February 10, 2004 1:56 PM PST

IBM reorganizes software group

IBM has reorganized its $15 billion software group to break down barriers among conflicting sales groups and focus on key technologies, part of the company's industry-oriented sales strategy.

In January, Big Blue officially revamped its software group to sell software packages tailored to vertical industries and to improve the industry training of its sales people. IBM on Tuesday disclosed more details of the reorganization and the company's cross-brand technical strategy in interviews with CNET News.com.

Under the new scheme, IBM managers will have leeway to assign salespeople with specialized skills from its five software divisions to address particular customer issues.

"The whole idea is to be able to respond quickly to what a customer solution might demand without adhering to too many organizational silos," said John Reilly, director of public relations at IBM Software. "Before, we were much more brand-oriented."

Under the revamped sales process, customers will be less likely to be grouped with salespeople based on their geographic location. Customers will retain a single contact, called a software sales representative, but IBM will have the flexibility to bring in others as well.

IBM has identified 12 technology areas where it plans to focus its energies and gain market share, in part by combining components from its different software brands. Those areas include content management, business integration, business intelligence, data centric automation, development tools, security, storage, pervasive computing, portals, Linux, storage, IBM's zSeries mainframes and "competitive win back" scenarios, according to IBM.

"We have created 12 (technology) specializations that break down the barriers of brand," said Jeff Schick, director of content management worldwide at IBM. "We do not want to present a generalist. We want to present someone who is deeply skilled."

On a given account, for example, Schick could bring in a salesperson who is an expert in records management to address a customer grappling with federal auditing requirements. This specialist could come from any of IBM's software brands: DB2 for data management, WebSphere for application server software, Lotus for collaboration, Tivoli for systems management and Rational for development tools.

"The idea is to drive the right folks to the right opportunity," said Schick, who said the new organization should speed up internal decision-making and problem resolution.

In bridging IBM's different product lines, the sales reorganization mirrors the company's cross-brand technology and marketing strategy.

IBM reuses components from its different products to accelerate product development and improve integration. The modular approach lets it use, say, existing systems management software from its Tivoli line within its WebSphere application server and cut out redundancy in the overall software portfolio.

IBM Software, once considered an industry laggard bound to its proprietary hardware systems, has become a vital component of the company's strategy and IBM's most profitable group. Revenue for IBM software grew 7 percent in 2003.

Although IBM's professional services group, Global Services, dwarfs IBM Software in size, the software group contributes much higher margins than both services and hardware, according to the company. Gross profit margins for software were 85 percent for the nine months ended Sept. 30, while margins for Global Services and IBM hardware were about 25 percent during the same period.

 

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