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Listen to Palmisano for a while, though, and you might begin to share some of his contrarian views. With CEOs, CFOs and CIOs desperate to cut costs and focus on their core businesses, IBM believes it can, in the words of a money manager who owns the stock, "wrap its arms around customers even more" by supplying IT seamlessly, on demand, on a variable, pay-as-you-go basis. J.P Morgan Chase bought Palmisano's pitch, as did American Express. But it's not yet clear how many others will be willing to hand over more control to IBM...
Even as Palmisano sat down to talk with TIME at IBM's woodsy, secluded headquarters in Armonk, N.Y., he was busy last week announcing a pact to outsource more of IBM's PC and low-end server manufacturing. "This is the opportunity of a lifetime for IBM," he says, "to go from a company that was almost out, to a comeback, to being the undisputed leader...
Palmisano's optimism might seem forced amid the wreckage left behind by the tech bust, with cash-strapped companies wary of spending on technology that often doesn't live up to expectations. Such skepticism is one of the principal reasons that IBM's 2002 earnings, which will be announced this week, are expected to drop more than 10%, a reversal from the solid, double-digit annual earnings growth that Gerstner consistently achieved--and that Palmisano is promising for 2003. That pledge will be all the harder to keep at a time when Wall Street is taking a much closer look...
...ambitious vision, IBM is becoming an unprecedented, one-stop shopping destination to help companies electronically integrate their divisions, as well as suppliers, partners and customers. Not only will it help devise business strategy, redesign and even take over key processes like human resources and finance, it will also deploy hardware and Web-enabled software (from both IBM and others) to make it happen. In some cases IBM will provide the entire system--with the hardware often located far from the customer--as a utility that corporations can buy "just like they buy electricity," as Palmisano has said. Instead of having...
...Blue, of course, isn't the only one going after this industry Holy Grail. It will have to do battle with hardwaremakers like Hewlett-Packard and Sun Microsystems; consultants like Accenture; outsourcers like EDS; and software players like BEA, Oracle and Microsoft. Its competitors snort that IBM simply glues together a hodgepodge of inferior systems--all too often pushing its own--and then charges big bucks to have its consultants keep them from breaking down, an approach they predict will soon lose its appeal. IBM's strategy "is an acknowledgment that the very technology it has been peddling all these...