Post-Merger Integration: How I.B.M. and Lotus Work Together | Glenn Rifkin | July 1, 1998 |

IBM has a competence in acquiring software companies, beginning in 1995 with Lotus. Some lessons were well documented in a rather complete article in Strategy + Business, describing the role that John M. Thompson played with Lou Gerstner. The expectation that Jim Manzi had, that a leader in a smaller business could take on the complexities of the larger enterprise are typical of the ambitious. More realistically, the transition of an acquired company into a successful business is a challenge in itself, and leaders from the acquired company should be appreciated for the value that they can bring.

Mr. Manzi initially surprised I.B.M. and industry watchers by saying he would stay on after the merger. His personal stake, after the deal, was $78 million, and the volatile, sharp-tongued chief executive seemed an unlikely candidate to be satisfied running a subsidiary.

Mr. Manzi insisted on reporting directly to Mr. Gerstner, and Mr. Thompson, a people-savvy veteran and team player, stepped aside and patiently watched events unfold. Mr. Manzi made a bid for Mr. Thompson’s job, deciding he should run all of I.B.M.’s software business — a $13 billion operation that made I.B.M. the largest software maker in the world. Mr. Thompson told him he should make his case to Mr. Gerstner, who listened and decided against the idea. When he was rebuffed, Mr. Manzi abruptly quit.

An hour after Mr. Manzi told Mr. Gerstner his intentions, Mr. Thompson placed a call to Mr. Zisman and to another Lotus vice president, Jeffrey P. Papows, who were both at a managers meeting on Cape Cod. He told them about Mr. Manzis decision to leave and asked them to meet him that afternoon in Boston at the Four Seasons Hotel. As they drove back from the Cape, the two Lotus executives could only speculate about what Mr. Thompson had in mind. Would he bring in an I.B.M. manager? Would he look outside?

Within 15 minutes, Mr. Thompson laid out his plan. The right thing, he said, was to have a Lotus executive run the show. Putting in someone from Big Blue would be disastrous, a blow to the integrity of the deal, and an outside search would take months and likely not yield the best candidate. And that, too, would send the wrong message.

Mr. Thompson said, “You guys are insiders, you’re in the right place. How do you want to do this?” The two were startled but pleased by the decision. Mr. Papows (pronounced PAP-pas), a 44-year-old former jet fighter pilot with the Marines, joined Lotus in 1993 after serving as president and C.O.O. of a small software company. Mr. Zisman, 49, an entrepreneur, sold his company, Soft-Switch, to Lotus in 1994 and stayed on as a senior executive. The pair had been successfully running Lotus’s communications business unit together and Mr. Thompson had noticed them well before Mr. Manzi decided to leave.

But neither Mr. Zisman nor Mr. Papows wanted the C.E.O. job — Mr. Thompson sensed they were afraid it would undermine their strong working relationship. So he suggested a dual leadership of Lotus, through an Office of the President, with Mr. Zisman as chief executive and Mr. Papows as C.O.O.

It was a bold stroke and the two men agreed. Mr. Gerstner approved it immediately. News releases announcing the move were out within 24 hours of the disclosure of Mr. Manzi’s resignation in order to squelch hallway rumor, gossip and angst at Lotus and around the industry.

Full article as “Post-Merger Integration: How I.B.M. and Lotus Work Together” | Glenn Rifkin | July 1, 1998 | at
Post-Merger Integration: How I.B.M. and Lotus Work Together