Exec: IBM-Google partnership merges top features

IBM’s Steve Mills talks about Google as an IBM customer, growth in China, software-as-a-service, and Microsoft

Does the software-as-a-service trend pose any challenges to IBM?

It provides a challenge to us in the context of who our customer is shifting. Not wholesale, but it continues to move. It moves to a process outsourcer, who then becomes our customer in effect. We need to know who those customers are. Our challenge is to track what's happening and go out and sell our products to them. They're clearly taking the place of what might have been a traditional customer we had been selling to that no longer needs software and hardware to do that job.

Is IBM planning any new software-as-a-service products or acquisitions?

IBM has a set of process outsourcing services [Applications on Demand] today, with some aspects of financial management and supply chain. We bought a company by the name of WebDialogs that delivers [Web conferencing] and incorporated it into our Sametime unified communications offering. These are the kinds of things we are doing and will likely do more of them as we see the market evolve and where customers seem to be most interested in alternative platform-delivered models of getting at function.

In what other areas might you make acquisitions or roll out major research projects?

We're spending over US$3 billion a year in R&D so you'll see a lot of stuff. Our acquisitions have been scattered across the major elements of our portfolio. That will continue to be the case. It could be applications development, systems management, systems administration, security, transaction processing, process integration, obviously the whole Information on Demand strategy, which is multiple elements of technology.

IBM's software group just announced some revenue increases with Lotus, information management, Tivoli, WebSphere and other products. What's been driving this growth?

We're a US$20 billion software business, so in order for it to grow the whole thing has to lift. We don't have the luxury of focusing on one area and not others. It is the world's largest software portfolio. We're not as big as Microsoft as a software company, but our portfolio is substantially larger. We don't get the kind of money from a single product like Windows as they do. Windows and Office fuel a huge amount of revenue and profit for Microsoft. We don't have those franchises.

Isn't it an advantage to be more diversified, or would you rather rely on a huge cash cow like Windows?

Diversity is generally viewed as an advantage. We think it is. On the other hand, having a monopoly has its advantages too. What more could you say? They make an enormous amount of money on Office and Windows. They have a very low cost of sales, relatively modest amount of development. It's enormously profitable. And that's the characteristic of a monopoly, which you're allowed to have. You're just not allowed to abuse them.

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