IBM’s Gerstner turned down SAP purchase


12 November 2002 Systems giant IBM came close to buying enterprise applications software vendor SAP in 1996, but the deal was stopped by Lou Gerstner, after IBM’s then CEO decided that the company should pull out of enterprise resource planning software altogether.

The disclosure is made in Gerstner’s book, Who Says Elephants Can’t Dance?, the story of his seven years at the helm of IBM, published today.

Gerstner partly attributes his success at IBM to the acquisitions that he did not make. “If life was so easy that you could just go buy success, there would be a lot more successful companies in the world. Successful enterprises are built from the ground up,” Gerstner said in an interview with Business Week magazine this week.

IBM was also offered the opportunity to buy virtually every major PC vendor, including Compaq. However, Gerstner turned them down on the grounds that they would not yield a significant enough return and it would be difficult to merge two major companies.

Gerstner is widely credited with turning around the ailing giant in the 1990s. But when he arrived at IBM, that the company was deeply divided, he said. “It was an organisation of fiefdoms. People had the view that ‘if this is not in my interests, I’m not going to participate’.”

Furthermore, the culture within IBM was resistant to change – so resistant that Gerstner’s predecessor John Akers and other members of IBM’s senior management were preparing to split the company up before Gerstner arrived.

He was expected to finish that job, but instead sought to reform the company. His first task was to change the business processes and the compensation system to encourage better cooperation across the company. “We changed the organisation system. We said… the whole company has to succeed before you get any payoff,” he added.

However, in retirement, Gerstner is planning a radical change in direction, studying Chinese history and archaeology at Cambridge University. “I want to become a student. I want to read Chinese history and go on a dig,” Gerstner told Business Week.

Lou Gerstner’s interview with Business Week magazine (November 2002)

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Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

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