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IBM Nabs Another Application Vendor

Written By: L. Talarico
Published On: August 31 2000

IBM Nabs Another Application Vendor
L. Talarico - August 31, 2000

Event Summary

International Business Machines Corporation. (NYSE: IBM) recently entered into a global strategic alliance with Vignette (NASDAQ: VIGN), a developer of e-businesses applications including CRM software. Under the agreement Vignette will closely integrate the V/5 E-business Applications suite with IBM's WebSphere Commerce Suite and Application Server. As part of the agreement Vignette promises to sell an undisclosed percentage of V/5 applications with IBM products, and IBM agrees not to develop business applications that directly compete with Vignette. IBM will perform the installations through IBM Global Services.

This is not the first time IBM has partnered with an applications vendor to cement distribution channels for its products and services. These alliances have a similar structure. The vendor agrees to optimize its applications for IBM's servers, databases, and consulting services as well as commit to selling a percentage of its applications with IBM's products. IBM agrees not to develop applications that compete with the vendor. There is also a joint marketing agreement. Recent strategic alliances between IBM and application vendors include:

  • October 28, 1999 - Siebel agrees to closely integrate their CRM applications with IBM's DB2 Universal Database, as well as optimize for the S/390, RS/6000, NUMA-Q, AS/400 and Netfinity servers.

  • December 7, 1999 - SAP expands their partnership with IBM to include support for DB2 Universal Databases with mySAP.com implementations.

  • March 8, 2000 - I2 and Ariba agree to integrate their marketplace technologies with IBM's Webshpere platform

  • July 5, 2000 - Industrial and Financial Systems (IFS AB) agrees to support DB2 Universal Databases for their IFS Applications.

  • July 12, 2000 - I2 agrees to deliver a percentage of their TradeMatrix e-marketplace platform on IBM's DB2 Universal Databases.

In an interview with the Wall Street Journal IBM's General Manager of Developer Relations, Robert Timpson, stated that last summer IBM decided not to develop specialized corporate applications. IBM has made over 30 similar alliances that reflect this decision and indicate their focus on selling servers, databases and consulting services.

Market Impact

Mr. Timpson stated that these alliances are not simply contractual pacts. IBM is creating strong channel partners that are committed to selling IBM products. This may have a significant impact on the CRM market as well as on other business application markets.

Vendors currently develop applications that will run on many different brands of infrastructure components because it allows them to sell their products to firms regardless of what brand of infrastructure components they own. Business application vendors may become less apt to do this in the future if the types of agreements that IBM entered into with Vignette become widely used. This is because support for other infrastructure products will take second priority due to the application vendor's contractual obligation to sell a percentage of their products with the partnered infrastructure vendor's products.

Furthermore, IBM may be stepping on its own toes by signing these agreements. Part of the reason that the application vendors are willing to enter these partnerships is because IBM agrees not to sign a similar agreement with another direct competitor. As the functionality of CRM suites becomes increasingly broad, it may be difficult for IBM to keep these agreements with Siebel and Vignette. Both companies offer applications that bring multiple data sources into one unified view. In twelve months there may be a significant overlap in their offerings, putting IBM in a difficult situation.

User Recommendations

Beyond the capabilities of the CRM application, firms evaluating a CRM product need to decide if choosing a CRM vendor that is partnered with an infrastructure vendor makes sense in their situation. The application vendor should be asked the following questions:

  • How many different infrastructure vendors are you partnered with?

  • Are you partnered with the infrastructure vendor that I currently (or plan to) use?

  • Do any of your partnerships have joint marketing agreements?

  • Do any of your partnerships require you to sell a percentage of your product with the infrastructure vendor's products?

These questions will reveal the nature of the CRM vendor's partnerships. Un-partnered CRM vendors generally offer applications that support a wider range of infrastructure products. Therefore if you have the required infrastructure in place to support the application or you would like to make the infrastructure decision independent of the application decision, selecting an un-partnered application vendor may be the best decision. Conversely, if you need to make an infrastructure decision as well as an application decision, and cost and implementation time are critical, a partnered vendor will make more sense.

 
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