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Executive Editor

Big Blue says it’s thinking smaller

Nov 18, 20024 mins
Enterprise ApplicationsIBM

IBM crystallizes its partner-driven strategy to infiltrate midsize companies.

SOMERS, N.Y. – IBM is working hard to build up its image as a midsize-friendly vendor.

Executives from IBM’s software division devoted a day last week to championing two groups: the independent software vendors (ISV) and partners that embed, install and resell IBM software products; and midsize companies, which IBM hopes will make up more of its customer base.

Companies with between 100 and 1,000 employees represent a potential bright spot in the anemic technology-buying market. IBM estimates that 400,000 midsize businesses will spend $15 billion next year on middleware – which Big Blue deems to include application servers, portals, databases, integration tools and management software.

They’ll also spend billions of dollars on enterprise applications such as CRM, enterprise resource planning (ERP) and supply-chain management. IBM doesn’t make these applications, but its partners do. And its partners need middleware to get their apps rolling.

IBM announced a slew of products and support programs to help its partners resell, install, integrate and finance IBM middleware – to midsize companies, in particular. Among the new offerings is a line of middleware products, called Express, with prices and features aimed at midsize users.

“Unlike some of our competition, we don’t compete with our partners,” said Donn Atkins, vice president of worldwide sales and marketing for IBM Software Group, at last week’s event. Atkins was the first executive (but not the only one) to emphasize the difference in strategies of IBM and Microsoft – which has lately stepped up efforts to sell the ERP and CRM software it gained by acquiring Navision and Great Plains Software.

For its part, IBM exited the applications business a few years ago, opting to focus on developing middleware and partner with other vendors and resellers for all other applications.

Lighter load

Geared for companies with between 100 and 1,000 employees, IBM’s Express line features smaller price tags and easier administration than its full-scale offerings.
Product What’s new Price

WebSphere Application Server — Express

Bundles a Web application server with development tools and templates for  projects such as building an electronic catalog.

Starts at $25 per user.

WebSphere Portal — Express Requires only one server and can be installed in five clicks, according to IBM. Starts at $77 per user.
WebSphere Business Connection —Express Links a midsize company’s systems with those of its business partners so the companies can perform tasks such as collaborative design and supply chain automation. Starts at $5,000 per server for 10 connections.
DB2—Express Due out in early 2003, will include remote database-administrator technology so companies can reduce their on-site support requirements, IBM says. Starts at $1,000 per server.

“We were spending a tremendous amount of money, and it wasn’t very clear, given the other major application vendors in the marketplace that we were going to be successful trying to do it all – trying to develop the industry application solutions, the middleware, the components and the hardware platforms,” said Mark Ouellette, IBM’s vice president of worldwide small and medium business software sales.

Since IBM’s exit from the application business,partners have become a primary source of revenue for Big Blue, generating about 30% of IBM’s annual revenue. Within IBM’s $13 billion software division, about 20% of revenue come from small and midsize markets, Ouellette said.

For example, 30% of new Tivoli business is through value-added resellers, said Michael Twomey, vice president of business development and channels for IBM’s Tivoli Software division. Sixty percent of Tivoli storage management sales come through partners, Twomey said.

On the data management side, 47% of revenue is driven by partners that resell or bundle DB2 products or have a measurable influence in their purchase, said Gary Schneider, director of channels and services for IBM’s data management division. That figure is up from just 2% in 1996.

To keep its prolific partners happy, IBM is investing about $1 billion in partnering and alliance strategies, executives said. Its efforts include training, support programs, advertising campaigns and new product development such as the Express lineup.