IBM Kick-Starts Plans For Midmarket Battle With Push For Partners

Not only will the DB2 Express database be aggressively priced,it may go for as little as $499 per CPU,but IBM is sweetening the pot for partners, offering 10 to 15 additional margin points on sales of DB2 Express, WebSphere Express, Lotus Domino Collaboration Express and Tivoli Storage Resource Manager Express.

"We're giving more margin to kick-start the offerings," said Mark Ouellette, IBM Software's vice president of worldwide SMB sales, at the company's PartnerWorld 2003 event here last week.

Company insiders confirmed that IBM may price DB2 Express, formally introduced last week, at $499 per CPU, plus $99 per user. The database, which will run on Linux and Windows, targets midmarket customers with ease-of-use and manageability enhancements. The product is slated to ship next quarter.

The computing giant is also recruiting thousands of new solution providers and ISV partners to sell and support the Express midmarket offerings, Ouellette said.

IBM's traditional strength has been in larger enterprises, many of which spent,or overspent,on Y2K projects and the dot-com boom and are now living with the reality of constrained IT budgets. With its move into the vast midmarket,which IBM defines as accounts with 100 to 1,000 employees,the vendor will bump up against Microsoft, which is trying to parlay its desktop dominance into the server and back-office realm, observers said.

"We have very good strength in the enterprise, Microsoft has good strength on the desktop. They are coming up. We are coming down. We want to keep them on the desktop," said Buell Duncan, IBM's general manager of developer relations.

The challenge is great for both companies. "On the database side, DB2 has always been reliable and scalable up. The question was, 'Can IBM scale down [the product for smaller companies]?' " said Sam Fatigato, president of Austin, Texas-based Ascendant Technology.

In the midmarket, where companies typically don't have big IT staffs, price is a key consideration, as is ease of use and manageability.

IBM's goal with DB2 Express is to be priced competitively against Oracle and Microsoft but offer better management features, insiders said.

Many solution providers maintain that Microsoft SQL Server leads the field in ease of use, although IBM has emulated many of Microsoft's tricks of the trade there.

While Microsoft touts its .Net vision, IBM continues to push what it calls an open-standards-based J2EE Web-services platform.

The battle is shaping up. IBM, relying on ISV allies, wants to keep Microsoft relegated to the desktop. It portrays Microsoft as a company that competes with its own ISV partners with its own applications.

Doug Burgum, president of Microsoft Business Solutions, the group leading the CRM/ERP charge, has maintained that the company is furnishing a platform upon which other ISVs can build vertical applications and capabilities.

Still, even longtime Microsoft partners privately view the developer's CRM/ERP/BackOffice application push with alarm. "When Burgum was at Great Plains, we could believe what he said about not competing [with partners]. Now we're not so sure," one partner said.

"There is a feeling with [Microsoft's] purchase of Great Plains, Solomon [Software and] Navision that it went into competition with its partners," said Don Webb, president of Prelude Systems, an IBM solution provider in Dallas.

Fatigato concurred: "We like that IBM is not doing applications, something they reaffirmed this week at PartnerWorld."

The flip side is that IBM, unlike Microsoft, fields a huge services organization that is viewed as a threat by some integration partners.

AMY ROGERS & STEVEN BURKE contributed to this story.