CRN Interview: John Swainson, IBM Software Group

CRN: Do you have any plans to extend the per-user pricing of WebSphere Express software to other WebSphere products, or will you just continue that model with more Express products?

Swainson: We will have more Express products. Express products were priced in a more flexible way in part to give smaller customers the ability to get started earlier. Interestingly, that doesn't necessarily mean cheaper. If you scale to hundreds or even thousands of users, it's actually cheaper to buy the product in a conventional sense. If you're a small business and you don't know what your usage is going to be, or you think your usage is going to be minimal, then we needed an offering that would allow people to address that. We try to make our products appropriate for the market in which they compete. And clearly for small to medium-[size] businesses, you need an offering with a lower starting point, which is why we went with that variable cost model.

We'll have Express versions of our [WebSphere] Commerce offering, for example, that will be aimed again at this marketplace that's very entry-price sensitive.

CRN: When will that be available, and when will other products follow?

Swainson: Later this year. I don't really want to commit myself quite yet [to a launch date]. It will be sooner rather than later I hope. My only point is that you're going to see particularly in the low end of the market a lot of flexibility in pricing because we're trying to make sure that there are no impediments for customers to start using our technology.

CRN: Will there be different pricing models for all of the WebSphere software?

Swainson: Not at this time. Obviously, in some large deals, we price very flexibly in special bid environments, but in general, we think the customers are telling us right now that they want to focus on predictability and total cost of ownership.

CRN: Do you have any success proof points on the current Express products?

Swainson: [Express] Portal and app server were available in fourth quarter, Business Connect in the third quarter. I haven't seen specific revenue breakouts for them yet, but I would imagine we are seeing more proof of concept and early placements than huge amounts of revenue, so I certainly wouldn't tell you that there's hundreds of millions of dollars in revenue from these things. On the other hand, we've had several hundred customers in the early support programs for those things rolling them into production. If you recall, one of the targets was the ISV community--particularly the focus was on medium-size customers.

I think the long-term revenue yield will be substantial, but it's a bit premature to think it's going to happen right now. We're very satisfied with the first six months, and we're still working on it.

CRN: Is there any kind of analysis to show that you're winning against Microsoft in the midmarket with Express?

Swainson: As I've said, we've had a couple of hundred medium-[size and] small ISVs participate with us. All of those, frankly, might have been Microsoft had we not had an offering in this space. So they range from [companies such as] J.D. Edwards and Lawson all the way through to [companies that] are lesser-known household names.

CRN: What do you think of Oracle's new application server pricing ($5,000 per CPU for an enterprise-scale product), which seems to be trying to undercut WebSphere's enterprise play?

Swainson: Oracle tried everything in the book to get [the company] established in the app server market. It's not clear to me that this is any more credible than their previous attempts. The fact is, they actually have been trying to give their products away and have not had a huge amount of success. So it's not clear to me that charging $5,000 for a product no one wants is going to be any more useful. Let's face it. If someone wants a cheap Web app server, they can go get JBoss or Tomcat and be perfectly happy. So if I was looking for something cheap, why would I buy Oracle's app server?

CRN: Well, Oracle is trying to offer an application server with enterprise functionality at a lower price than IBM or BEA [Systems], and with more functionality than Tomcat or WebSphere Express.

Swainson: Oracle has no credibility in this space. They've tried everything, this is their latest gambit. They'll undoubtedly convince some number of dedicated Oracle customers to buy it simply because they include it in the deal, but I'm not seeing much take up on it. I think this latest round just illustrates their desperation.

Now, announcing that they're going to give it to BEA customers [for free if they migrate from BEA to Oracle] is an interesting strategy. It does tell you that they think BEA's customers are probably susceptible because they tend to have more lightly used systems and therefore they will have an easier time converting. Whereas you notice they haven't tried the same with our customers because they know that our customers are using these systems in ways that they don't have a competitive alternative.

CRN: I would argue that BEA has a lot of enterprise customers, not just those with lightly used systems. I think Oracle is going after BEA customers running on Sun infrastructure that probably have an Oracle database.

Swainson: I don't think, to be honest with you, anybody that is using BEA for a heavy-duty application. They're not going to be particularly attracted to this deal. They're going to be people who are using a little bit of app server on top of an Oracle database, with a very light usage of the app server. Now Oracle's going to come along and offer them a free app server, but guess what? They've been bundling their app server with their database for the past year and a half. So how is this different? This is just re-spinning this into a new PR story.

CRN: There has been a lot of criticism that WebSphere name covers a lot of products under a brand that IBM acquired and don't necessarily run on the same architecture. Can you talk about the progress IBM has made in its steps to integrate the product line more closely?

Swainson: The only product that is not today fully on the WebSphere base is the CrossWorlds [integration] technology we bought last year. We are on a plan to do that by the end of this year.

CRN: What about MQ Series?

Swainson: The MQ Series, which is a messaging technology, is actually included today with WebSphere and [is] the way we carry the [Java Messaging Service]. We have a very robust way of doing JMS whereas most of our competitors have a lightweight or flimsy way of doing them.

I understand that my competitors' favorite knock on IBM is that we've got this loosely bundled bucket of bolts. I would point out that last year, we grew by 20 percent and they shrank, so whether they think it's loosely bundled or not, customers are buying it because it solves business problems. The business integration part of my business grew by 50 [percent] to 60 percent.

CRN: I have heard rumblings that BEA is getting some wins in the integration space, and some smaller vendors like Sonic Software and its parent company Progress Software, are doing well financially. Are you seeing increased competition there?

Swainson: In niches, we certainly do see Sonic. They've got an interesting product that fits in some spaces. We've typically done very well at enterprise-level of business integration and earlier we were up about 50 percent last year in that space when the bulk of that industry was negative. I don't remember what Progress was, but in general, we've done very well in a market that's been down.

This whole business integration and business process integration market is one of the stronger areas of the marketplace right now because customers, even if they're not building a whole lot of new applications, they are choosing to try and integrate the applications they've got more tightly.

CRN: What about BEA's focus on that space? I'm sure initially BEA's installed base will buy WebLogic Integration.

Swainson: They probably will. That's certainly a possibility. But BEA has interestingly one offering, it's certainly a valid product, a valid way of integrating applications, but business integration needs to be done at a multitude of different levels. You need products like MQ Series that allow you to do message-based integration. You need app server-level integration, which is what BEA does and what we do with our WebSphere enterprise product. You also need to be able to integrate at the business process level. That's what we do with our WebSphere Business Integrator, they don't have a comparable product in that space.

Business integration is more than simply creating a bunch of enterprise JavaBeans and stringing them together. While that can be the answer sometimes, there are also both simpler and more sophisticated solutions that people sometimes need.