Down To Business: The IT Industry Is Showing Its Age - InformationWeek

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4/28/2006
05:10 PM
Rob Preston
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Down To Business: The IT Industry Is Showing Its Age

The marquee vendors are bringing in new leadership and flailing in new directions. For the most part, the glory days are over.

With the announcement last week by Sun Microsystems that Scott McNealy is relinquishing his CEO duties, one of the last of the IT industry's founder-icons is stepping aside.

As chairman, the wisecracking McNealy will tend to Sun's "government and academic relationships globally, as well as expand his role with key strategic partner relationships." Whether such wide-ranging relationship-building places McNealy at Sun's strategic center or just allows him to work on his scratch golf game while Jonathan Schwartz runs the company isn't yet clear.

What is clear is that we're witnessing a changing of the guard across the IT industry. Bill Gates gave the CEO title to Steve Ballmer long ago, and newcomer Ray Ozzie (though an icon himself as the creator of Lotus Notes) is said to be calling the shots at Microsoft these days. Computer Associates co-founder Charles Wang left that company four years ago, and with former CEO Sanjay Kumar pleading guilty last week to securities fraud and obstruction of justice, the "old CA" is dead and buried. Now running Hewlett-Packard, a company ruled for most of its six decades by technologists, is Mark Hurd, an operations taskmaster. Larry Ellison still heads Oracle as CEO, but he has ceded the spotlight and the execution to his two presidents. Dell chairman Michael Dell handed the keys to Kevin Rollins in July 2004. Among the marquee tech vendors, only Apple is still run day to day by its founder, and Steve Jobs had to be yanked back into the CEO suite after giving up those duties in the 1990s.

For the most part, grown-ups are now running the major computer vendors--professional managers rather than tech and business visionaries. The transition is less about the age of the founding icons-- McNealy is only 51, Gates, 50, and Dell, 40--and more about the growth challenges their megabillion-dollar companies face. With the exception of HP, their stock prices are stuck in neutral, so investors are demanding changes at the top.

Sun knows it must move beyond its proprietary Solaris on Sparc legacy--a realization delayed by the dot-com buying binge--and now with Schwartz at the helm must finally decide if it's a systems, software, or services company. Microsoft, through acquisitions and internal development, is acting out a midlife crisis, moving into hot markets like gaming and Web-delivered applications while neglecting the old mainstays, Windows and Office, whose next iterations are delayed again. Having spent $16 billion to acquire much of the legacy enterprise applications industry over the past couple of years, Oracle is now tapping into the technical innovation, energy, and vision of open source startups. HP's stock may be up because of Hurd's operational adjustments, but a long-term profit-growth strategy based on tighter cost controls and sales of printer ink isn't sustainable. Moving in new directions often requires new leadership, but sometimes big, bureaucratic companies can't help but slow down and cool off.

Even Dell, whose direct-sales strategy made it the poster kid for business excellence for most of its 22 years, needs to find new products to cram through its industry-leading supply chain if it's to keep Wall Street happy. It can squeeze only so much cost out of its manufacturing and distribution processes.

Dell has stumbled of late, missing financial forecasts and losing some PC market share, all while trying to hit the target it set in 2002 of becoming a $60 billion-a-year company by 2007. (If there's a sure sign a company is losing its growth momentum, it's when it starts setting big revenue targets years out.) Having made a go of storage but failed in consumer electronics, Dell is eyeing computer services as its next big market opportunity, as it now embarks on reaching $100 billion in revenue (without giving a time frame this time).

The going won't be easy. It's tough getting old.

Rob Preston,
VP/Editor In Chief
[email protected]


To find out more about Rob Preston, please visit his page.

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