If your company plans to buy any servers, peripheral devices, or communications software this year, I have good news for you. The battles for market share in these product categories are about to heat up, and three vendors—IBM, Hewlett-Packard, and Microsoft—will be the chief protagonists. The heightened competition could put System i shops in the driver's seat when they negotiate purchases with these companies.
The first shot in the latest skirmish was fired three weeks ago by Hewlett-Packard during its Americas Partner Conference. At the event, HP announced that it will dramatically increase the financial incentives it offers partners when they sell its Intel processor-based servers and PCs as well as its printers and personal system services. For some products, partners will see their compensation boosted by more than 50%. In addition, HP will increase its staff resources that support partners by 20% and add hundreds of new direct sales representatives.
In case anyone at the conference wondered whom HP was targeting with its announcement, the company made it clear that it had IBM in its crosshairs. In her keynote address, HP's Executive Vice President Ann Livermore prefaced her remarks about the improved incentives by saying, "This is a great opportunity to talk to you about how we're going to kick IBM butt." What she did not say is that HP is trying to achieve that objective by emulating a strategy that IBM pioneered several years ago. That strategy focuses on improving partner profitability, dedicating more support resources to the channel, and helping partners to move from selling point products to delivering complete solutions.
A Bid to Break Down Communication Silos
One week after HP's conference, Microsoft grabbed the spotlight at a San Francisco event in which it announced its strategy for a unified communications platform. The platform will help workers to manage their email, telephone, fax, instant message, and Web conferencing communications in an integrated fashion. Microsoft's goal is to give workers a single identity across all of these communication modes when they are using the vendor's upcoming Office 2007 applications and third-party products that augment Office 2007.
The core of the new platform will consist of two products. The first, Office Communications Server 2007, is a new version of the current Live Communications Server that will include presence-based Voice over IP (VOIP) call management, Web conferencing, and instant messaging. The second, Exchange Server 2007, will deliver a unified inbox experience that includes email, voice mail, and faxing functions. Microsoft and its partners will ship software clients, add-on tools, and peripherals that will take advantage of these core solutions. In addition, Hewlett-Packard will provide hardware devices and system integration services for the communications platform.
Microsoft's strategy is an ambitious one that could help the vendor achieve multiple objectives. Besides providing companies with a reason to buy Office 2007 when it ships next year, it could help Microsoft compete with IBM communication products such as Lotus Sametime. In addition, Microsoft could take mind and market share away from leading communications providers such as Cisco and 3Com. Indeed, Communications Server 2007 could compete with the VOIP solution that 3Com is shipping for the System i this quarter. That said, Microsoft's alternative will not ship until the second quarter of next year at the earliest. In the meantime, its mere presence as vaporware could convince some companies to hold off on communications software purchases until they can evaluate the product.
Big Blue Strikes Back
While IBM has not made any headline-grabbing announcements similar to those of Hewlett-Packard and Microsoft, it has not been caught flat-footed by them. This year, for instance, the company has been quietly recruiting Business Partners into Express Seller, a program that provides rapid delivery of high-volume hardware and software products at aggressive prices. The program should help IBM to counter HP's new initiative with its partners. On the System i front, IBM has appointed Peter Small—a former pSeries sales manager—to oversee all System i sales made by Business Partners. The appointment indicates that the vendor is ready to defend the relationships it has been rebuilding with System i partners over the last year.
As for Microsoft's latest challenge, IBM mounted a response on the same day that its rival unveiled its communications strategy. Specifically, IBM announced that Sametime 7.5—its next release of the Web conferencing and instant messaging product—will integrate with Microsoft's Outlook, Office, and SharePoint applications. In addition, Sametime 7.5 will connect to wireless devices from RIM and Nokia as well as Windows Mobile devices. IBM will promote Sametime 7.5 as a more open alternative to Microsoft Communications Server 2007 that does not require costly upgrades to current Office releases. Sametime 7.5 should ship later in this quarter.
While the outcomes of the latest battles between IBM, HP, and Microsoft are not yet clear, one thing is certain: Savvy customers will benefit from the increased competition. As HP's partners receive heftier commissions and bigger rebates, they will undoubtedly pass some of their profits to customers. Most of the discounts will be captured by companies that entertain competing proposals from HP and IBM. Similarly, smart companies that are in the market for communications software will invite both IBM and Microsoft—not to mention Cisco, 3Com, and other network providers—to pitch their offerings against each other.
In short, this summer could be an excellent time to acquire the competing products of these rival firms. If your company is in the market, I would encourage you to start writing your requests for proposals. As they say in my corner of the world, the surf is up.
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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