CIO 20/20 Honorees–Innovator’s Profile: Louis V. Gerstner of IBM Corp.

Chairman

IBM Corp.

If you’re a CIO and you run into Lou Gerstner, don’t forget to thank him.

Back in the ’70s, negotiating with IBM was no picnic. So when things started to go south for the company in the ’80s, we were positively gleeful at the idea of finally getting the upper hand. But as IBM’s downward spiral continued, with the attendant layoffs in support and development, our smug satisfaction began to slide in the direction of panic.

Gerstner arrived to take the CEO position on April Fools’ Day 1993, having previously served as chairman and CEO of RJR Nabisco and president of American Express. Five years later, the Armonk, N.Y.-based company posted profits in excess of $6 billion. As one of the few non-IBMers around, Gerstner could be dispassionate about the difficult changes that had to be made. The turnaround began in a tidal wave of layoffs, a cultural revolution for a company that was one of the first to provide group life insurance, survivor benefits and paid vacations. Next, Gerstner turned the company’s focus from just hardware to software and services under the banner of IBM Global Services.

Not everything he did worked. Despite lavish investments in development and marketing, OS2 couldn’t bump off Windows, and the diversion gave Sun and HP time to beat IBM at the Unix game. And IBM’s PC business continues to circle the drain thanks to its inability to meet the “direct” challenge head on. But in the end, these missteps are inconsequential when compared with Gerstner’s resuscitation of an institution in which we had so much invested.

Gerstner, now 60, stepped down from the CEO position in March 2002. He continues to serve as chairman of the board, and he is writing another book.