February 27, 2004 12:32 PM PST

Big Blue straightens up for partner push

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IBM is expected to launch a revamped program for business partners next week, as it tries to pull in more vertical industry customers and to muscle in on Microsoft's stronghold in small and midsize businesses.

New efforts designed to streamline the interaction between IBM and its partners, such as third-party consultants and independent software vendors (ISVs), will be unveiled at Big Blue's PartnerWorld Conference in Las Vegas next week, the company said.

News.context

What's new:
IBM plans to introduce revamped programs for application partners that are meant to make it easier for them to work with Big Blue's software group.

Bottom line:
Partner relations are a top priority for IBM as it works to gain customers in vertical industries and to win small and midsize companies away from Microsoft.

More stories on this topic

One change will be the setting up of a single point of contact at IBM for all five of the company's software brands, a representative told CNET News.com. On Tuesday, Big Blue intends to detail the changes to its ISV relations program, which is part of a major reorganization of its software group.

The recruitment of business partners to build applications using IBM's software and hardware has become a top priority for Big Blue in the past year. Rivals Microsoft and Oracle are also trying to convince ISVs and consultants--particularly those catering to small and midsized companies--to create applications with their products.

The partnering strategy is vital to IBM's push into vertical industries and medium-size businesses, according to analysts. In its vertical industry effort, it sees an opportunity appealing to the large number of software companies that already cater to industries such as health care or insurance. As for smaller businesses, they tend to buy finished applications, rather than write their own.

"As IBM rolls forward with their vertical and small-business focus, ISVs are critical, absolutely crucial to that message," said Stephen O'Grady, an analyst at research firm RedMonk. "(Application providers) provide very specific functionality that no software company, not even IBM, can address all of."

IBM's partner relations needed work, O'Grady said. The computing giant's overlapping product divisions can make working with the company complicated for partners, and communications can become fragmented, he said. In January, IBM organized its multiple software product groups into 12 technology areas, so that all its expertise in content management or development tools, for example, is centralized in a single place, rather than scattered through IBM's different software brands.

On-demand performance
On Monday at PartnerWorld, CEO Sam Palmisano is expected to describe IBM's vision for computing, which is centered on its on-demand initiative.


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Big Blue is expected to argue that this forward-looking on-demand strategy and its commitment to vertical industries and deep technical resources make it a better company to partner with than other information technology providers.

"If you look at the classic IT companies--Microsoft, HP, Sun--we are paying a tremendous amount more attention to industry vertical expertise than any one of them," said Irving Wladawsky-Berger, the vice president of technology and strategy at IBM. "And we are applying a hell of lot more research and development than any (other services firms), including Accenture and EDS."

Wladawsky-Berger said that IBM's strategy of providing hardware and software infrastructure creates opportunities for business partners, especially those that write applications for specific needs, such as the analysis of RFID information for the supply chain industry.

As part of its vertical industry efforts, IBM has appointed general managers to head up all activities related to particular industries, such as life sciences or finance. It has also begun introducing editions of its Java-based integration software, called WebSphere Business Integration, with components tailored to vertical industry processes.

Earlier this month, IBM released 15 software packages that are designed to speed up the automation of common business tasks in the finance industry, such as the installation of a Web site for retail banking. Next week, the company is expected to unveil other industry-specific editions of software products.

IBM hopes to appeal to partners with its technical direction, notably its stated commitment to industry standards and its heavy investments in open-source software.

In the past year, large packaged applications providers, such as PeopleSoft and SAP, have strengthened their development agreements with IBM.

Thinking small
But Big Blue is also trying to extend its reach to smaller ISVs, particularly those that focus on smaller organizations. The company announced on Wednesday that 200 ISVs that cater to smaller companies had joined IBM's application partner program, which the company launched one year ago.

For example, London-based AlphaNova, which provides customer relationship management applications to midsized companies, signed an agreement in January to use IBM's DB2 database and WebSphere Java server software in its product line.

IBM's use of standards and its commitment to Linux made Big Blue a better choice than Microsoft or Oracle, AlphaNova CEO Andros Papageorgiou said. The company has written its software to run on Linux-based PCs, which helps lower the overall costs.

"The costs accumulate on the desktop. Licenses for (Microsoft) Office and Windows XP cost a few thousand dollars per desktop," said Papageorgiou. "Microsoft doesn't justify the huge difference with StarOffice (productivity suite) for many of my customers."

Papageorgiou said that converting customers from a Windows-based to a Linux-based desktop application does require training. But for smaller companies with 100 to 300 employees, training can be done in a day and is not prohibitively expensive.

Many large technology providers are focusing on medium-size customers as a potentially strong area of growth. Microsoft has committed to spending billions of dollars and purchased two packaged applications providers to further attract smaller organizations, where Microsoft is already well established.

For Papageorgiou, IBM's commitment to smaller businesses is quite clear and a marked change from the past. He said he recently attended a day-long workshop to which IBM had sent its managers to discuss the market conditions.

"They've changed a lot lately towards the midmarket and software vendors," he said. "I don't think we could have reached the same level of cooperation with IBM three years ago."

 

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