Applications Battlefield Mid-Year Scoreboard
- August 28, 2002
Part 3: IBM
market has recently witnessed a number of high-profile announcements of
stalwart vendors in the enterprise applications space. Given the contrasting
nature of these announcements, from impressive to disappointing financial
performances on one hand, and from new acquisitions and/or job openings
to massive layoffs on the other hand, it becomes painfully obvious that
the overall picture largely consists of many shades of grey.
is a four-part note covering large and small ERP vendors, scoring their
progress during these unsettled times.
One discussed recent financial results of:
part discusses the Market Impact on IBM. Part
Two discussed the impact on Microsoft. Part Four will cover the other
ERP vendors, CRM, SCP, and make User Recommendations.
'larger than life' enterprise infrastructure contestant, IBM, although
recently setback with the effects of business unit sell-offs and dilapidated
hardware and services markets, was saved by the fact that its infrastructure
business unit grew at a solid 8%. IBM remains the largest computer company
involved in manufacturing or servicing almost everything in IT from mainframes,
processors, servers, Unix, Linux, workstations, PCs, application servers,
databases, Web services, e-business, directories, grid computing, IT services,
content management, collaboration, and much more.
focus going forward, however, is on total and partnered solutions for
complex, heterogeneous enterprise requirements that can be grouped into
three primary growth areas:
(i.e., higher-margin and leverageable) business services - to create
further opportunities in services and software
software (with continued investments in Lotus Notes collaborative
groupware and Tivoli enterprise management systems, and while
maintaining heavy emphasis on middleware (WebSphere) and database (DB2)
to become the major component supplier (in an OEM fashion) to the IT
The PwC Consulting
acquisition, while it will hardly help IBM with regard to profitability
improvement in the short term, will nevertheless help it building additional
capabilities and should address any IGS' weaknesses, especially in application
management, consulting, integration and vertical areas. From an enterprise
applications vantage point, this is a worthy accomplishment for IBM, which
should gain a healthy number of Siebel
implementations, and should also become the global leader in SAP implementations.
PwC Consulting's Life Sciences and Pharmaceutical, Oil & Gas, Aerospace
& Defense, and Automotive expertise will also be a welcome addition to IGS'
traditional strengths in integration and IT outsourcing.
will thereby extend its lead in the market in terms of outsourcing revenue,
market share, and ever-broader geographic reach in over 160 countries.
The IBM brand recognition (a lasting brand, well recognized worldwide
that implies strength in business-oriented IT solutions), the sales and
marketing expertise with the largest dedicated sales force in the industry,
a large number of alliances, the broadest range of IT services and products,
greatest geographic spread which can deliver full range of service solutions,
the ability to control its customer base business and deny other vendors'
access to it, and the ability to sell above and around the CIOs should
help IBM continue to win outsourcing deals and likely further fuel growth
and gain more channel control. IGS should also boast a complete service,
including consulting, system integration, applications management, and
Business Process Outsourcing (BPO).
this merger will have far-reaching consequences down the track. It ups
the ante for IBM's product-centric competitors, such as HP, Dell
Computer, Sun Microsystems, EMC, Unisys, Siemens,
and Fujitsu, some of them still being PwCC's partners, very questionable
from now on. The merger also puts more pressure on independent IT consulting
services companies such as Accenture, Deloitte Consulting
(recently renamed Braxton), Computer Sciences Corporation
(CSC), ICL, KPMG Consulting, CMG, and EDS,
as well as on the large enterprise application vendors such as Oracle,
Seibel, SAP, and PeopleSoft, whose larger services providers' pool to
implement and run their software is now dwindling. As prospects increasingly
shy away from custom applications built on proprietary platforms in favor
of an increasingly open and heterogeneous environment composed of inter-connective
(not necessarily customized) applications, vendors still have to rely
on capable services providers for their products to be successfully implemented.
IBM's clout at selling its services, an ongoing challenge of executing
well enough to keep customers happy enough to renew contracts remains.
Some improvements seem to be needed in IBM's overall service, particularly
at the desktop level and regarding problems in IBM's services complex
delivery model and coordination of services. These problems might make
IBM less competitive against pure-play services companies focused on specific
segments, such as e-business. Therefore, IBM still needs to convince users
that it is nimble enough to handle the smaller projects prevalent in today's
cost-conscious market, which may be a concern that is aggravated rather
than alleviated by the acquisition.
challenges attributable largely due to resulting unwieldy combined organization
(which may give heads up to competitors such as Accenture, Deloitte Consulting,
KPMG Consulting, EDS, to take advantage of this inevitable time of merger
confusion and to win away business) include the following bullet points
(some of which have been excerpted in part from the Analyst Views'
Weekly Report dated August 5, 2002 - The
- It has
been well publicized the fact that IBM and PwCC have quite different
corporate cultures given PwCC is organized as an entrepreneurial partnership
(with partners holding equity in the firm), while IBM is a top down
corporate hierarchy organization where PwCC partners will become regular
salaried staff members. Retaining quality people will thus be a major
challenge, particularly if the company will mainly rely on the poor
job market situation as a main attrition deterrent.
sales forces can create problems in terms of whether service or product
leads the sales effort, leading to inconsistent service delivery tied
to program management
already too many existing management layers impacting customer satisfaction
related to problem resolution, and also leading to difficulty in partnering
with other firms due to too big and account-controlling setup.
market perception that IBM pushes its own products, which sometimes
leaves customers wondering if they got the best overall solution available.
IBM will have to preserve PwC's objectivity without coercing its consultants
to sell IBM-based solutions.
strategy consulting — not related to technology adoption — remains underdeveloped
in most geographies, and will not improve soon with the acquisition.
Another cultural disparity between IT service-oriented IGS and business-centric
PwCC will have already been experienced in the Cap Gemini and
Ernst & Young merger, yet to met the expectations that were flaunted
when the deal was unveiled in 2000 (see Meiosis,
Mitosis: Cap Gemini's Mating with Ernst & Young).
- IGS brand
is still not as well-known as the IBM brand, and IBM will not be able
to make use of the well-known PwC brand. As a result, the new organization's
brand will remain completely IBM.
are few low-cost, pre-integrated solutions, causing IGS to still struggle
with small/midsize business market. IBM must find a way to drive out
costs by operating large-overhead PwCC within the IBM infrastructure.
This may be a major hurdle as IBM's overhead add-ons make IBM Global
Services bids too rich for all but the largest organizations.
the software front, IBM is expanding the range of application areas for
DB2 with version 8 with a number of new features relating to XML integration,
ready for the inevitable world of web services. This includes automatic
XML schema validation and automatic transformations via eXtensible Stylesheet
Language (XSL), while all XML documents can be stored (as XML columns
in a table) and recomposed when required. By bundling this with the various
content management capabilities that are already in the DB2 portfolio,
it is a small wonder that IBM has been lately usurping the database leader
title, although the challenges of assimilation of Informix, limited presence
on HP-Unix, limited DBA skills and services, administrative complexity
at high-end, and possible advanced management features gap compared to
Oracle may remain.
for middleware, recent acquisition of Metamerge should provide
IBM with integration technology that complements IBM's growing line of
integration products, including those acquired from CrossWorlds and licensed
from Extricity. Should IBM combines Metamerge's directory-oriented
architecture (Metamerge Integrator integrates directory services,
databases, and messaging systems) with the application connectors and
workflow rules of Extricity and CrossWorlds, IBM will have a flexible
integration framework that can provide business process management across
data management technologies (directories and databases) and applications.
released WebSphere Business Connector centers on trading relationships
and automating interactions using a combination of modules including the
CrossWorlds process engine, an LDAP server, and the Web services gateway,
forming an interesting approach to dealing with several Web service issues
such as security and the differences in service consumer and generator
protocols while exposing internal Web services to trading partners. WebSphere
therefore gives IBM the worldwide domination of the market for enterprise
computing in large enterprises, with broad platform coverage and interoperability,
strong global services business and leadership in application server and
integration middleware markets. The caveats still remain — like market
perception of IBM as a legacy technology vendor, the improvement of third-party
products support (i.e., reducing interconnectivity and features gap with
Microsoft, Oracle AIS, Sun One and BEA Systems),
and reducing complexity due to the need for competitive, easy-to-use packages
for the lower-end of the market.
the battle for the dominance in Web services/enterprise platforms has
so far largely been a war of words without the clear winner yet (and not
any time soon), as many underlying standards have emerged only recently.
Still, the bitter enemies, at least agree on the future of Web services,
and have been building similar technology frameworks for developers. Both
.NET and Java camps also rely on the same set of established standards
such as XML, Universal Description, Discovery, and Integration (UDDI),
Web Services Description Language (WDSL), and SOAP.
interoperability seems to currently be the motivation for bigger players
to suspend hostilities and focus on standards adoption, the desire for
domination will tempt them to weave dependencies on their products into
their strategies. There is also the possibility that WebSphere and .NET,
while competitive offerings, will end up in a peaceful coexistence given
their amenability to satisfy needs of different ends of the market, higher
and lower respectively (see Liberty
Alliance vs. WS-I; J2EE vs. .NET; Overwhelmed .YET?).
concludes Part Three of a four-part note scoring the ERP vendors in these
difficult times. Part One was an
overview of recent developments. Part
Two discussed the Market Impact on Microsoft. Part Four will cover
the other ERP vendors, CRM, SCP, make User Recommendations.
This article has been modified from its original form since the original