The future of the IT industry is in services and consulting, but never mind the Big Five -- the real services leader is Big Blue, IBM CEO Lou Gerstner said last week during his annual meeting with Wall Street analysts.

IBM's focus on services was a central theme of Gerstner's remarks. "Four years ago we bet the company on e-business," he said. "E-business is for real, and it will prescribe customer IT spending for the next decade. You are headed for commoditization hell if you don't have services."

Several analysts predicted that this meeting could be Gerstner's swan song. His contract with IBM expires next March, and the 59-year-old executive is not expected to renew. Company President Sam Palmisano has been Gerstner's heir apparent since he was promoted to COO in July 2000.

Gerstner defused those rumors with a reference to Mark Twain's famous line about greatly exaggerated death reports. He deflected questions about whether he'll be attending next year's analyst meeting, quipping that IBM "doesn't plan that far in advance."

IBM's services focus will usher in a new Golden Age for the company akin to the one it enjoyed in the 1960s and 1970s when it ruled the then-dominant mainframe market, Gerstner said. He also cited several examples of IBM's internal heeding of its e-business mantra. The company "e-procured" 94% of everything it purchased last year, saving $375 million, Gerstner said. Online employee education saved another $350 million.

Gerstner took swipes at several IBM rivals in his speech, noting corporate investment in hardware and software grew 11.3% in the U.S. in the first quarter of 2001. The only firms having trouble with sales and growth, Gerstner hinted, are those that "were accomplices in this New Economy mumbo jumbo."

"I never fail to be amazed by the binary, in or out, feast or famine mentality in this industry. You know the pattern: mainframes rule, then mainframes are dinosaurs. PCs are king, PCs are dodo birds," Gerstner said.

"Most recently, December was 'like somebody turned out the lights.' And now there is a '100-year flood' in this industry," Gerstner said, riffing on Cisco Chief John Chambers' recent metaphor for the downturn. He dismissed such comments as hand waving, firing back, "There's no blackout and there's certainly no washout. What's really going on here is that a bubble has burst. The dot-com bubble has burst."

Network World

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