IBM software strategy: Knock off Microsoft

It has taken seven years and billions of dollars in development and acquisitions but IBM is now in position to achieve one more lofty goal: beating Microsoft  at its own game.

Part 2 of this series: IBM hitting pay dirt with software push

Rivals such as Oracle, Sun and BEA Systems have felt Big Blue's muscle. Now Microsoft, IBM's sometimes comrade, sometimes competitor for the past 20 years, is the foe as the two giants have emerged as heavy favorites in a race to build software that connects systems, applications and business processes between and among corporations of any size.

"These two are the leaders in the battle to define who will become the company that is the major influence for IT architecture and systems for the next 20 years," says Dave Cearley, senior vice president for research operations for the Meta Group.

However, clearly the companies have different strategies to win this software race. IBM takes a cross-platform, heterogeneous approach; Microsoft relies on Windows and its broad .Net  umbrella for integration. And each has a prizefighter's eye for pinpointing the other's glass chin.

"Software is an engine for IBM's services organization and I don't think their software is easy to use, and I don't think it is easy to integrate," says Paul Flessner, Microsoft's senior vice president for .Net Enterprise Servers. "It works once you put it together, but it takes 140,000 people worldwide to make that happen. That is not the case for Microsoft software."

Steve Mills, IBM's senior vice president for software, says Microsoft is one-dimensional. "Microsoft is a great marketing company and they generate a lot of attention and a lot of imagery around what they do, and in particular what they intend to do," Mills says. "But the one-size-fits-all notion is naive."

The war of words is part of a complex relationship between the companies. Over the past year, they have collaborated on defining security and workflow standards to help jump-start Web services . IBM is a top reseller of Windows, and Microsoft partners with IBM's large service organization.

The two basically created the PC revolution in the late 1980s before a fallout resulted in Microsoft building a monopoly with Windows and IBM's OS/2 becoming an afterthought.

Stage set for battle

Now with the broadest software portfolios in the industry, the companies are set to clash. The stakes will be high as Windows and Microsoft development tools based on .Net and Java 2 Platform Enterprise Edition battle IBM's WebSphere and Linux products . Messaging/collaboration servers, databases, management and security products also will be key competitive arenas.

IBM is entrenched in large companies that need to integrate across platforms internally and externally. Microsoft excels with companies ranging from 100 to 1,000 employees, as these midmarket types are attracted to ease-of-use and low-cost software.

Each wants to maintain its dominance while stealing a slice from the other.

To achieve that, experts say, IBM will have to exploit its cross-platform strengths and overcome the challenges of integrating its stable of software products built through acquisitions - it bought seven software firms in 2002  - and cater to midmarket companies without hiding behind an army of consultants.