Thompson Steers IBM's Software Strategy

JOHN M. THOMPSON, a 32-year IBM veteran, has been at the center of IBM's software revival. Thompson, an understated executive compared to flashier software rivals, has quietly turned IBM's software business into one of IBM's three biggest growth centers after operating at a loss four years ago.

Thompson sat down with InfoWorld's Executive News Editor Martin LaMonica and Editor at Large Ed Scannell to discuss the top issues facing IBM's software organization and its customers.

InfoWorld: What was the thinking behind the latest reorganization within IBM?

Thompson: Having dealt with tens of thousands of [electronic] business engagements, we have found that as people begin to integrate applications, they move them from simple applications to more complex mission-critical applications, and so there's a number of things that they have to do.

They find they not only need [electronic] commerce systems, but they need to link them to the systems that support people and their applications. They also need to mine data and reach informational data because they are out there on a Web site somewhere. These are the four major categories of functionality customers need.

The first category has to do with new transactional systems, or Web self-service systems, and being able to integrate them into existing systems.

Next, users need to be able to leverage the data, so we have created a category now where they can reach the information. Third, they need to be able to make their own organizations more effective by distributing this data to people, including knowledge management. Fourth, they need to manage this new technical infrastructure.

InfoWorld: Does it also serve as a way to more effectively tell your customers what you are up to?

Thompson: Right. It also shows them an end-to-end framework that doesn't dead-end them. And they don't have to reprogram their software. We've said, "OK, if we can put our products together under these bigger banners and then link those four things together, [we can] create an architecture and platform from which the customers can grow.

InfoWorld: So you think you now have an applications architecture users can work with?

Thompson: People like to know there is an architectural structure and one they can get high-quality service from. They want to know if they can link things and integrate things as well. You don't sell architectures though, you sell a solution to a problem.

InfoWorld: Can you give us a snapshot of where your top 100 customers are in terms of transitioning to becoming an e-business?

Thompson: We saw a lull with the Y2K focus in the last half of the year. But all of the surveys show that is behind us, and that customers are going full steam ahead with e-business. I think you are going to see a lot of renewed investment in moving their systems [over to e-business] and taking advantage of the Internet; in particular, a lot of business-to-business.

InfoWorld: How would you define a second-generation e-business?

Thompson: I think of second-generation [electronic] business as being founded on second-generation Internet knowledge. So it is not about technology per se, but that's the enabler. But what customers clearly most want to do is integrate systems to a much higher degree than they have been in the past.

InfoWorld: Tighter integration for both the platforms and applications?

Thompson: Primarily the application level. They want to link applications such as their ERP [enterprise resource planning] systems with a CRM [customer relationship management] system. They are also linking in to what I call B-to-E -- the business-to-employee systems. There is just a tremendous focus on this integration problem across the board.

InfoWorld: How does last week's Linux announcement fit in with your Java strategy?

Thompson: First, we believe Linux is going to grow and it is going to be an important operating system that we will enable on all platforms. Two, we will fully exploit [Linux] with all of our middleware and system services, as well as all of the functionality that I talked about in this application architecture. We think that Linux can be the Unix platform that users develop for.

InfoWorld: Strategically, how much of a focal point will Linux be relative to AIX?

Thompson: And (Project) Monterey allows AIX to work on both RISC and IA-64 architectures. There are a lot of new applications being built on the Web, and because we are exploring that, we will tend to grow that. And what you'll see us do is bring those Linux services over there. You will see us start to merge that capability. How far that convergence goes, I'm not sure.

InfoWorld: Some believe Linux will be a lot more strategic to IBM (than AIX or Monterey) because it attracts many more ISVs, is generally a lower-cost platform to develop on, and helps shore up market share among some IBM servers that need it.

Thompson: And not just for those reasons. We see the market going increasingly with Linux because it is open source, and that has a lot of appeal. Also, you'll see us increasingly take IBM technology from IBM Research [Division] and put that into open source and move it into the Linux community. That has to be done in conjunction with the Linux community and it has to be something that they want.

InfoWorld: IBM's got a pretty big war chest these days. Is your inclination to develop or acquire the software to fill in some of these Web technologies?

Thompson: Both. I'm not against acquisitions -- we did six last year and six the year before that. We will continue to do them, but they may be smaller acquisitions that fit into a place where we need the best time to market with a technology.

InfoWorld: What are you looking for these days?

Thompson: I don't want to get too specific, but one area we are looking at is e-commerce technology and trading systems. You'll see us making some major moves this year. You will see us take our whole e-commerce technology upscale.

Another area that will grow in importance is [enterprise] application integration, or EAI. We believe we are already a leader there, but there is an awful lot more to help people integrate applications. There is a huge benefit to customers in terms of being able to change their business life. A third area we will focus on is the whole area of enterprise portals and being able to exchange information from people on Web sites. We want to create communities of people -- virtual communities -- where people have places to go to get all their information. You will see us demonstrate that at LotuSphere, something called Raven.

InfoWorld: How relevant are application service providers to your customers and your overall strategy?

Thompson: I think that ASPs in their strict definition are somewhat theoretical and don't really exist. And, I don't see a business from it today. I think they become part of a broader business, which includes my services. The ASP model will evolve into some combination of ISPs, ASPs, and service providers. And that way you can differentiate yourself and make money.

Executive: Close-up

John Thompson

IBM

Age: 57

Title: Senior vice president and group; executive of IBM software1998 salary: $1,612,500 (includes bonus)Key challenges: Working with corporate customers as they transform their businesses around the InternetPersonal note: Boating

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