In-Depth

Is openness enough for IBM?

• By Jack Vaughan, Michael W. Bucken
• November 1, 2001

For an update, go to: IBM news in review for 2002 - Jan, 2003

The IBM development strategy today is, in a word, WebSphere. The strategy places IBM tools from myriad sources under the WebSphere moniker and reflects the Armonk, N.Y.-based computer giant's latest embrace of technology standards, open source technologies and a newfound willingness to join forces with a variety of suppliers.

The strategy revolves around integrating existing systems and extending legacy systems to the World Wide Web using Web services, XML, Java and a variety of other middleware technologies. IBM is betting that standards-based technologies can solve the age-old quandary of connecting dissimilar systems.

A decade ago, a struggling IBM stumbled through a variety of setbacks as it maintained allegiance to proprietary mid-range and mainframe platforms as corporate users sought to become free from reliance on a single vendor. At the time, competitors like Microsoft Corp., Hewlett-Packard Co., Compaq Computer Corp., Sun Microsystems Inc. and many others thrived while IBM's software operations focused on supplying tools and packages for its proprietary offerings.

Meanwhile, corporate IT organizations were turning to Unix-based systems and those running Windows NT to gain access to development technologies emerging from the independent software community. IBM suffered mightily, to the point of starting an effort to dismantle the firm and create several independent units focused on specific markets and customers. The effort was abandoned under current CEO Lou Gerstner.

Gerstner, hired from consumer product giant RJR Nabisco to replace the fired John Akers, initiated a radical shift in IBM's philosophy to embrace the open systems movement, and to build software to run on machines manufactured by competitors. Gerstner also began a renewed focus on services, pushing to use the huge services organization to distribute IBM systems and software.

While earlier IBM standards efforts, like the doomed Systems Application Architecture (SAA) and AD/Cycle, focused on linking the multiple IBM proprietary systems or building software for them, Gerstner ordered the troops to venture outside the firms' confines and support non-IBM technologies.

Gerstner ordered the creation of a software organization charged with selling a variety of offerings for IBM and non-IBM platforms. The unit has grown steadily through the years via internal growth and several acquisitions, most notably collaboration software producer Lotus Development Corp., Tivoli Systems—a maker of systems management software—and most recently struggling database supplier Informix Inc.

The all-important database business began a foray into multi-platform support that crept along for a few years before achieving significant growth on non-IBM platforms over the past couple of years.

So began IBM's much vaunted refocus on e-business, the term that spread through its advertising and marketing material and through the rest of the computer industry. The term was embraced by the Internet revolution and—accurately or not—made staid IBM a standing member of a new technology generation.

"It all began with the Web," said Steve Mills, senior vice president and group executive of the IBM software operation, in an interview at IBM's headquarters. "Our shift started in 1995 to get behind basic [Internet] standards like HTTP and TCP/IP. Client/server interoperability standards were elusive, so customers at the time were going to a single vendor like Microsoft. All of a sudden, Web standards changed the interoperability model." IBM was also an early supporter of the "write once, run anywhere" Java phenomenon, and now that technology underlies much of IBM's development strategy.

And, noted Mills, "E-business is where the dollars are going. At this point there's no growth and no opportunities in client/server computing and traditional computing." For IBM, e-business revenue comes via software, hardware and services, according to Mills.

According to Mills, IBM's interoperability and e-business strategy prompted the acquisitions of Lotus and Tivoli, the aggressive development of application server technologies and the aggressive push to attack database leader Oracle Corp. with its DB2 Universal Database. The use of industry standards allows interoperability between these technologies, third-party offerings and potentially proprietary systems built by IT development operations.

Mills and other IBM executives are quick to list the standards that contribute to the IBM interoperability strategy—HTML, XML, J2EE, Web services and open source/Linux technologies. "I can't emphasize the importance of open standards enough," Mills said. "The accumulation of IT stuff put in place over a couple of decades is not going away. The problem is fitting the new technologies in with the old. Open standards are critical to solving the problem."

Web services, based on industry standards like Simple Object Access Protocol (SOAP), Universal Description, Discovery and Integration (UDDI) and Extensible Markup Language (XML), are another key to their strategy.

"We view Web services as the most important issue in addressing software/application development," said Irving Wladawski–Berger, IBM vice president of technology and strategy. "Building applications by connecting reusable modules or objects—that's the Holy Grail of development. Web services is the best chance we have to reach that Holy Grail."

Adds Rob Lamb, director of business process management at IBM, "For IBM, Web services is about two things: integration and transactions. Both of those are strengths for IBM."

On the whole, IBM hopes that the effort will convince corporate users that its WebSphere software is open enough to seriously consider running on non-IBM hardware platforms and with non-IBM databases. Executives point to a contract signed last month calling for eBay Inc., San Jose, Calif., to use WebSphere as the technology foundation for the next version of its Internet auction and trading site.

Chuck Geiger, eBay vice president of technology strategy, said his firm will run WebSphere on Solaris-based systems from Sun Microsystems or on Windows NT-based systems from Compaq Computer Corp., Houston. He added that eBay has no plans to replace its installed Oracle Corp. database systems. The company also retains an earlier commitment to support Microsoft's .NET platform and Web services technology.

A slew of changes planned for the IBM line of development products will be formally revealed this fall, though IBM executives have been discussing the plans in recent months, and explained much of it in August at the IBM Technical Developer Conference (a.k.a. Solutions).

The latest effort comes just about three years after IBM redeployed the bulk of its middleware offerings into WebSphere. Along with the Apache-based WebSphere application server, the MQSeries message-oriented middleware and some of mainstay transaction systems, CICS and Encina were added to the family, and responsibility for the transaction processing technology was brought into the development unit under John Swainson, whose latest title is vice president and general manager of IBM's application and integration middleware unit.

WebSphere tools

IBM has realigned its development tools under the WebSphere moniker, which includes IBM and third-party tools and middleware.

The new WebSphere will include all of the middleware offerings, the VisualAge line of toolsets, all of the transaction processing technologies, portal technology from Lotus Development Corp., e-commerce technology from the DB2 unit, all of the current WebSphere products and perhaps isolated technologies from other units.

WebSphere on the server side
Aware that one computing era's success may be the next era's curse, the Gerstner-led IBM took the advent of the Internet commerce age in the late 1990s to begin to move a variety of middleware products—CICS, MQ, an application server, as well as e-commerce and online catalog offerings—under the WebSphere umbrella.

In the early days, the WebSphere middleware grouping was something of a market construct. Some observers suspected that the strategy was little more than a marketing ploy. "IBM plunked the WebSphere brand in front of a lot of products," chides competitor Sanjay Sarathy, director of product marketing for iPlanet, the Sun–Netscape application server alliance.

Since the products were brought together in 1998, IBM engineers have created a single code base to underlie all the products that are WebSphere. The result is that a traditionally host-centric company is starting to gain the image among analysts and corporate users of a solutions provider with notable mid-tier offerings. Key elements in the strategy, according to a report ("New WebSphere release aims at much broader audience," June 2001) by Massimo Pezzini, an analyst at " Inc., Stamford, Conn., are new technologies, aggressive marketing efforts and a focused targeting of the company's loyal and large installed base of customers.

Deals with independent software suppliers also intended to drive WebSphere forward. IBM has strategic alliances with large and small application software providers, including SAP, Siebel Systems, PeopleSoft, Ariba, i2 Technologies, Vignette and others, which reportedly generated $750 million in incremental revenue across IBM during fiscal 2000. Bob Timpson, general manager of IBM solution developer marketing, said IBM is projecting that such deals will generate $8 billion in sales by 2003.

The aggressive effort to court third-party applications vendors was boosted early this year when IBM disclosed plans to abandon its own efforts to sell IBM-developed applications software. "We weren't a leader in the application spaces and we were irritating (potential partners)," said Timpson, who is responsible for negotiating agreements with software suppliers and ensuring a good relationship with them. The sale of such applications prior to this year, said Timpson, "was a major contributor to the success of Sun, Hewlett–Packard and the like" in partnering with top application providers like SAP, PeopleSoft and Vignette. He noted that since stronger agreements were signed earlier this year, 35 IBM employees are dedicated to the SAP relationship, 35 to the Siebel relationship and 20 to 30 IBMers to Vignette.

WebSphere Studio Workbench

IBM's primary development platform can incorporate a variety of IBM tools and open interfaces for adding myriad IBM and third-party offerings.

IBM's marketing abilities and technology prowess are feeding off one another. The marketing success is a return to earlier times when marketers convinced IT managers their job would not be lost by choosing IBM systems. On the technical side, IBM boasts a software patent portfolio of more than 6,000, including more than 1,000 patents that were granted during 2000. Today, on mass-market highway billboards promoting WebSphere, no less, the customer is assured once again that IBM is committed to high-tech software for the long term. And IBM management has shown willingness to accept, and in some cases drive, new standard technologies (such as EJB, SOAP and Linux).

"IBM took the WebSphere brand and up-scaled the brand name to cover their whole e-business platform," said Evan Quinn, an analyst at Hurwitz Group, a Framingham, Mass.-based consulting firm. "And that notion has spread throughout the entire software stack."

"It's happened little by little," Quinn said. "The WebSphere brand name has more to do with e-business solutions than just the app server. It's a full-blown architecture."

True Blue
Throughout the 1990s, competitor systems houses Sun and HP made advances in replacing IBM and other mainframe makers' big system offerings with high-performance, Unix-based offerings running third-party applications software and development tools. In many ways IBM suffered, analysts said, because its earlier success forced it to maintain older systems to satisfy a substantial customer base, forcing continued concentration on proprietary systems at the expense of open systems. The WebSphere line has been the spearhead of an effort to bridge the older technologies with new ones, analysts said.

"The loyalty base for IBM has been pretty strong," said Quinn. (He notes that rival Oracle Corp. has maintained a loyal customer base as well.) "IBM to a large degree has been 'up-selling' WebSphere into its installed base," said Quinn.

IBM has estimated that the current WebSphere offering has nearly 35,000 customers, and is used by 90% of the top U.S. commercial banks, seven of the eight largest U.S. telecommunications companies and 80% of the top U.S. health care companies. According to the company, WebSphere revenues more than tripled in 2000 on Unix and Windows NT platforms. According to figures compiled by International Data Corp. (IDC), a Framingham, Mass.-based research and consulting firm, WebSphere grew two times faster than the overall application server market in 2000.

Although many of its customers may be traditional large Big Blue shops, the projects for which IBM must compete are often fresh ones. "This is a new enough area" said Quinn of e-commerce, "a lot of these projects are getting sent out for general bid."

Said Quinn: "Even if you're a pure Oracle shop or 'true Blue' shop, it's not a slam dunk. It's a new area, relatively. There's risk involved, and organizations need a level of comfort."

Geiger of eBay said his firm selected WebSphere following a three-and-a-half month evaluation of most of the top application server offerings and the IBM application server technology met the performance and transactional criteria set for the very high-volume auction Web site. Executives from both firms declined to disclose the value of the contract, which calls for eBay to use the full WebSphere system, including development tools and transaction monitoring software. "EBay undertook a three-month due diligence effort," he said. "We looked at all the application server players and did a quantitative and qualitative analysis. This is the cornerstone technology for V3—the next generation eBay platform."

The IBM system will replace a proprietary system that broke down several times in its maturing days. The V3 development project is projected to take about 16 months, Geiger said.

In many large bet-your-business apps, IBM may be able to play from strength.

The company, said Hurwitz's Quinn, has a reputation for being able to deal with larger projects. "They have all sorts of resources at their disposal. They have experience," he noted. The company's services unit specializes in such projects, observers noted.

Where they may be less successful, Quinn said, is in grabbing proof of concept or leading-edge technology projects. As IBM's reputation for stability helps overcome the safety issue, the same traits can hurt its reputation for taking advantage of newer technologies, observers said.

Low-end app servers still appear to be an area where IBM needs to grow its offerings, experts said.

Said Quinn: "IBM tried consciously to offer entry-level products for WebSphere. The company has tried to communicate that IBM doesn't have to mean big. Nonetheless, that has been IBM's core competency."

Among emerging app server trends, said Stefan Van Overtsveldt, program manager for IBM WebSphere technology marketing, is the blurring of the application server and the enterprise integration server product types. Here, too, he sees IBM competing from a position of strength.

"App servers and integration servers are merging," said Van Overtsveldt. "You are also seeing more intelligence, for example workflow routing, added to integration servers."

Chairman and CEO Gerstner, a former McKinsey and American Express executive who came to the job with little high-tech experience, is still at the helm, and is now widely judged as something of a technology leader. A likely successor—Sam Palmisano, now president and COO—has been indicated, though not anointed.

Many viewers deemed the IBM that Lou Gerstner inherited in 1993 a lumbering giant at best. It is still big and, thus, hardly a growth company. Yet, in the Gerstner years—especially during a recent technology downturn that saw its hardware competitors stumble—IBM has performed well by several key estimates.

The conventional advice when Gerstner took charge was to spin off its very diverse businesses. With a few exceptions, Gerstner pretty much kept the "Big" in "Big Blue," and, ever since, he and his colleagues have used software to sell hardware, hardware to sell software, and hardware and software to sell services. This could be dubbed the "many-headed dragon" approach to market competition.

To what extent is IBM either a software, hardware or services company? For year 2000 revenue as broken out by the company, hardware represented 42.7%, services equaled 37.5% and software was set at 14.3%.

Forecasts of the demise of hardware–software bundles are seldom heard these days, and such packages remain an IBM specialty, whether the development target is a database server or the newer server type known as the application server. Competitive systems houses Hewlett–Packard and Sun Microsystems both bought application server companies in recent years to shore up their offerings in that realm, while IBM built up its WebSphere application server line, for the most part, using in-house expertise.

Hardware server revenues provide at least one scorecard on how these fierce competitors are faring. In the fevered dot.com environment of 2000, according to Gartner Dataquest, IBM maintained its number one position in the server industry based on worldwide revenue. But Sun Microsystems came on strong. Gartner Dataquest estimated that IBM 2000 server revenues were $13.7 billion, just about the same as in the previous year. Sun gained $9.7 billion in server revenues in 2000, versus $6.7 billion the year before.

In the U.S. during the second quarter of this year, IBM's share of the server market increased to 28.6% from 19.1% in the second quarter of 2000. By contrast, Sun's share decreased to 20.7% from 22.4%. Success of the IBM eServer line that uses advanced IBM silicon-on-insulator chip technology and a series of strategic alliances with important applications vendors such as SAP and Siebel are cited as drivers behind recent IBM server sales achievements.

The year 2001 to date has been one most computer companies would rather forget. But IBM's flatness on the upside last year has not yet been accompanied by a plummet to the downside this year. Meanwhile, Sun's rapid vault forward has stalled somewhat.

Gerstner, Palmisano or whoever else heads IBM in years to come, will hear the break-up call again. For now the many-headed IBM dragon is on the prowl.

—Jack Vaughan

Development tools
By later this year, the tools will include a new generation of WebSphere Studio Advanced and Professional Editions Web site development environments that will include the new WebSphere Studio Homepage Builder, said Scott Hebner, director of marketing for WebSphere software.

Swainson, of IBM's application and integration middleware unit, said the VisualAge for Java toolset will remain a separate product under the WebSphere banner for Java developers and that many of the older VisualAge technologies, including the Enterprise Suite, will be subsumed with new WebSphere offerings.

Swainson said that over the long term, all the tools will be built on the same base WebSphere technology, and offer users the same look and feel, as well as the same Interactive Development Environment (IDE).

Hebner said the new tool offerings are based on open standards, and can be used on Microsoft Windows- and Linux-based platforms initially, with platforms to be added as demand warrants. The tools will incorporate links to partner offerings from toolmakers like Rational Software Corp., Cupertino, Calif.; Serena Software Inc., Burlingame, Calif.; and Versata Inc., Oakland, Calif.

The new WebSphere Studio Workbench will include a tool for building tools, allowing IT development operations to build applications specifically for their businesses, Hebner said. The tools built by IT developers can be integrated with other IBM and non-IBM tools, he added.

Daniel Sabbah, IBM vice president of application and integration middleware development, maintained that the role of development tools in the new WebSphere family is "crucial. They provide a basis for developing applications, and developing applications is crucial for WebSphere."

Web services emerge
The battle to tune performance and add standards-based functionality to application servers has been ongoing for several years, with top vendors like IBM, Sun, BEA and Oracle regularly trading places. Today, IBM managers maintain they have an edge versus the application server competition in the emerging Web services software stack.

"We were first to market with full tools support for Web services," said Overtsveldt. He also touted the company's leadership role in Web services infrastructure standards formulation as an edge.

Yet, protests Sun–Netscape's Sanjay Sarathy, it is too soon to claim an edge. "We are talking about a segment that is just six months old," said Sarathy. "It is a little premature [to claim leadership]."

Hurwitz analyst Quinn seconds such a notion. "The Web services forecast is cloudy. It's still extremely early," he said. "It's difficult to characterize whether anyone does have better tech or better 'PR.'" If anything, judged Quinn, in Web services, "Microsoft got the jump."

IBM's Don O'Toole, director, Web Services marketing, insists IBM has a lead. When pressed for an example of Web Services today, O'Toole points to Beacon International Inc., Buffalo, N.Y., a shipper that took "an old green screen CICS app, wrappered it as a Web service using XML, gave it out to trading partners and used it to sell excess shipping capacity." This historically would have been done through telephone conversations, O'Toole noted.

The application is quite different from those depicted to date by Microsoft. The flagship example of that company's .NET strategy takes the form of HailStorm. That form of Web service is somewhat consumer-oriented.

"With HailStorm, Microsoft is focused on the application of the Web services model to the individual, specifically to [establishing the online] identity of an individual and passing it around the Web," commented O'Toole. He did add that he suspects the Redmond, Wash.-based desktop productivity software leader may already be working in-house to develop enterprise Web services solutions that resemble the Beacon applications more closely.

Web services can only help spread WebSphere, O'Toole indicated. "Customers are going to need some kind of app server base to deliver services," he said.

The spread of DB2
When Janet Perna, vice president and general manager of IBM's data management unit, stood up before a press conference in San Francisco several years ago to sketch out IBM's plan to aggressively sell DB2 for non-IBM platforms, she agreed she was taking on Oracle, Sybase, Informix and some emerging suppliers. Today, Perna and IBM are targeting market leader Oracle alone, and are claiming some significant successes.

Perna said that during the first half of 2001, as Oracle sales have flattened, DB2 sales have risen 34% on Windows-based systems, 19% on Unix-based systems and 12% on OS/390. Overall sales for the first half of 2000 rose 19% (IBM would not break out the dollar figures).