News

Analysis: Microsoft and IBM preparing for battle

• By Gary Barnett
• August 9, 2004

ANALYSIS: For several years now Microsoft and IBM have been politely engaged in the run up to what is set to be an awesome battle, one that will commence within the next two years and will help to shape the technology industry for the next decade.

If you've watched both of these vendors for any length of time, you'll notice that while both have been very pointed in their comments about other vendors, they've been scrupulously careful to avoid getting into any messy arguments with each other. Indeed, despite competing fiercely, the two companies have gone to great lengths to agree on technology protocols like Web services. This is because Web services, and the various protocols that make up the family, are not just about interoperability, they are about defining the field of battle.

Microsoft is starting at the low end of the valley and plainly seeks to control the higher pastures, while IBM is conscious that if it is to grow it has to expand its territory further down the hillside. Microsoft wants to conquer the high ground, while IBM wants to conquer the low. This battleground lies in the upper reaches of a territory known as SMB (small and medium business).

Both parties know this land well; indeed they both derive a great deal of their prosperity from it. They also know that the company that can gain control of this part of the market will be almost unassailable.

The past two years have seen a renewed effort on both parts to establish a beachhead at the top of SMB. Microsoft's acquisition of Navision and Great Plains are part of a larger plan that is being played out across the company's product portfolio. Microsoft has a huge number of allies. These come in the form of foot soldiers provided by simple resellers to the crack troops that the mid-market independent software vendors can bring to the fray.

IBM has a similar strategy and is investing a huge effort in developing better, closer alliances with resellers and ISVs in the mid market. IBM hopes to make up for the shortfall in numbers by counting on the superior quality of its troops.

Some of IBM's obvious allies come from the group who rally around the Java standard, but the problem is that potential allies like Sun, BEA and Oracle spend too much time squabbling and plotting against IBM itself to be truly reliable in battle.

Microsoft's war chest is phenomenal. The firm has software revenue that outnumbers the software revenue of IBM, Sun, Oracle and BEA combined. Indeed Microsoft's revenue outnumbers the combined revenue of the next 10 software vendors when ranked by size.

On the other hand, IBM isn't exactly short of a bob or two. While IBM's software business may be dwarfed by Microsoft's, IBM is the king of the hill when it comes to hardware and services. Overall, IBM is the bigger of the two. Yet the key question when it comes to IBM is whether it can adapt its strategy to switch from the castle-storming tactics it used to win the high ground to the nimble street fighting that it will need to win in SMB.

What about the other nations in this landscape? Well, this is where things inevitably get a little messy. Most of the smart ones will pick sides and swear allegiance to one army or the other. Some will be able to declare neutrality and profit from their refusal to pick sides. Sadly, a significant proportion will simply be annexed by the invading nations or, worse, end up trampled underfoot without the big armies even noticing.

After all, even the courtliest of wars incur some collateral damage.