IBM realigns software unit
- By John K. Waters
IBM Corp. disclosed last week plans to reorganize its $13.1 billion software
business. The new strategy shifts the focus of the company's sales, marketing
and development efforts away from its five product brands to an approach that
emphasizes cross-brand application packages targeted at a dozen vertical
IBM will divide its software group into 12 industry-specific segments,
according to a company spokesman, including retail, manufacturing, health care,
financial services and others. The Armonk, N.Y.-based industry giant is expected
to invest hundreds of millions of dollars in the new initiative.
Although Big Blue is characterizing this new vertical-industry push as its
most significant strategic shift since the company abandoned the application
business in 1999, IBM executives have also hastened to emphasize that it is not
a radical change.
''This is the continuation of an evolutionary path that we have been on for
some time,'' Buell Duncan, general manager of ISV and developer relations at IBM,
told eADT. ''The market has moved to embrace more integrated solutions and we're
moving with it, taking our software sales organization more toward this solution
In fact, IBM actually began targeting verticals earlier this year with
enterprise integration packages built around its WebSphere application server.
The company has also been using its ''ISV Advantage'' program, which it launched
in April, to support the shift. According to Robert M. Gaura, manager of IBM's
Solution Partnership Center in San Mateo, Calif., the program is designed to
provide technical and marketing support for ISVs specializing in mid-market
customers. IBM announced in October that it would expand the program in an
attempt to attract ISVs serving small- and medium-sized businesses in vertical
The role of ISV developers, and IBM's relations with them, will be a key
component in the new software strategy shift, the firm's Duncan said. ''It's
about building an ecosystem of strong partners,'' he said. To date, the ISV
Advantage program has signed 125 firms, for which IBM will provide technical
support, as well as co-marketing and ''go-to-market'' support. Duncan expects that
number to grow next year.
The San Mateo center, which is one of 19 centers worldwide, provides
resources for 300-plus ISVs every year, the firm's Gaura said. Among those
vendors is Evant, a San Francisco-based merchandise planning and demand
management software provider. Evant used IBM's Solution Partnership Center last
year to perform a proof of concept for the Staples office-supply retail chain,
which led to a major contract.
Jack Harbaugh, VP of marketing and business development at Evant, sees the
shift in IBM's software strategy as a reaction to demand in the marketplace.
''In part, this is a recognition that we are dealing with a much more
sophisticated, much more knowledgeable group of people buying and using
technology these days,'' he said. ''The industry has been moving away from
traditional vendor-customer types of relationships with software and technology
providers toward building strategic business partnerships. Industry verticals
want to deal with a partner that understands their business. I think IBM's
decision to shift toward a focus on verticals helps us as a vendor because we
will be partnered with other ISVs with offerings that are complementary to what
N. Nobby Akiha, VP of marketing at Actuate Corp., a provider of scalable
business intelligence applications, and another ISV Advantage partner, agrees.
''The move makes sense,'' he said. ''In this day and age, customers are not
interested in off-the-shelf solutions. I think being more focused on
industry-specific needs will be very helpful. We're as curious as everybody else
about what the specifics of the announcement are in terms of how it affects the
technology stack, but we believe IBM is on the right track.''
The wheels on IBM's new strategy are expected to begin turning officially
next month with new training programs for IBM sales personnel and new business
development activities. The company wants more than half of its 13,000 worldwide
sales reps to begin focusing on industry-specific product offerings, the firm's
Duncan said. ''As we begin to get our teams aligned by industry,' he said, 'we
believe that we'll be adding real customer value.''
The entire strategy will unfold throughout the coming year, Duncan noted, and
will ultimately touch every part of IBM's Software Group. The company plans to
launch a number of new industry-specific products next year, he added, including
12 new middleware offerings for such industries as insurance, banking, financial
services and automotive, which will be unveiled in January.
IBM's Software Group posted revenue of $13.1 billion in 2002, and accounted
for just over $10 billion in the three quarters of this year. The division's
product offerings include five 'software portfolios:' DB2, its venerable
database; WebSphere, its application server platform and integration software;
Lotus, which handles Web-based collaboration and information management; Tivoli,
which manages networks; and its Rational development tools.
''These are powerful and successful brands in the
marketplace,'' Duncan said. ''And they're not going away. But as we take the
focus off these brands and build new products with a solution focus, industry
flavor and point of view -- and as we connected those products to a sales
organization that is aligned in the field and connected to strong partnerships
committed to open strategies -- we believe that we will be responding to what
the marketplace is now demanding.''
John K. Waters is a freelance writer based in Silicon Valley. He can be reached