IBM Shakes Up Its Software Strategy

The shift, which IBM officials call the most significant move since Big Blue's exit from the applications business in 1999, is intended to provide customers with more tailored implementations that address very specific business problems, such as the need to store years' worth of e-mail to comply with the Sarbanes-Oxley mandate around corporate accountability. IBM's vision is to mix-and-match pieces of its software, such as DB2 or WebSphere Portal Server, along with IBM's prebuilt protocols and APIs that facilitate the flow and integration of vertical processes indigenous to industries like banking, retail, automotive and insurance.

"[The approach] is about having a vertical dimension to our infrastructure business, and secondly, it reflects how customers choose to buy middleware, which they base on their business objectives and the projects they are pursuing," says Paraic Sweeney, vice president of marketing for IBM's WebSphere Business Integration.

In the past, Sweeney says, IBM's sales team might have sung the praises of J2EE support or bidirectional adapters as an enticement to buy WebSphere. Now the tack will be more business-oriented; for example, telling a consumer goods manufacturer how a certain combination of middleware will help him achieve product item synchronization.

In executing the plan, IBM will accelerate four key initiatives in the coming year:

• In January, roll out 12 new industry offerings that feature different components of IBM middleware, and target such areas as insurance, insurance, banking, financial markets, automotive, retail/wholesale, consumer package goods, utilities, telecommunications, electronics, healthcare, government and life sciences. These protocols and programming interfaces reflect specific processes in each of these industries. They could be construed as dangerously close to applications themselves, a charge that IBM will deny vigorously. One analyst agrees with Big Blue, saying these prebuilt process templates are quite general with respect to each of the industries they represent, leaving a lot of real estate for ISVs to build and extend out applications that tend to very niche process requirements.
• "When you look at the really distinct [industry] needs and filter them into micros levels of say, the financial industry, that's where ISVs come in," says Stephen McGrady, industry analyst with Redmonk, in Bath, Maine. "IBM can't solve all those problems."
• But McGrady says that IBM will have to walk a fine line, sticking to providing the low-level vertical APIs and functions in their products so that ISVs can extend out from there. "That will take some explaining and not everyone is going to get it. There's the messaging challenge."
• Retrain IBM's 13,000-member direct software sales force to push the industry solutions. This will involve training half of the sales force as industry-specific technical experts. McGrady says this is the biggest indicator of IBM's commitment to the solutions approach because re-purposing sales personnel is "not a trivial task by any means."
• Augment existing ISV programs with a series of marketing and technology enablement programs around vertical industry solutions. There will be an added emphasis on ISVs that deal in the SMB market.
• Invest "millions of dollars" and other resources throughout 2004 in developing new or enhancing existing industry-specific middleware offerings.
• For partners, the new software pitch should play well with what many of them are already doing around providing domain expertise to customers, according to IBM. Sweeney says he expects the new selling strategy will boost demand for VARs to provide more services and consulting to deploy and custom-fit these IBM solutions. For ISVs, in particular, the potential lies in crafting applications that ride on top of IBM's vertical middleware, according to IBM. Systems integrators can take advantage of the prebuilt templates to cut time and cost out of integration projects.
• No other platform player is zeroing in on a vertical software approach as much as IBM, O'Grady says. If the company executes well, the strategy could be a new differentiator from the likes of Oracle, Microsoft and Sun.