'Linux has the potential to shake up the trade'

Thirty-eight

years is a long time to be in a company. Nevertheless, Canada-born William

Etherington is quite happy after having spent four decades in IBM. Ask him the

reason and pat comes the reply–stimulating environment. Today, as senior

vice-president and group executive, he looks after IBM’s sales and

distribution operations for 164 countries worldwide. He is also responsible for

IBM’s revenue and profit performance and customer satisfaction. It was largely

due to Etherington that Big Blue amassed $88 billion in revenues last fiscal. A

1963 graduate, Etherington joined IBM Canada in 1964 and has been here ever

since. He took on his current job profile in 1998. Etherington met DATAQUEST

during a recent visit.

Lou Gerstner once said, "Let's kick some butt", hitting out at

Sun. But all through last year, IBM lost marketshare to Sun...

In calendar 2000, we had flat worldwide server sales. In fact, last year was

a very interesting year for us. We got through Y2K and woke up with no order in

the first quarter. Also, we misjudged the capacities our customers had purchased

the year before. So the Q1 and Q2 we basically had no growth. To add to the

problem, we missed the dot-com market place. Companies like Sun did an excellent

job on the same. Though in retrospect, it hasn’t worked very well but at that

time it was a clearly an advantage and that’s where our competitors grew. In

Q3, we started to see some growth but faced execution problems. We ran out of

parts for some of our products and even the software business did not do well.

However by Q4, we had the execution in place and the saw the growth trend with

12% followed by strong performance in the first quarter this calendar.

Has this been resolved? Is first-quarter growth an indication of any

progress...

We have a whole new sense of execution. We have weekly sales meetings across

the globe and we are driving the business very aggressively. And strong growth

in the first quarter indicates the same. In the Unix server market we grew by

33% while Sun went down 2%. So a 33% versus 2% is very good for us. So last year’s

agenda of kicking some butts is still on, especially in the Linux space.

Everybody’s been talking of the slowdown...

In the first quarter, IBM grew by 13%. That’s super-growth in the slowdown

situation. People, analysts and companies are scratching their heads and

wringing their hands over what’s been happening with technology companies.

Handfuls are up; but most are down. Quite a few are history. However, the truth

is, at the cost of sounding clichéd, the bubble has burst. The big impact has

been on the dot-com segment or the Nasdaq suite of companies and telecom. But

this has not been the universal phenomenon. So many of our large customers have

not dramatically reduced IT spending and that is one of our key market.

Lessons from the dot-com fiasco...

Sell the old fashioned way. I lost a dot-com order in the US to my competitor

where the competitor paid the company to take the equipment. Many of these

start-ups convinced the vendors that it would be a good proposition for the

vendors to have these start-ups on their brochure. In return, discounts and

equity were given. We did some business with start-ups but never took high risk

on financing. We made the sale the old fashioned way–we sell, you pay. It did

not work well for us from the market share point of view in 2000. But, in

retrospect, I think we did the right thing compared to our competitors.

In recent times, IBM is focusing on Linux...

We believe that Linux has the potential to disrupt the industry. Look at it

this way, every student leaving college today knows Linux, have worked on the

same and understands Linux because of the free movement. This is only going to

strengthen the movement. With the advent of the e-business model, people will

start demanding open architecture platforms rather than closed ones. We have won

several large orders for consolidating Sun and Intel servers into z-series

mainframes with Linux. We took a huge bet of about a billion dollar-investment

in enabling Linux on our hardware and middleware.

A common e-server platform, killing the equity of RS/6000 and AS400...

No doubt the e-server is a rebranding at the cost of our existing powerful

brands like AS400, RS/6000 and Netfinity. This has been the longest running

debate in IBM–to do or not to do. Each of these products had built huge brand

equity over the years and yet we knew that customers were sort of confused by

having four different platforms. Also, we were against single competitors. While

we were up against Sun in the RS/6000 Unix space, in the S/390 platform it has

been Fujitsu. We had to take Compaq head on in the Netfinity. We felt that we

were fighting on their platform and it was their battleground. It was time to

change the battleground and go to the market with a single family of servers

from Intel to Unix to application servers to mainframes.

How IBM has changed over the last few years...

One clear thing that has happened since Lou came in is the narrowing of our

portfolio. We sold off our networking business to AT&T in exchange for their

computing business. Likewise, rather than be in the network hardware business

where we were not focussed like core networking players, we exited the same and

created a partnership with Cisco.

Yograj Varma in New Delhi