its prominence in the upper-end of the market, IBM Corporation
(NYSE: IBM) is hardly an alien in the mid-market and in the application space
alike, given it had developed and it used to own possibly the first full-fledged
ERP system, MAPICS, a progenitor of today's MAPICS
ERP for iSeries product. Having subsequently spun off MAPICS nearly
three decades ago, IBM had long relinquished the in-house applications development
per se. However, through a number of partnerships with dozens of applications
ISVs, SAP, J.D. Edwards, Geac,
SSA GT, QAD, MAPICS, Intentia,
Adonix, PeopleSoft, to name only some, and
many of which have traditionally been mid-market incumbents, IBM should feel
entitled to this market. Also, owing to the once highly successful AS/400
hardware platform (now branded iSeries), IBM has quite a high brand awareness
in certain sectors, and, more importantly, brand preference due to the platform's
proverbial immaculate performance and reliability. However, price and the need
for specially trained RPG development language administrators
that are not that ubiquitous in the market like Microsoft Visual Basic
(VB) programmers, have never boded well for IBM's massive acceptance
within the space. Not to mention Microsoft's undisputed supremacy on desktops.
has lately reenergized its onslaught on the mid-market hoping to capitalize
on the mid-market forays of a plethora of its enterprise application partner
providers, while also providing some real alternative for Microsoft at the low
end of the application market. As IBM delivers more integrated software packages
for small-to-medium enterprises (SMEs) within its Express portfolio,
it can first target them at iSeries customers, a large installed base of mid-size
enterprises. IBM will also likely undertake an immense re-launch of the iSeries
platform, in which software will play a big part. As mentioned above, several
years ago, the platform was its primary product targeting the mid-market, and
the AS/400 business had built a solid organization of business partners aimed
primarily at SMEs.
the other hand, the IBM Software Group had traditionally focused
(and succeeded much more) with large enterprise sales but has lately begun to
exploit its technologies to expand into the mid-market space. Still, although
the iSeries installed base remains large and religiously loyal, growth has slowed
to a snail's pace. Thus, the Express project also will likely have the following
three goals with the iSeries in mind: 1) maintain the installed base, 2) mine
the installed base by offering complementary IBM software (primarily WebSphere
and Lotus Domino), and 3) regenerate growth in the business.
In fact, the cross-sale of Domino will have contributed significantly to quite
a modest growth the iSeries has had in the past few years.
is Part Two of a three-part note.
One summarized the Event.
Part Three will discuss the Challenges and make User Recommendations.
Undisputed Leader in the High-end of the Market
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. Its corporate focus, however, for some time has been on total and partnered solutions for complex, heterogeneous enterprise requirements that can be grouped into three primary growth areas:
Higher-end (i.e., higher-margin and leverageable) business services — to create
further opportunities in services and software.
Cross-platform 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) platforms). Although IBM has created some synergy between Lotus
and the rest of the Software Group, particularly in WebSphere Portal, the
future of the Lotus and WebSphere will require much tighter product roadmaps'
to become the major component supplier (in an OEM fashion) to the IT industry.
for middleware, recent acquisition of Rational and Metamerge
should provide IBM with respective development and integration technology that
complements IBM's growing line of integration products, including those acquired
from CrossWorlds and licensed from Extricity.
Should IBM combine, e.g., 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 (BPM) across data management technologies (directories
and databases) and applications. This way, IBM has been swiftly closing any
web application server (WAS) functional gaps it might have initially had compared
to main competitors' products like BEA WebLogic or Oracle
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 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.
Professional Services Near-supremacy in the High-end of the Market
PwC (PricewaterhouseCoopers) Consulting
acquisition last year has certainly helped IBM in building additional capabilities
and has addressed any former IBM Global Services' (IGS) weaknesses,
especially in application management, consulting, integration and vertical areas.
From an enterprise applications vantage point, this was a worthy accomplishment
for IBM, which has gained a healthy number of Siebel, SAP and
PeopleSoft implementations, and has possibly become the global leader in SAP
implementations. PwC Consulting's Life Sciences and Pharmaceutical, Oil & Gas,
Aerospace & Defense, and Automotive expertise have been a welcome addition to
IGS' traditional strengths in integration and IT outsourcing. The similar case
is with the Supply Chain & Operations Solutions (SCOS)
group that has again brought together PwC Consulting's and IBM's respective
strengths. The group possesses a worldwide staff of over 8,300 consultants,
making it likely the biggest and most geographically widespread provider of
supply chain consulting services, spanning business strategy and operations.
The SCOS group focuses on many industry sectors, including Communications, Distribution,
Financial Services, Industrial, and Public.
Given the recent poor performance of many Tier 1 consulting giants, IGS will have thereby extended 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).
Entering the Mid-market
the time has long come for IBM to leverage its credibility, market share and
open standards support of its WebSphere product bundle to enter the lower-end
of the market. Contrary to AS/400, the WebSphere platform has not had a tremendous
acceptance by SMEs, although, like AS/400 it has had a higher price level and
technical complexity, but IBM has also lacked an SME-focused marketing effort
for the product. The Express line, which repackages some of the most successful
WebSphere's components, especially WAS, portal and Business Connection,
however, has a potential of a product with aggressively reduced cost and the
complexity of middleware, and which should represent a solid foundation for
mid-market e-business strategies.
IBM's moves coincide with the industry trend of many technologies, like application servers, becoming more affordable and considered by SMEs. The technology needed to manage the entire supply chain often requires more than what one can get from almost any particular software application vendor, SAP and Oracle included despite their broadest possible functional footprints. To achieve nearly perfect customer fulfillment operations, users will inevitably need to tie together applications from a variety of vendors with their legacy systems using nearly-commoditized integration tools in an effort to integrate their internal organizations and external supply chain trading partners. SMEs have recently begun to seek integration platforms that address this end-to-end business process management (BPM) rather than the traditional pesky point-to-point interconnectivity solutions. IBM's strategy of selling WebSphere Express through local VARs and of letting smaller enterprises deploy only what they need in an incremental fashion, should go a long way with the current buying patterns.
Further, 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, SMEs still have to rely on capable services providers for their products to be successfully implemented. Technology consultants and systems integrators are positioning to help users move to this integrated SCM technology strategy. Having acquired PwC Consulting, IBM's consulting services are poised well to serve this market, leveraging its extensive system integration tradition.
the Express strategy is most dependent on the several dozens of thousands of
partners in the IBM ecosystem, which could potentially give IBM broad coverage
across geographies, functionality, industry, and company size. For ISVs, IBM
has to represent a technology partner completely disinterested in building applications
and that is willing to invest significant marketing effort into the partnership.
Otherwise, many smaller vendors will be hesitant to get too close to the behemoth,
which may always eventually take over the well-established local relationship
and squeeze them out. The ultimate success will thus come from IBM's ability
to focus and execute on the mid-market in the long run, and to help the ISV
partners be more successful than those of mid-market competitors like Microsoft,
Best Software or even Oracle. Time will only tell whether IBM
will ensure that its application partners will be better off for relying on
Express portfolio also seems to offer some incentives for mid-market focused
VARs, such as no need for traditional significant investment (time and money
wise) in professional services necessary to install the Portal Express framework
given its improved simplicity. Also, compelling could be its offering of mySAP
All-in-One software and services package built specifically
for wholesale distribution enterprises with fewer than 50 users, which is not
only with fixed-scope (10 weeks), fixed-price ($300,000), but it also includes
all application software, middleware, storage, hardware, and services and is
based on a standard menu (albeit likely in a pure vanilla fashion, and without
major modifications). While most providers will nowadays be willing to negotiate
and deliver fixed-scope, fixed-price deals on a project basis, industry-specific
implementations with standard pricing are still a rarity. Thus, many more no-frills
a la carte' offerings like this will certainly help IBM penetrate the market
and should give all other SME contestants run for their money and a need to
rethink their value propositions.
concludes Part Two of a three-part note.
One summarized the event.
Three will discuss the Challenges and make User Recommendations.