IBM Once Again Looking To Software For Growth

IBM Software frequently goes shopping in its partner network to fill gaps in its vast portfolio. Its Webify acquisition, made in early August for an undisclosed sum, was typical. Webify specialized in component technology for services-oriented architectures (SOAs), a hot growth area, and had deep industry expertise in two fields, health care and insurance. An IBM partner for several years, Webify already had fine-tuned its technology to work with IBM's WebSphere software and was accustomed to selling in conjunction with IBM.

"Most of our significant customer wins have been with IBM, with the software group or global services group," said Webify CEO Manoj Saxena. "IBM approached Webify because it saw an opportunity to accelerate its offerings to the market. I think a lot of it had to do with our joint customer successes."

Building ISV partnerships has been a priority, particularly as IBM works to deepen its midmarket footprint. While any number of vendors offer their partners sales, co-marketing, and training incentives, IBM partners say the company distinguishes itself with the depth of its partner assistance programs.

Hosted financial apps maker Intaact, San Jose, Calif., has worked with IBM executives on crafting its marketing strategies, building market recognition, and tapping customer leads., Intaact CEO Robert Jurkowski said. "Lots of vendors provide technology or product services but don't really provide much beyond that," he said. "IBM provided more than we expected. They've done a very good job partnering in the industry and not competing, like Microsoft."

Mills says his goal is to continue the software group's ferocious growth, targeting annual revenue increases of 6 percent to 9 percent and double-digit profit growth. But nipping at IBM's heels are equally savvy rivals—especially Oracle, which gained a beachhead in IBM database and middleware accounts by buying up key IBM partners like PeopleSoft, Siebel and J.D. Edwards. Eschewing applications worked for IBM when it could align with top applications players and serve as their preferred infrastructure backbone. It's riskier in a consolidated market where leaders like Oracle and SAP have their own middleware to push.

Still, IBM has shifted with the software winds since Mills began helming the division a decade ago. As the group plows resources into SOA, security and other booming areas, it's well-positioned to continue picking off attractive acquisition targets and quietly powering IBM's growth.