Big Blue ISV double-take

In comparison to many of its strategic competitors, IBM has been behind the curve in the small to medium enterprise (SME) space for many years now. Whether it’s hardware, email servers, platform software or development tools, IBM’s presence as a supplier tails off rapidly as we look below 5,000 employee mark in terms of company size.

So is it that IBM offerings are less suitable for smaller businesses than alternatives from Microsoft and others? Well not if you consider it on capability. IBM has invested a great deal in packaging and even designing solutions for SMEs under the Express umbrella, and doing a good job of making enterprise class technology accessible to those with more modest IT budgets and limited IT resources. So why the lack of market penetration?

There are a couple of contributors to this, the first being that other suppliers better managed the transition to commodity kit and software that swept the market during the 90s, while IBM was still focusing its efforts on higher margin proprietary platforms. The end result was a loss of position in the traditional reseller and integrator channel that serves the needs of the majority of smaller businesses when it comes to IT infrastructure. The likes of Microsoft and HP therefore largely took control of some important routes to market, and while IBM has been trying to catch up since, and nowadays has very much embraced commodity solutions as well as open standards within its portfolio of offerings, the gap that exists is still pretty big.

The other big contributing factor to IBM’s challenges in the SME space is the way in which technology is bought. Unlike large enterprises that make explicit investments in IT infrastructure improvement and evolution, the type of platform technology that IBM delivers tends to be pulled through more on the coat-tails of business application purchases in smaller organisations. This brings the companies who build and deliver those business applications, commonly referred to as ‘Independent Software Vendors’ (ISVs), into sharp focus. And when we look closely at these, the majority of them focused on SMEs are using non-IBM technology, e.g. from Microsoft and Oracle, to underpin their solutions at the moment.

In practical terms, the two factors we have been discussing are linked. If we think of it from a business perspective, ISVs generally need to focus on selling their own capability in the sales cycle. They really don’t want to waste time explaining to customers who are already familiar and comfortable with the Microsoft stack, for example, why the application they are offering is based on something else. To put it another way, if you are an ISV targeting the SME market, then building your application on Microsoft or Oracle technology has traditionally represented the path of least resistance and therefore the lowest cost of sale. This is a generalisation, of course, but it does lie at the root of why relatively few SME focused ISVs have bet their business on an IBM platform in recent years.

The exceptions are very interesting, though, and when you talk to IBM business partners you hear a couple of strong reasons as to why they ended up in the Big Blue camp. The first is technology and the feeling that IBM platform solutions are more open, standard, capable and scalable than the alternatives. The breadth of the portfolio is also a perceived strength for some, with solutions ranging from data warehousing at one end to systems management at the other. While Microsoft and Oracle could legitimately argue with most of these claims nowadays, it is clear that some ISVs believe the IBM foundation and backing provides them with a useful competitive differentiator.

The word ‘backing’ provides a clue as to the other big reason given for embracing IBM platforms as an ISV. While some we have spoken with allude to historical challenges interfacing with the complex machine that is Big Blue, they also highlight the rewards that are available if you can crack it from a partnering perspective. The general consensus also seems to be that while things are not perfect, the IBM partnership programmes are becoming progressively clearer and easier to access.

Against this background, it was interesting talking recently with three of the IBM executives responsible for overseeing ISV related activity in Northeast Europe – Robert Curran, VP General Business Channels, Melinda Matthews, Director of ISV and Developer Relations, and Aidan Troy, Director of Channel Sales. What struck me most about the conversation with these guys was that as they talked about their programmes and activities, the rationale for working with ISVs was consistently explained in terms of what was in it for the partner. This is in stark contrast to my discussions with people in similar positions within other IT vendors who are more inclined to talk in terms of partners being a route to market for product – a subtle but very important difference, implying a genuinely partner centric mindset.

Having said this, the IBM team were very clear about their objectives in business terms, and spoke in a realistic way about the need to ‘convert’ key ISVs in target industry sectors that are currently aligned with the competition, or at least get them to embrace elements of the IBM technology portfolio in a complementary manner.

The point was made that many of the acquisitions IBM has made over recent years is helping a great deal here. On the one hand, the broadening of the portfolio, often with products that already coexist and interoperate with other vendors’ technologies, provides more potential entry points into the partnership discussion. Then, of course, each acquired product has brought with it a partner base of its own, which provides potential win/win opportunities for some ISVs to extend their involvement with IBM through cross training and evolution of existing commercial arrangements.

We also spoke about the resources, facilities and education/coaching available to ISVs to help them from initial porting/development of solutions, through go-to-market planning, and ultimately sales and marketing execution. This is something I will pick up on in more detail in the future, along with some of the internal mechanisms in place to coordinate between product, industry and partner groups across IBM on both a local and international basis. Suffice it to say in the meantime that when you speak to senior management and tour one of the facilities geared up to supporting business partners (‘Innovation Centres’) as I have a couple of times now, the level of commitment IBM is making to driving and enabling its ISV community leaves little to the imagination.

So, I will be watching with interest, and indeed tracking through market research, the impact IBM’s efforts through the ISV and other programmes on its SME market share over time. It appears to be doing all the right things to make itself more relevant, and with ISVs having to deal with ever more complex requirements, I can see many of them tempted into the IBM fold by the breadth and depth of both the products and support on offer.

It’s not going to be easy though, and I don’t imagine for a moment that Microsoft, Oracle, HP, and other competitors are going to allow IBM into their partner bases without a fight, but from what I have seen, it is definitely a case of ‘game on’, so any ISV looking to re-evaluate the foundation for their solution would do well to check out what’s on offer from IBM. After all, when someone is coming from behind, they are often willing to put in a lot more effort to catch up.

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