IBM Buys Micromuse and Bowstreet – Lou Gerstner's notes on why these are important.
I’m not going to get into the coverage of the purchases of these two companies, there is plenty of news and links out there. I will say that it is the 10th and 11th acquisition by IBM Software Group this year.
When Lou Gerstner was retiring, he came to RTP to make his farewell remarks. There were over 15,000 IBM’rs at the site and about 200 got to go, I was one of the lucky ones…. thank you Lyle McGuire.
I have always had a lot of respect for Lou. Not many executives can save the largest company in a particular industry (IT of course for us) and accomplish an 18 BILLION dollar turn around. While I’m commenting on Lou, I once heard some folks say he made to much. I say he didn’t make enough for what he did (kept IBM together and made it profitable and productive). I wouldn’t be blogging today if it wasn’t for him.
Back to my point on the aqusitions. Lou spoke during a downturn in our industry. He said buying companies is easy to do, but hard to do correctly. He spoke of the HP purchase of Compaq, that it was not smart to buy a company that does relatively the same thing you do, no added value there. Although at the time it was disguised as a “services purchase” to get on equal terms with IGS (that still hasn’t come close), it was described to me by more than one analyst as thinly disguised “Lou Envy” by the then head of HP who has met her demise.
Lou then commented on the purchase of Price Waterhouse Coopers for business consulting services. From this purchase, we used the PWC data and research to help formulate and design our industry strategy, a go to market par excellance strategy that is being copied by our competition.
Lou’s point was that in tough times, smart companies position themselves to be on top when the market turns around or when the next trend of strategic selling comes to fruition. So there is a little insight on how to do things right. Some buy for R&D, some for customer base and some for extra bottom line. While there is some of that in our acqusitions, strategic positioning for the future to make us stronger and more competitive, advancing our business strategy is a driving force.
No, no one consulted me on which companies we are going to acquire, but being smart and doing it for a good reason, not just to do it is nothing to sneeze at. I’m guessing that Steve Mills, the head of SWG and Sam Palmisano ultimately pull the trigger on these, but every time they do, Gerstner’s words come back to me and make more sense each time.