Next year, IBM will be selling software that looks dramatically different than it does today. That is because the IT vendor plans to ship new middleware packages that will help specific industries automate and integrate their business processes. At the same time, IBM will retrain thousands of its software sales representatives so that they focus more on vertical industries than on IBM's software brands.
Under the new strategy, IBM will roll out industry-specific software packages that combine middleware components from its DB2, Lotus, Rational, Tivoli, and WebSphere product lines. In a break with tradition, many of these packages will carry the names of the industries and business processes at which they are targeted instead of their software brand names. While the new packages will include middleware and process-specific programming interfaces, they will not provide the application logic needed to deliver a complete solution. That logic will come from independent software vendors (ISVs) who are IBM Business Partners.
Making Middleware "On Demand"
In many ways, IBM's new middleware roadmap is a logical outcome of its On Demand strategy. When IBM CEO Sam Palmisano announced that strategy a year ago, he set off a fundamental change in the nature of the company. Here is how I sum up that change. Before Louis Gerstner ran IBM, it was an IT product vendor. During the Gerstner era, it became an IT services vendor. Under Palmisano, it is becoming a business transformation vendor. This means that when IBM goes to market, it will lead with business transformation services first, not IT products or services. Of course, these business transformation services will drag plenty of IBM's IT products and services along with them. However, IBM will repackage those products and services to complement its business transformation focus. That is exactly what will happen to IBM's middleware products next year.
As IBM realigns its software behind business process transformation, customers can expect the company to focus heavily on particular business processes. Earlier this month, Ginni Rommety--IBM's Managing Partner for its Business Consulting Services (BCS)--told a room full of Wall Street analysts that organizations will spend $58 billion in 2004 to transform four major business process areas: customer care, human resources, financial management, and procurement. These are areas where IBM as a whole and Rommety's group in particular have considerable expertise, so it is highly likely that the company's new middleware packages will focus on these processes.
Besides focusing on business processes, IBM will also differentiate its middleware and services by industry. According to sources inside the company, initial middleware offerings will focus on twelve industries: automotive, banking, consumer packaged goods, electronics, financial markets, government, healthcare, insurance, life sciences, retail/wholesale, telecommunications, and utilities. If you work in one of these industries and face challenges in any of the business process areas listed above, chances are good that IBM's new middleware packages will be of interest to you.
A Roadmap for Change
If you are one of those interested parties, I have good news for you. Next month, IBM intends to kick off its new initiative by rolling out a dozen middleware packages for specific business processes. This first wave of offerings will be followed by many more packages over the course of 2004. In some cases, IBM will announce packages in concert with ISV applications that deliver complete solutions on top of the package. If you want a good example of what such a solution will look like, check out Lotus Workplace for Business Controls and Reporting. This offering will bring together DB2 Content Manager, WebSphere Portal Server, application logic from KPMG, and financial management consulting services from IBM's BCS. The solution will enable publicly held firms to comply with financial reporting practices mandated under the Sarbanes-Oxley Act.
While IBM is realigning its middleware by business processes and industries, it will also retrain many of its software specialists so that they can sell the new solutions. Indeed, sources inside IBM Software Group are saying that half of its brand-oriented sales force will receive industry-specific assignments and extensive training in industry business processes. As a result, thousands of Big Blue's software specialists will soon be promoting cross-brand business solutions instead of touting the particular advantages of DB2, WebSphere, or some other IBM product family.
In the months to come, IBM will also add industry enablement offerings to its existing ISV programs. These offerings will provide ISVs with the support they need to develop solutions on the new middleware packages and then bring them to market. As it recruits ISVs to develop on the new packages, IBM will pay special attention to vendors that focus on medium-size businesses. That will include ISVs that develop solutions for the iSeries.
In short, IBM will make 2004 the year when its software and IT services come together to promote a business vision that is bigger than both of them. In the process, it intends to bring its ISV partners along for the party. If the company succeeds in doing so, it could have a significant impact on the business processes of its customers. However, IBM's new middleware vision will not materialize overnight. It will take several years to retrain its sales force, bring new solutions to market with ISVs, and prove those solutions at customer sites. Along the way, IBM will learn many lessons and encounter numerous challenges. It will be interesting to see how it overcomes those challenges, and you can expect me to analyze its efforts in future issues.
Lee Kroon is a Senior Industry Analyst for Andrews Consulting Group, a firm that helps mid-sized companies manage business transformation through technology. You can reach him at
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