The Art of IT: Tough Times at the Top

Changes in the leadership of our industry's top companies are becoming the norm these days. Although installing a new CEO may satisfy directors and shareholders, it doesn't always address the

June 29, 2006

3 Min Read
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In an industry that experiences as much churn and innovation as ours does, I'm always amazed at the tenure of many CEOs: 10-year runs are common. Much of that longevity stems from the fact that many sitting CEOs founded their companies. But it struck me, as I read that Novell's board had fired Jack Messman, that we've seen something of a sea change in the leadership of our industry's top companies.

The CEO Shuffle

HP's ouster of Carli Fiorina last year started an exodus of chief executives, whether through unceremonious firings or as part of an orchestrated transfer of power. This April, Scott McNealy stepped aside at Sun in favor of Jonathan Schwartz. A few weeks ago, Bill Gates announced his retirement plans. At Cisco, John Chambers was elevated to board chairman as John Morgridge is set to retire; the move is seen largely as a precursor to Chambers giving up the CEO post. Adaptec CEO Robert Stephens retired after nine years. And then there was Messman's firing in late June.

While the circumstances for all these departures, retirements, planned successions and management shakeups vary, there's a pattern. With the possible exception of Adaptec, all of these companies are facing, or have faced, substantial challenges to their core business. Microsoft's challenge is perhaps the most studied these days. It faces the rise of Software as a Service, as led by now-archrival Google. Historically Microsoft has been able to enter almost any new software market by hiring twice as many engineers as all competitors combined and then giving them enough time to copy--and eventually one-up--the competition. That strategy isn't working with Google. I'm not suggesting Gates doesn't have the stomach for this fight, but certainly it's wise to let others do battle if his heart now lies with his charitable foundation.Similarly, Chambers has laid the groundwork for Cisco to enter new markets, and has talked extensively about the value of the end-to-end Cisco solution. But even Cisco faces growth challenges as businesses of all sizes realize they can wait seven to 10 years to swap out gear. The four-year cycle is history. It may warrant some new management blood to deliver on that claimed end-to-end value now that Linksys and Scientific Atlanta play prominently in the Cisco product line, too.

For his part, Mark Hurd (Fiorina's replacement) has done a masterful job of reinvigorating the HP culture. Indeed, after IBM's sale of its PC division, the two companies are now battling it out for the top rank in total sales. HP, however, has gained its position primarily by selling lower margin consumer goods (except, of course, ink jet cartridges, which account for a shocking piece of HP's overall profits).

As for Sun and Novell, both are great engineering companies, but neither can get out from under their proprietary trappings. That and an inability to market their way out of a paper bag will continue to spell hard times for both firms. In fact, the next CEO at Novell will have just as tough a time as Messman had. Judging by the success that former CEO Eric Schmidt is now enjoying at Google, my guess is that the problem isn't the guy in the CEO chair.

Installing a new CEO may satisfy directors and shareholders, but it doesn't address the root problem. The enterprise has gone from being easy pickings to a very hard place for IT vendors to do business. Sure, we change application deployment models more frequently than a superhero changes identities--but fundamentally, enterprise IT is built out. Enterprises have little incentive to rip-and-replace or deploy new technologies when the technology they have gets the job done. Businesses are investing cautiously and will continue to do so for the foreseeable future. Swapping out CEOs won't change that fact.

Art Wittmann is editor in chief of Network Computing. Write to him at [email protected].6044

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