IBM doubles down on software services

IBM is in discussions with its partners to create a prepackaged set of hosted applications, a move that could ultimately create an online analog to traditional packaged applications and spur market adoption of software services.

Though still under development, the project is meant to simplify the process of procuring a full suite of hosted business applications--and boost IBM's billion-dollar hosting business, people familiar with the plan told CNET News.com.

The initiative, called by one member the "IBM Software as a Service Partner Council," could be announced as early as next month at IBM's PartnerWorld conference in Las Vegas. An IBM representative declined to comment Thursday.

News.context

What's new:
IBM and some of its application partners are discussing a plan to create a preintegrated suite of hosted applications, or programs that are delivered over the Internet, CNET News.com has learned.

Bottom line:
The initiative is one of many at Big Blue to promote the once-discredited idea of software as a service, a corner of the computing industry that's seeing faster growth than traditional software sales.

More stories on IBM and hosted applications

The creation of an IBM-hosted application bundle is one of several initiatives at Big Blue to promote the notion of software as a service, or having applications delivered over the Internet. This model for buying software "on demand" is taking hold after years of missteps and failures, which were due to both technical challenges and faulty business models.

IBM on Tuesday acquired Corio, an application service provider serving medium-size businesses. IBM also has programs to encourage independent software vendors, or ISVs, to convert their applications to run effectively over the Internet.

Analysts said IBM's growing interest in hosted services reflects a belief among software companies that spending on hosted applications offers brighter growth prospects than traditional software sales.

"It's where some of the hottest growth in the market is right now," said Tom Kucharvy, president and chief research officer at Summit Strategies. "It's going to be many years before we reach a crossover point, but the growth rates are much higher for software services."

Indeed, the potential for boosting the number of its application hosting customers, particularly to midsize companies, drove IBM to buy Corio. Until now, IBM's application outsourcing business has been primarily focused on larger customers, which favor customized development and installation, while Corio has software to run a simplified application installation to a large audience, said analysts.

"The hosted market will grow at over 20 percent annually--that's four times as fast as unhosted software," said Jim Corgel, general manager of IBM's e-business hosting services, when discussing the company's