going to run the company. Zeitler, who is general manager of the company’s Systems and Technology Group, which designs, makes, markets, and sells servers and storage, never had a chance to take the reins of Big Blue once it became apparent that Gerstner and the IBM board would tap the younger Palmisano for the top job, but it seemed likely back in 2002 that the board might decide, with Gerstner and Thompson leaving, that IBM would keep the president and COO roles alive to start training the next generation of leaders at the company. Steve Mills, general manager of Software Group and as visible at IBM as Zeitler has been, is 55 and is similarly not going to be in the running for the top job, either, unless IBM changes its informal retirement policy.

Zeitler has been at IBM for nearly four full decades (39 years), and that is anywhere from two to eight times as long as any journalists and analysts in the IT sector have been around. (Zeitler has a 2X factor over me, and I am one of the former upstarts and rapidly becoming old farts of the IT trade rag racket.) Zeitler started out as a programmer with IBM back in 1969 and held a number of executive positions before being tapped as general manager of IBM’s worldwide software sales and marketing when Software Group was constituted a decade and a half ago; he was eventually given charge of the AS/400 Division, then all of IBM’s server brand marketing, and then took over mainframes, and then in 2000 was given control of the entire IBM server portfolio. Zeitler has pushed for the consolidation of IBM’s server lines as well as their continuing differentiation at the software level, and has been keen on ramping up sales of chips to external companies and custom (rather than general purpose) computer systems.

Zeitler has been replaced by a PC guy, Bob Moffatt, who joined IBM in 1978, where he handled IBM’s supply chain operations (it wasn’t even called that back then) and eventually rose to take over as general manager of the company’s Personal and Printing Systems Group, the formerly merged PC and printer businesses that IBM has subsequently sold off to Lenovo and Ricoh. Since 2005, Moffatt has been senior vice president of Integrated Operations, which included running IBM’s supply chains, call centers, and customer fulfillment operations. Moffatt may or may not know a 9672 from a 9406 from a 9117, but he knows how the guts of IBM’s operations that actually make equipment work. Ironically, IBM’s supply chain has been increasingly offshored to China and substantially reduced as the company has exited the disk drive, PC, printer, network equipment, and a number of other businesses. (Hopefully, Moffatt’s appointment doesn’t mean that IBM is selling off its server business any time soon. . . . Then again, I would not be surprised by much in this wacky IT world.)

Donofrio, as vice president of innovation and technology, is a real computer scientist who also once ran IBM’s mainframe division, too. His is almost certainly the highest ranking PhD at Big Blue, and has more honorary degrees and awards from the universities of the world than any other public-facing IBMer, too. His job in the past decade at IBM has been to find technical talent and bring it to IBM Research and the other divisions and to make sure that the company also retains the talent that it has; Donofrio has also been one of the key–if not the key–strategic leaders at the company, helping IBM find the right technical stars to steer its business ship by. Rather than try to replace Donofrio, the executives of IBM’s various technical units will now report directly Palmisano.

There were a number of other appointments, which you can read in Palmisano’s letter below to his fellow IBMers:

Dear IBMer:

I am writing to tell you of the upcoming retirements of two people who have played seminal roles in the modern IBM company.

Nick Donofrio, Executive Vice President, Innovation and Technology, will retire on October 1, 2008, after an IBM career of 44 years. Nick joined the company in 1964 as a co-op, and proceeded to build a rich career of technology leadership. His broad portfolio of responsibilities and his strong personal relationships with leaders in business, government and academia all over the world are testament to the breadth of his impact. Nick has truly been IBM’s Mr. Innovation–not only as the leader of our global technology strategy, but also as the conscience for much of our societal and policy-related efforts, especially in the area of career opportunities for minorities and women. He has inspired tens of thousands of IBMers with his boundless energy, bottomless curiosity, and unfailing optimism.

Bill Zeitler, Senior Vice President and Group Executive, Systems and Technology Group, will also retire, effective August 1, after 39 years at the company. One way of looking at Bill’s rich and accomplished career is by the many parts of IBM he’s led. But when I think of the imprint he has left on our company, I see a close colleague whose imagination and courage pushed IBM into new markets and helped us take advantage of important turning points–launching the AS/400, leading sales and marketing for our software business during its formative years, embracing Linux and, most recently, leading the systems business through a period of extraordinary change.

I have worked side by side with Bill and Nick for many, many years. Aside from their contributions to our business success, they have embodied the best of our values. I will personally miss their counsel. I know all IBMers join me in thanking them for their decades of leadership and for their example. I am pleased to announce the following appointments:

Bob Moffat will succeed Bill as Senior Vice President and Group Executive, Systems and Technology Group, effective July 1. Integrated Supply Chain will continue to report to Bob.

Tim Shaughnessy, Vice President and Controller, will become Senior Vice President, Services Delivery, reporting to Mike Daniels in Global Technology Services. Tim will be succeeded as IBM Controller by Jim Kavanaugh. Both Tim and Jim assumed their new positions as of May 2.

Nick will not be replaced, per se–in many ways, his role and leadership at IBM are unique. Upon Nick’s retirement, John Kelly and Linda Sanford will report to me. They, along with senior vice presidents Jon Iwata and Bob Weber, will assume responsibility for teams that currently report to Nick. Details of those reassignments will be announced shortly.

Lastly, I want to thank Bruce Harreld for his strong leadership of IBM Marketing over the past two years, and for encouraging deeper collaboration between Marketing and Communications. We have seen tangible benefits from this collaboration, and now it is time to take that to the next level. In that regard, I am pleased to announce that Jon Iwata will become Senior Vice President, Marketing and Communications, effective July 1. Bruce will become Senior Vice President, Strategy, on that date. Both Jon and Bruce will continue to report to me.

I know you all join me in congratulating our colleagues on their new roles.

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