The Agenda - Fast Change

The software business is full of dramatic, pivotal moments: moments when the gut-wrenching pressure can be almost unbearable, when egos and reputations are on the line -- and when, in the end, you either win or lose. At Tivoli Systems Inc., one such moment is game point in a round of office headball.

Headball is something that software developers at Tivoli dreamed up while cranking code deep into the night, and it's become a favorite pastime. Basically, it's handball using heads instead of hands; the ball is green and purple, and the size of a volleyball. The game today is between Mitch Medford and Marty Stich, and the score is tied at four all. Medford, 36, director of work-group systems, is stocky, like a catcher, but his trash talking compensates for his lack of agility: "Here we go! Game point! He can't handle it!" Medford launches a serve that bounces off his forehead and then off a wall. Stich, 34, a lanky staff engineer who has the quickness of a tennis player, lunges headfirst for the return and misses. Game, set, and match to Medford. He howls with delight. Then he and Stich return to work.

Tivoli could be any startup in Palo Alto, Austin, Seattle, or Boston. There's a sense of mission in the air. The staff is serious and passionate about its work, yet the environment remains playful and irreverent: A hallway doubles as a bowling alley, with plastic water bottles substituting for pins. One office has been converted into a game room, complete with a foosball table. And everyone is fair game for the top-10 lists posted on a wall ("Top 10 reasons why the strongest hurricane of the year was named after Mitch -- No. 4: What else is big, loud and disruptive to people's lives?").

But this isn't a startup at all. Tivoli is actually part of IBM. Headball Central is located in the heart of IBM's wooded campus in Research Triangle Park, North Carolina, between Raleigh and Durham. Forget crisp blue suits and starched white shirts. This operation represents the future, not the past. It is IBM's answer to a set of vexing questions that haunt big companies everywhere:

Must the advantages of size -- financial resources, clout with customers, deep reservoirs of talent and technology -- come at the expense of speed?

Must a commitment to professional behavior -- clear lines of authority, sound rules for making decisions -- come at the expense of agility and flexibility?

Must a proud tradition of success -- a well-honed sense of "how we do things here" -- come at the expense of changing with the times and doing things differently?

In short, must being big mean being out of touch?

IBM's answer to all of those questions is no. IBM bought Tivoli, which is headquartered in Austin, Texas, in early 1996. The acquisition raised eyebrows and expectations throughout the computer world. Some pundits commented that IBM had paid too much -- $743 million for a seven-year-old outfit with annual revenues of just $50 million. But there was a clear strategic fit. Tivoli was strong where IBM was weak: Tivoli makes powerful software that manages networked PCs and distributed systems from a single location, regardless of the platform -- IBM, HP, Microsoft, Sun -- on which they run.

But the deal involved more than importing new technology or inventing new strategies. The real objective was to accelerate change. IBM did not fold Tivoli, the young upstart, into its existing business -- as is customary in such lopsided acquisitions. Instead, IBM placed Tivoli in charge of IBM's entire systems-management business. Almost overnight, Tivoli boosted its workforce by a factor of 5 (from 236 people to 1,300 people) and increased its revenues by a factor of 10 (from $50 million to more than $500 million). It was an acquisition all right, says Frank Moss, 49, Tivoli's then-CEO -- but it was a "reverse acquisition." At the staff meeting announcing the deal, Moss dispelled fears about Tivoli's future by projecting an IBM logo onto a screen. Below the logo were the words "A Tivoli Subsidiary." He was only half joking.

Three years later, that reverse acquisition is a promising new model for how to make big change fast. It blends the power of a big company with the speed of a small one -- and produces something that neither company could create on its own. The result is, to be sure, an unlikely mix. Suits meet shorts. Wing tips meet sandals. Big Blue meets little red. (Tivoli's corporate color is bright red.) But sometimes opposites do more than attract -- they blend.

Tivoli veterans admit that they still occasionally study the org chart of the new Tivoli to trace the bloodlines of the people they work with: Blue signifies original IBMers; red, original Tivolians. But when Bill Foster, 41, a product-verification manager based in Raleigh, looks around, he mostly sees a third color. "We're not blue, and we're not red," Foster boasts. "We're purple. We're the best of both worlds."