Big Blue sings a midmarket song

IBM assembled a group of its top executives Tuesday to explain why IBM -- a company accustomed to signing multibillion-dollar deals and providing technology for Fortune 500 corporate data centers -- is accelerating its efforts to woo business from small and mid-sized companies.

With growth slowing in the high-end enterprise software market and smaller companies increasingly interested in technologies such as CRM (customer relationship management) and ERP (enterprise resource planning) suites, a slew of top vendors are strengthening their portfolios of offerings for the small and medium business (SMB) market.

IBM's strategy differs from those of its rivals in that it doesn't plan to tap the SMB market by selling its own applications. Rather, it has partnered with an array of ISVs (independent software vendors) that will offer customers their own applications. IBM's revenue comes from selling with those applications its own hardware, middleware, financing and services.

The decision made three years ago to exit the applications business has been a key part of IBM's strategy, said Donn Atkins, IBM Software Group's vice president of worldwide sales and marketing.

"Unlike Microsoft (Corp.) or Oracle (Corp.), we are not competing with ISVs, we are partnering with them. Partners have become a very, very key piece of our ecosystem," he said.

They're also a piece about which IBM is increasingly vocal. The company announced Tuesday the latest addition to its recently created WebSphere - Express line of middleware tailored to SMBs. " That new line is "the most significant initiative we've put in place to continue our growth next year," said Scott Hebner, director of WebSphere marketing.

Executives said Tuesday that IBM is planning a steady procession of new SMB offerings throughout 2003.

IBM's partnering emphasis is part of an ongoing cultural shift at IBM dating back to the start of former Chief Executive Officer Lou Gerstner's tenure, said Bob Timpson, who oversees developer relations for IBM.

"There's a shift from Fortress IBM -- 'I'd rather do it myself' -- to more -- I won't say we're completely there yet -- but much more of a partnering attitude," he said. "We are ramping up off what's already a large base of 20,000 partners and a whole bunch of SMBs."

IBM spends close to $1 billion annually on programs, marketing and support for its ISV partners, he said, in exchange for which it reaps about 30 percent of its annual revenue from resellers.

Several of those partners turned out for the gathering at IBM's Somers, New York campus -- located not far from the company's Armonk headquarters -- to testify about the advantages they've found in partnering with IBM.

Aligning with IBM gives midmarket CRM vendor Relavis Corp. credibility and a worldwide sales capability, said Vice President of Sales and Marketing Joe Debold.

For companies seeking to partner with a major vendor, IBM is a far more benign option than many of its rivals -- particularly Microsoft Corp., said J.D. Edwards & Co. Chief Marketing Officer Les Wyatt.

"Microsoft is moving very aggressively into the applications space, and I think many ISVs see that as a major threat to their business. They see Microsoft with an initiative to try to own it all," Wyatt said.

The midmarket has traditionally been Microsoft's domain: Companies already invested in Windows and Microsoft Office tend to go back to Microsoft when they need to extend their capabilities. But IBM is confident that its partner-based, open standards-focused approach is more in tune with today's business climate, Timpson said.

"Windows owns the desktop," he said. "Microsoft is very strong with a self-contained entity that doesn't need to integrate or communicate with the outside. Our contention is that doesn't describe much of the world anymore."

Still, he also stressed that one reason IBM strongly favors companies committed to an approach that is standards-based, open and generally centered on J2EE-centric (Java 2 Enterprise Edition) is that it doesn't want to force customers into locking in to one proprietary system.

"We are not eager to see Business Week covers with 'The Big Battle: Armonk vs. Redmond,'" Timpson said. "It makes good ink, but customers hate it. They have to make this stuff work. They don't want to see IBM and Microsoft fighting. They say, 'Children, will you please go away and get this sorted out so I can get on with my business?'"IBM complemented its session Tuesday with a flurry of partner and SMB-market news. In addition to adding a tailored version of its WebSphere Application Server to its Express line, IBM disclosed plans for an Express edition of its DB2 database. DB2 - Express will be available in the first quarter of 2003 for Windows, Unix and Linux, with a price tag starting at US$1,000, IBM said.

IBM also lowered the minimum transaction size for its customer purchase financing programs to $25,000 and signed on several new ISV partners. IBM partner Intuit Inc. announced plans to integrate the new WebSphere Application Server - Express into its Intuit Eclipse supply chain management software.

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