Nick Donofrio

The IBM Years

1 The IBM Years, The Nicholas Donofrio Story; Celera Search LLC

The Nick Donofrio Story

Several years ago, I had the privilege of meeting Nick at The Kittle House in Chappaqua, NY one of his favorite restaurants near his home. As a favor to Dr. Pedro Aspe former Minister of Finance, Mexcio and a board member of McGraw-Hill, I had an exploratory meeting with Nick to see if he might consider joining the board of McGraw-Hill. Earlier that summer I met with Dr. Aspe at his office in Mexico City. In 1993-4 I placed Dr. Aspe on the board of McGraw-Hill and he and I were catching up on things. During our discussion he talked about the changing nature of McGraw-Hill’s business. He was concerned about the challenges facing legacy based publishing companies like McGraw-Hill. He sensed the company needed to have a visionary tech- nologist on the board to help them transition into the digital age. Someone who understood the enabling power of technology and could play an important role guiding, directing and help reshape the company so it could thrive in the future.

Nick Donofrio, had recently retired from IBM after a 44 year career. He was an EVP who led IBM’s technology and innovation strategies from 1997 until his retirement in October 2008. His most recent responsibilities included IBM Research, Govern- mental Programs, Technical Support & Quality, Corporate Community Relations, as well as Environmental Health & Product Safety. Also reporting to Mr. Donofrio were the senior executives responsible for IBM's enterprise on demand transformation. In 2008 IBM Chairman Sam Palmisano elected Nick IBM Fellow, the company’s highest technical honor. After being hired full time at IBM in 1967, he spent the early part of his career in integrated circuit and chip development as a designer of logic and memory chips. He held numerous technical management positions and, later, executive positions in several of IBM's product divisions. He has led many of IBM's major development and manufacturing teams – from semiconductor and storage technolo- gies, to microprocessors and personal computers, to IBM's entire family of servers which in 1992-93 represented more than half of IBM’s global business revenue.

On November 21, 2011 I had my first of numerous interviews with Nick at the IBM Thomas J. Watson Research Center. In the interim, Celera Search has conducted more than 15 hours of interviews with Nick which we are presenting in four parts and featuring on the Celera Search website. Part I, The Formative Years introduces the reader to Nick’s ancestry and upbringing leading up to being hired full time at IBM in 1967. This section, Part II covers his 44 year career at IBM. Part III covers his Post Career Activities serving on boards, as a highly sought after advisor and independent consultant. Part IV examines his insights into topical issues relevant to key decision makers across the private and public sector.

Grant P. Lussier

Grant P Lussier is the Managing Partner of Celera Search a small boutique executive retained search firm that specializes in recruiting executives and board directors familiar with large scale innovation and transformation initiatives. The firm works with some of the world’s most prominent Global 2000 companies and Mr. Lussier is recognized by industry insiders as an influ- ential senior level executive search consultant. He is also the Chairman and founding member of Celera Partners Transfor- mation Advisory Services, LLC (TAS) a consultancy that assists CEOs, CFOs, CIOs and corporate boards undertaking large, risky IT transformation and modernization initiatives. TAS and its Advisory Board is composed of a distinguished array of preeminent retired and current CIOs, business leaders and consultants. These thought leaders provide valuable insights on innovation and best practices for the business of technology and corporate governance. Via the combination of Celera Search and Celera Partners Transformation Advisory Services, Mr. Lussier has worked extensively with business leaders on large scale change management projects with a focus on reconceptualizing business models, reconfiguring value chains and business pro- cesses. During the past twenty years, Mr. Lussier has established a broad base network of distinguished CEOs, CFOs, CIOs and influencers across most industry segments in the private as well as public sector. Prior to Celera Search, Mr. Lussier was the founding partner of the Mexico Offices for both Heidrick & Struggles and Spencer Stuart. Prior to Hedrick & Struggles, Mr. Lussier worked as a strategy consultant with Arthur D. Little where he focused on strategic and operating issues in the financial services, technology, consumer products industries and the privatization of Mexico’s state owned industries. Mr. Lussier was born and raised in Argentina and received a B.A. degree in International Relations from Brown University. He is fluent in Spanish, Portuguese and English. Upon graduation, Grant was the founder and for 11 years the CEO of 3XM, Inc. a pioneer in the CAD-CAM CNC software industry.

2 The IBM Years, The Nicholas Donofrio Story; Celera Search LLC The IBM Years

Part II of Nick’s story focuses on his 44 years at IBM, and the evolution of his career. During his tenure he worked for seven of IBM’s eight CEOs. In 1967 when Nick joined IBM, Thomas Watson Jr. was the CEO of IBM. The following represents one of our numerous discussions with Nick. In Part II we examine Nick’s distinguished career with IBM, the company he loves more than any other. We pick up where we left off in Part I, and now it is the early ’70s. Having moved his family to Burlington, Vermont, Nick finds that the business of technology is changing very quickly. We start by inquiring what it was like at IBM during his early years:

Nick worked for 7 of IBM’s 8 CEOs

Grant Lussier: Grant Lussier: Nick Donofrio: Oh, no, gosh, How would you characterize the probably a hundred other labs. culture of IBM at the time that IBM grew very wildly through you joined the company? the ’70s. It was very successful; they were doing a lot of hiring

1 and building labs all over the Nick Donofrio: It was definitely world—in Japan, and Taiwan, in a “command-control” type of 1 2 Europe, also Latin America. culture, with lots of directives. They had a big presence in Bra- That aspect of the company zil, Mexico and Argentina. didn’t appeal to me much, but 5 of course, I listened and did what I was told. I understood 4 Grant Lussier: What was the the hierarchy. Before Frank logic to this expansion? Cary, Vincent (Vin) Learson was 3 6 the Chairman and CEO in the early ’70s. He was a tough guy. Nick Donofrio: The thesis was CEOs of their generation would that there are smart people every- say things like “I do not want to where. Moreover, they were tak- see you here ever again,” and ing the British Trading Compa- they meant it literally. ny approach: the thought was that IBM was needed and want- I started in Burlington in ’71, 7 8 ed in many countries, and of and we were there for nine course we could import and ex- years. Toward the end of that 1. Thomas Watson Sr. 5. John Opel port, but the tariffs were huge. time was when I first became an 2. Thomas Watson Jr. 6. John Akers But it’s a different story when executive. I was one of the top 3. Vincent Learson 7. Lou Gerstner you build your product there. It six or seven people reporting to 4. Frank Cary 8. Sam Palmisano was an interesting protective the lab director. So I was manag- strategy. IBM headed for the ing a specific function in the countries that were hot. We were Burlington lab, in which I’d in Brazil, with the thought that it grown up as a technical person. was going to grow quickly, as well as Argentina and Mexico. And then it formed the whole Latin American strategy around those three countries. They were pretty good at Grant Lussier: At this time IBM probably had what, four figuring that kind of program out. I can’t begin to tell you or five labs? how many plants we had in Japan. And eventually we had

3 The IBM Years, The Nicholas Donofrio Story; Celera Search LLC

to close them all. After the fast-moving ’60s and ’70s, then we Anyhow, it wasn’t long before I was told that my family and I hit the slower-moving ’80s, and we hit the wall. would be moving to Manassas, Virginia. My kids were still in elementary school, and it was not easy to move them to a new

town and school, but we went. The plant in Virginia was a In 1980, I was an executive reporting to the lab director. I test and packaging plant, and I ran the general technology was told that I would be going to White Plains to work for side of the operation. Although I was a lab guy, and not really Jack Kueheler, the president of the General Technology Divi- a manufacturing guy, I thought, “Alright, fine.” I oversaw sion. I would be the division’s planning director. I said, “I about three thousand people. don’t know planning; I have no skills,” and was told “Don’t

worry about that; we’ll teach you that.” So it was a training job. IBM was fa- My wife and I loved the area. We found a mous for rotating staff and investing in tiny little house in a cute little develop- people. I didn’t know this, but they’d ment where nobody actually knew what already marked me. I was thirty-five IBM was. It took a while for the kids to years old, and I was learning a lot about settle in, but eventually, they did. It got business. We had an across-the-board hot there in the summer, and I promised pricing policy, where the cost of our my wife that if it got too hot I’d put a goods might go up 10 or 12 percent pool in the backyard. So I doubled down. each year. Of course, this could encour- It was the first time in my life I ever took age our buyers to go elsewhere. It got a second mortgage. We were enjoying it, very complex, and I enjoyed it. It was a and I said, “Unpack everything, we’re good intellectual challenge for me to staying; I’ve got a good five years’ worth figure out how we were going to pull of work here,” given the projects I was that off. overseeing. But the next year I was told, Jack Kuehler—President of “Costs are becoming a bigger problem, the General Technology Division and we don’t have the right technology Grant Lussier: During the 90’s I was a in Vermont. We want you to go back to partner with Heidrick and Struggles and Burlington. You’re going to become the then Spencer Stuart. At that time, the lab director.” This was a big deal for me, concept of stretching executives was considered a best prac- really a change in career, because I was an engineer. But I tice. It was adopted by IBM going back to 60’s when I was a didn’t look forward to the conversation with Anita . child growing up in Buenos Aires, Argentina. Today I find

that companies do not stretch their executives as much. Grant Lussier: You had to make sacrifices—and be flexible—to

stay on the fast track. Nick Donofrio: IBM did that better

than most. And recently, in November “I can go into a 2011, IBM again was rated number one Nick Donofrio: Yes, each move was a in Fortune magazine’s survey for leader- room with no prior trauma of sorts for my family, and yet ship , as the company that generates the each move for me was toward a better greatest number of leaders. That was knowledge, and I can job. I recall that my son, Michael, said to the second year in a row that IBM me, “If we go back to Vermont, I am not earned the top spot. And, of course, I pick the IBMers out. moving. I’m starting high school in Ver- think the fact that Ginni Rometty was They stand out in a mont, and I’m finishing high school in chosen to take over for Sam as CEO is Vermont. You got it?” I couldn’t argue a good example of what we are talking crowd.” with him, and I became the lab director about. I think IBM is blessed. They in ’82. But if Anita and I were smarter, have a huge talent pool. They care we would have figured out that with about their leaders. I can go into a room with no prior each step on the corporate ladder, there was another step. In knowledge, and I can pick the IBMers out. They stand out in ’84, they came knocking again. I had been asked to go to a crowd. They just lead a different way. corporate headquarters to become the secretary to the corpo- rate management board. That time she and I agreed that we

4 The IBM Years, The Nicholas Donofrio Story; Celera Search LLC

wouldn’t move, but that I’d come back every weekend. Grant Lussier: This is when IBM started to hit the wall, right? So help us understand how that came to be.

I went to work for John Opel, the CEO, transitioning to John Akers. I was the committee’s technical assistant, helping Nick Donofrio: IBM hit the wall essentially because it was them write the agenda, documenting it, and not paying attention to what its clients want- keeping things moving. I got a chance to ed. It was making better and better things play, as it were, with everybody behind the every year, but they were not the things that scenes. The group was responsible for decid- people wanted to buy. They were ranked the ing everything: marketing, sales, personnel, number one company in the world in the every decision anyone made was reviewed ’80s, so they were everybody’s envy. It was a there. For me, this was a great broadening slow and gradual degradation. In a few years, experience, because I got to see the entire it started to fall off the backside. company and meet everyone who ran it, up

close and personal. This position was a great Terry Lautenbach—during the late Grant Lussier: Microsoft had already been path forward for someone like me. I was told 80’s early 90’s he was responsible for in business for quite some time, and the it would be about a yearlong assignment, worldwide manufacturing and develop- famous thinking was that IBM missed the and that was right. From there, I was sent ment. boat early on in not investing in software back to Vermont, to become the general when it could have, allowing Gates to take manager of the Burlington site. I was respon- off and run with it. sible for manufacturing as well as development at that time, about ten or twelve thousand employees, with about a dozen direct reports. Nick Donofrio: Well, note that by developing the PC, IBM put Microsoft in business. But, that said, the director of soft-

ware, my compatriot, was trying to fix that problem, while I Then I was assigned the job of corporate was trying to deal with the hardware develop- director of development at the headquarters ment issues. I had many worries. When the in Purchase. I told Anita that we would not only way you can close your plan for the year be going back to Vermont; staying there is by a price increase, you’re pretty much meant my career was capped. Of course our cooked. Plus we were reorganizing the com- son graduated. At that point, our daughter pany, which was one of John Akers’s re- extracted the same promise that he had, she sponse to the downshift. Terry Lautenbach was determined to finish high school where asked me to serve on a reorganizing commit- she started it. It was tough, because she was tee. by herself now. She had to find a peer group

and start all over again. Lou Bifano — (on left) one of Nick’s key go-to-guys inside IBM Grant Lussier: Who was in that group?

It was a big job; I was in charge of all hard- Nick Donofrio: It was a microcosm of the ware development around the country. I thought, “Man, this company, people that John Akers trusted. We had a person is it. I have made it.” from manufacturing, from software, finance, HR, myself, marketing, sales. I was taken aback by the seemingly unscien-

tific nature of the process. I thought, “My God, is this how it Grant Lussier: Did you feel that you’d fulfilled your aspira- is done?” But it seemed like the answer was yes, completing tions? the task and getting everybody back to work was of prime importance. It was the end of ’87, and we needed to have our

kick-off meeting at the beginning of ’88. So we did it. Nick Donofrio: No. Then I thought to myself, “I’m going to

be the corporate vice-president. I need it, I am going to be there. I can feel it.” I was forty-two years old. Even my father The business was continuing to slow down, however. In April was actually saying things like “I’m proud of you.” of ’88, I was asked by Terry Lautenbach, my supervisor at the time, to “fix the PC company.” I would have to travel to offic-

es in the South. By this time, IBM had announced PS2, and

5 The IBM Years, The Nicholas Donofrio Story; Celera Search LLC

OS2 and was having trouble. It wasn’t getting adopted, and With the new lab director in place and the new strategy the we were having all kinds of technical problems. We did all Boca Lab was running in the right direction. It didn’t take the wrong things. I spoke then with the president of my divi- long for my tenure in Boca to expire. sion, and he just said “Take on whatever you’ve got to do, go In November of ’88 I got yet another call from Terry, asking back and fix it. And be me to go to Austin to aware that we are going Nick’s Career Tracks With manage the Advanced to have to collapse; we Workstation Division. can’t afford all the plac- Exponential Advances in Technology They were making com- es we have. We’re going plex/advanced work- to start to move people stations that used high out of Austin and Ra- As most readers probably know, Ray Kurzweil is one of the leading performing computing leigh.” inventors of our era, responsible for the creation, among other things, of capabilities and high the first print-to-speech reading machine for the blind, the first CCD visualization. This was a flat-bed scanner, and the first omni-font optical character recognition. tough market, which So I went to the lab in In a famous chart (see the modified version below), Kurzweil depicted SUN had cornered with Boca Raton and dug in. the development of technology over a hundred-year period. Tellingly, the SUN-OS their I was blessed because I about the chart, Nick said: UNIX-based operating had one very smart guy system. Because it was a assigned to me who The reason I use it is because it has my life on it. Kurzweil bit antithetical to the knew everything, Lou plotted a hundred years of technology advancement, not for mainframe SAA Bifano. He actually de- IBM’s benefit, but it can also be used to describe the evolution (Systems Application signed PC/AT, which is of IBM. It’s a very interesting, semi-logarithmic chart. What he Architecture), IBM was a very successful prod- plotted was the amount of computational capability you can get just not comfortable uct. He helped me un- for a fixed amount of money in a fixed amount of time. And it with UNIX. Although derstand where the turned out the curve is a hugely super-semi-logarithmic chart— we had very smart peo- problems were, and super-exponential. In one hundred years it rises sixteen orders ple in research, we were- what I needed to do. of magnitude, which means that the industry is productive ten n’t getting anywhere They were bringing in a times itself, sixteen times over a hundred years. That’s and were falling further leader from Japan, to productivity the likes of which nobody had ever seen. What I and further behind. head up the Boca lab, like to point out is where my career began, which is at the point They wanted to make but he wouldn’t arrive of vacuum tubes, right about in the middle of the chart. me the president of the for another three Interestingly, the science was shifting so rapidly that from the division—not to move, months. And the busi- time I left college to the time I started work, the tubes were just travel back and ness couldn’t wait. I was being replaced with transistors, and I was already behind the forth. I told Anita that told, “Whatever you’ve curve. As the chart shows, the level of sophistication in the it would be stressful and got to do, go ahead and computer industry has just skyrocketed. that I’d have to be there do it.” So I did—I basi- every week. cally took the lab in Boca apart. The soft- ware people were pretty Grant Lussier: This was skeptical about taking considered the future of orders from me, a guy growth for the compa- who knew nothing ny, wasn’t it? about software and PCs. But I was determined, and I had Lou right by Nick Donofrio: Yes, my side. Eventually the absolutely. So of course, new lab director showed I went to Austin, it was up. While he wasn’t Christmastime of ’88, happy with everything and I was there by my- I’d done, nonetheless self . I knew that I didn’t know everything, yet everything was he agreed that we needed to focus on shoring up our prod- my responsibility—the hardware, the software, the business ucts and make decisions faster. It was a problem-intense time. model, the sales, the support, everything. John Akers told me

6 The IBM Years, The Nicholas Donofrio Story; Celera Search LLC

that we had to ship all of the Advanced Workstation prod- meeting every Friday. Everybody had to show up, and I asked ucts by September of 1989. I began to immediately realize everyone to be very candid about their status and how they that there was no way we were going to felt about what they were accomplish- make anything the next year. We had ing. I knew that not everything was an operating system that needed to “During my entire career perfect, but we had good leaders and I consist of about 1.5 million lines of with IBM, the only job I got saw great progress. We reset our target code. We had only 150,000 of them date to the to February 14, 1990, Val- done. That’s a big gap. And software to pick was the first one. entine’s Day, and also the day of needs to cook for a while and you Akers’s annual launch meeting. need to test it and test it and test it… Every other job was a job He agreed to let me try to figure it out, and to come back to Armonk once a they told me to do. I Grant Lussier: What were you trying month to report to the corporate man- to create? How did it compete in the agement committee. couldn’t say no.” marketplace?

Interestingly enough, the technology that they were using in Nick Donofrio: This was the fastest-growing part of the mar- Austin was based on the work I’d done years before in Bur- ket at the time, it was providing high-computational prod- lington. So at least I was comfortable that the hardware was ucts. Sun and DEC and HP were all in this market. It was in reasonably good shape, but we were still missing so many definitely the direction that the world was moving in. And pieces, with so many unanswered questions about which then I was told, “By the way, the RT PC”—which was the lab’s model was best, and whether any of it could be manufac- product then—“doesn’t actually work. It actually makes a mis- tured. It was a mammoth take every time it rounds undertaking. We needed Leadership 101 off a number.” I realized to literally release ten that I had to take back major products. My initiation into leadership occurred in the “old IBM,” every one of them, the 62,000 computers in- when the hierarchical structure was firmly entrenched. It was pretty rugged. I was in Burlington, overseeing about stalled in the market- Lou Bifano started to ten circuit designers in my department. I was really close place. They were in a work for me again, and with them. The supervisory assessment process at the large retailer and high as I said, he was my go-to time was a survey taken of the people reporting to you, tech manufacturing com- guy about everything. I and the reports of the managers ranked best and worst pany and I had to go talk was trying to build up a were sent to the leaders at corporate. The rankings were 1 to their people. It was a strong team, but my chief to 5, with 5 at the top. I got my opinion survey back; I real challenge. I heard a technical person was was flabbergasted by how bad it was. I was terrible. I did- lot of, “Are you crazy? needed elsewhere and as n’t get a 1, but like 1.4. I was crushed, and I thought, “I’ll You sold us this, and it a result a lot of people in be jobless. I’ll be the worst on site.” It was a very hum- doesn’t work?” In the the software develop- bling experience, but it taught me some important les- end, we turned the prod- ment area quit. We for- sons. One: that just because I “knew everything,” that uct into an incredible tunately found a wonder- didn’t mean that I was a good leader. I needed to let peo- sales opportunity because ful person to take over, ple do their jobs. Two: I was going to have to learn how when we were ready to and she did a great job. to ask for help. Without the assistance of my staff to steer ship the new one in There was so much to me in the right direction, I was a goner. 1990, we offered every- do; we were trying to body a 50 percent trade- enter a brand-new busi- in. So users got a chance ness... A few months More broadly, I think this event taught me that change is to get rid of their old one after I started I had to important. You have to be willing to evolve and to be and get a brand-new one tell John that we’d get it okay with not having every answer. for half-price. By the end done, but not by Septem- of 1990, the Advanced ber. Workstation Division had gone from a fundamentally negative business to a billion-

dollar business. We managed to do everything we said we To bring the Austin staff together, we started to have an open would. We introduced the products in February at Mr.

7 The IBM Years, The Nicholas Donofrio Story; Celera Search LLC

Akers’ annual leadership meeting and we shipped them by But of course I took it. I did what they told me to do. It’s very the end of May. interesting, during my entire career with IBM, the only job I got to pick was the first one. Every other job was a job they

told me to do. I couldn’t Grant Lussier: You were say no. an actual hero. I mean Nick’s Thoughts on the Amazing Mainframe

there you were, becoming the president of a small Remarkably, in April of 2014 the mainframe, the system Grant Lussier: Where did company, a start-up, right? 360, will be fifty years old. The first line of code written the mainframe business It looks like you were back in 1964 can run on a 2014 mainframe unaltered. stand relative to IBM’s getting tracked as the fix-it Every time we thought that the mainframe should just be other businesses and com- guy inside of IBM. scrapped, we decided to stick with it. And the clients love panies? Nick Donofrio: Perhaps. it. They are committed to it because it’s committed to I remember presenting them. In the end, we did the right thing with the Nick Donofrio: It was the the Advanced Work- mainframe business. largest business, and it station products to IBM’s was in great decline. By board of advisors, and I We had a big celebration for the mainframe’s thirtieth then there was a reduc- was shaking in my boots anniversary at the Computer History Museum. I hosted the tion in the price perfor- because while I felt that evening, and two of the three guys who’d received the U.S. mance curves, and a lot of we were doing the right Medal of Technology for the mainframe ten years earlier money was coming out of and smart thing, it was were there: Fred Brooks, who did the software, and Bob IBM’s pocket. We need- very unorthodox. I Evans, the guy actually responsible for the system. (Erich ed, as it was put to me, a thought it was going well Bloch, who also won the medal for technology couldn’t “safe landing.” I was told when Vin Learson, who make it.) They had great stories, and the museum staff to go work with Carl Con- was CEO in the early recorded the night and archived the discussion. When it ti—a group executive—he ’70s, stood up in his seat, was over, I asked Bob, “Did you ever think this computer was an icon. He ran the pointed his finger at me would last twenty-five years? He and Fred both said, “Oh, mainframe, hard-disk and said, “So you are the no. We were thinking twenty years would be terrific.” And drive, and storage busi- guy who is going to drive he added, “The past ten years, they’re on you.” nesses. I think that there this company into the were four group execu- ground.” Learson contin- I thought about it, and in a way, it actually turns out the tives then, and he was one ued, “All these price per- last twenty-five years will be on the team and me, because of of them. I started working formances that you’re the difference we made in the value proposition by for him, and we soon got putting into the market- changing the technology. We kind of parallelized all the in each other’s way. It was place, we’re going to have subsystems in a way that was transparent to the client. different from the ad- to take down the price in Client codes never changed. To be able to do that, to take a vanced workstation situa- the mainframe.” I waited scale-up systems model and to transparently make it a scale- tion, because in Austin for him to finish, and out systems model had never been done. This task was so they had the right stuff, said, “Thank-you Mr. incredibly clever, thoughtful, and challenging, someone will they were just doing it Learson, but with all due write a book about it at some point in time. poorly. But in Poughkeep- respect, I am not the guy sie they had the wrong doing any of this. That is stuff altogether. what the market is doing. I am the guy who’s trying to build a company response to the market. And if along the way any- I saw just how badly the mainframe business was being run. thing you just said happens, what better position could we be We were in the wrong technology; we were investing way too in?” Later I got a call from Terry Lautenbach and John Akers much money and getting no return. But try to understand, thanking me and telling me what a great job I did in front of entering into the mainframe business at IBM was like enter- the advisory board. Then, after the success with the Ad- ing holy ground. Everyone there believed that the business vanced Workstation Division, in ’91 Terry and John asked was incredibly important. Thankfully, there were some bril- me to take over the mainframe business, which was in deep, liant people in the mainframe business, and they shared with deep trouble. I said to myself, “So, this is how you get reward- me some great ideas about what the company could do to ed?” make it more competitive. Slowly but surely I was getting Carl to see my perspective, but it was hard for him to change

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all the things he put in place. In my efforts elsewhere in the franchise.” I was swept away by what a terrific job we could company, I’d seen repeatedly that a willingness to really re- do; this was a never-fail technology, it’s a different mind-set think your product or your business was crucial altogether. It was then that I really learned why to your success. And to make a major shift in the businesses had bet on their mainframes, and why mainframe area, in particular, was a bit like pull- there were clients, encouraging us to keep the busi- ing up your last, heaviest anchor. I asked him if ness alive. we could have a talk, and he invited me into his

office, the copy room of all places if you can believe it. He said, “Well, before you talk to me, When Lou Gerstner took over in April of 93, his I want to tell you that I’m leaving. And I’m turn- brother, Dick, was working for me at the time as a ing this whole thing over to you.” I was floored, consultant. Although he had to leave due to a because I’d intended to tell him that I was going conflict of interest, I am certain some where along to leave. He said, “No, it’s got to go through too the way he explained to Lou why the mainframe much change for me. I don’t know that I can do was important and what he saw as necessary to it.” So I gulped and said, “Thank-you, Carl.” Carl Conti—a group execu- move forward. I had had John behind me, but with Lou, I told myself, “Okay, they chose him. tive—he was an icon. He ran We are going to find a way to work together or it A week later they announced his departure. IBM’s mainframe, hard-disk drive, and storage businesses. is simple, I leave.” But we got along quite well, and Grant Lussier: You became one of the top four although he regularly put me through my paces in leaders of the company. How old were you at reviews, he understood what I needed to do, and that time? how ugly it was going to be. I explained to him that we would build larger systems to satisfy our clients, but it

would take time. We were going to switch everything at our Nick Donofrio: I was forty-five. It was ’91, and I was then end and ask our clients to change nothing at their end. We named the general manager of large-scale computers. I told were going to enhance the System 360 client value proposi- John Akers about our plan to revitalize the business, which tion as articulated by Mr. Watson. Jr. when he introduced required switching technology and investing billions of dol- the System 360 to the world in April 1964; a family of sys- lars. We would win in the end, but it was going to be pretty tems compatible with itself and with your investments dear ugly in the beginning. We would have to lay off about thirty client capable of growing when as you need to grow, up or thousand people, scrap a couple of billion dollars’ worth of down. We would lessen the dependency on the technology assets, and rely on the Burlington plant to be our technology curve for our clients to respond to their business needs. provider. “Oh, Nick,” he said, “I With a parallel mainframe system would have never expected this of they could more readily add or sub- you.” I was never sure what he meant “Rather than be the guy with tract capacity. They could upgrade by that. In the end, John left IBM in the first idea, I was the guy their processors when the technolo- the early part of ’93. We were going gy was ready but also change their to break the company in two. The with the last idea.” capacity whenever they were ready. mainframe business and a few other We put a great deal of technology to businesses were going to become the work in a very short period of time “Old Co”. The PC Company, the (hardware, software and system technologies) to address the Advanced Workstation Division and other businesses were issues of the mainframe but in the end, being true to the going to become the “New Co.” I was getting ready to meet a System 360 client value proposition of 1964 truly insured our major challenge and certain that I was sure about what we success. In the end, technology mattered, but the client value what we needed to do, switching to CMOS as fast as we proposition saved the day and the mainframe. The team did could and putting processors together. Of course, I knew I a great job! was in the “Old Co.” bucket, and not the “New Co.” bucket. But having to reduce the workforce by thirty thousand peo- ple, I still had to worry about the remaining thirty thousand Then in ’95 Lou asked me to head up the server group. As employees, and I was going to get that end of the company its group executive I was responsible for the RS/6000 fixed. Ninety-two was a tough year for me. (advanced workstations and all), S/390 (the mainframe), AS/400 (general business mid range), and PC servers. It was a very large piece of the IBM Company. The more I learned about the mainframe’s capabilities, the more I thought to myself, “My God! This is an incredible

9 The IBM Years, The Nicholas Donofrio Story; Celera Search LLC

A Philosophy of Management Gerstner legacy-heavy hardware company to a software-based analytics company? Did anyone have an idea about the whole Smarter Planet, services-oriented paradigm that IBM is in I guess that my philosophy toward how to live today ? your life was drawn more from experience than from “theory.” My whole ethos was around making a difference, and to me, that was very Nick Donofrio: I don’t think so. But IBM always took the important. I also learned to be always aware of opportunity to move to the higher ground—the better set of the Hippocratic oath, “Do not do harm.” I principles, the safer footing as opposed to just producing this didn’t want to be successful at someone else’s or that piece of technology. As the Internet gained momen- expense. I wanted to do no harm. Wouldn’t it tum, we exploited e-commerce to give us relevance in that be a better world, even if we did nothing every marketplace. That was the mid-’90s. We thrived with the take day but not hurt others? So make a difference, off of the Internet because it required our hardware and soft- do no harm, and then, lastly I would close with, ware. As long as you can keep transforming your product to have no regrets. Don’t wish things were stay relevant to the purpose, you’ll do well. It’s really a matter different. Take every moment that’s given to of keeping your eye on the marketplace as well as on the qual- you and do everything you can with it. ity of what you’re offering.

Grant Lussier: How many employees do you think you had I think the two anchor points for IBM on the server side now in that group? are the advanced workstation products I worked on in Aus- tin, now called the pSeries; and the mainframe I worked on

in Poughkeepsie, now called the zSeries, which is a Nick Donofrio: Over one hundred thousand people. A very “descendant” of the System/360. Software is an incredible large piece of the company that was constantly under attack pillar and source of both growth and profit now for IBM. by its competition every where around the globe. When Sam Palmisano became the CEO in ’02, IBM became even more acquisitive and software opportunities led the list.

It really made sense business-wise. As long as you have the Grant Lussier: So, you are saying the market is large enough software to run on your platforms, it’s a good deal. That’s for the server business worldwide to have multiple players? where the heavy lifting comes in, but it keeps you in the hard- ware business. I mean hardware with-

out software is just the interesting Nick Donofrio: Right. It was then for box in a corner. You cannot do any- sure. In order to successfully grow, we thing with it. Software without hard- often forged partnerships and relation- ware is the sheet music that is never ships with the very folks we competed played and therefore never heard. As with day in and day out. Alliances, in- much as the world wants to separate dustry organizations, standards, all them, they only have and create value these and more become part of the together! daily routine. The only way for anyone

to survive and thrive was to find part- ners. Cooperation and competition Grant Lussier: What do you think quickly turned into ‘coopetition’. If that you’ll be remembered for? you build a large enough ecosystem, it The System/360—circa 1964. The first line of

turns out they really do come! The only code written back in 1964 today can run on a 2014 Nick Donofrio: When I look back at way for anyone to survive is by finding a mainframe unaltered. my career, seems like I was smart partner to deal with...it’s a different enough to take what I learned at RPI direction from the way we had func- and continually reapply it in a time of tioned previously.. And that’s become very high transition and change! And that is how I made my- the mantra moving forward. self; that is how I made my name. Rather than be the guy with the first idea, I was the guy with the last idea. I learned that there was nothing wrong with not being first, or not Grant Lussier: Was anyone envisioning moving from a pre- being in the lead. As an engineer, I’m a problem solver at

10 The IBM Years, The Nicholas Donofrio Story; Celera Search LLC

heart. That is what I did for a living; solved problems! really want it that way, you would have kept working to get something different. But you decided you were going to set-

tle, right? Or you decided that you were powerless, right? When it comes to getting along in the world, there’s nothing There are only a handful of ways, if I remember correctly, to wrong with being a good, hard-working person, with caring a resolve conflict—you either fight, you flee, or you change. lot about people and trying to do the right things. So because This stuck with me, as IBM developed me into a better and I kept those ideas in mind, I always felt comfortable with better leader and manager . myself. I never had to be something I wasn’t. And as a result I was never afraid of change. I actually thrived on it! I hope the legacy I left behind is the sense that you can not change fast As for me, I really want you to understand that the leadership enough given how fast the world is changing around you. of IBM has fundamentally been very good to me. I didn’t know it always at that time. Sometimes I seriously questioned

their judgment because of the things they asked me to do. Grant Lussier: So you would say that being good is more But when I step back and look at it, my experience with the important than being great? company was kind of uncanny—I started as a tech guy in Bur- lington, I left Burlington, and they sent me back to Burling- Nick Donofrio: Yes. And I think good people should always ton to fix the technology base, to bring in CMOS. And for win. Even though they often don’t, even though life isn’t me, this was a karmic decision, because the rest of my tech- kind or fair, that doesn’t mean that someone should become nical and business career was built on a CMOS base. Every- bad or compromise them self to get forward in the world. thing I did after that, the advanced workstation overhaul and That doesn’t make any sense to me. I’ve been asked, “Why the mainframe transition, everything had CMOS at its core are you always willing to listen to people, and to reach out to technology. I’m not saying I believe in destiny, but it’s a little people?” I guess that is just the way I was raised. I enjoy giving scary when you think about how well it worked. I’ve often back and helping people and realizing that there are so many wondered, “Was some force driving this turn of events, or people so much brighter than me in the world who could do was it just luck?” so much more with just a little help.

Grant Lussier: But you had the tools that probably nobody Along the way, I also came to believe each one of us is the in the company had. It seems to me that they had problems, ultimate creator of our situation. You get either what you and you were the only guy with not only the wherewithal want or you get what you deserve. But whatever you have in from a knowledge base, but also the management gumption, the end, it is yours. You have no one to blame, or to credit, to tackle those problems. but yourself. That is the truth as I see it. In the end, for peo-

ple like you and me who’ve been at liberty to exercise our Nick Donofrio: Maybe you are right, Grant. Maybe you are wills in life, it is a pretty sobering philosophy. If it didn’t right. work out well for you, it didn’t work out well for you because you decided that it didn’t work out well for you. If you didn’t

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Archive photography courtesy of the IBM Corporation; Modified Kurzweil chart courtesy of Nick Donofrio.

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11 The IBM Years, The Nicholas Donofrio Story; Celera Search LLC