IBM escalates SMB war with Microsoft

Trying to build some momentum going into its annual PartnerWorld conference in Las Vegas next week, IBM Corp. on Wednesday announced it has now signed up 200 independent software vendors (ISVs) in 10 months to its ISV Advantage Initiative, including some it has ripped away from archrival Microsoft Corp.

The ISV Advantage Program is intended to recruit developers interested in selling to the small and midsize business (SMB) markets, which analysts estimate to be worth some US$300 billion. The Advantage Program equips these developers with technical, marketing, and sales support in order to deliver customized turnkey solutions for a range of vertical markets.

Company officials claim that more than 70 per cent of those developers signed up for the program are supporting IBM server software running on some flavour of Linux.

“We think this is good news for both IBM and the ISVs. Through these contracts they are committing to not just supply WebSphere and DB2 and Linux, but more importantly a majority share of their revenues in are being gained in partnership with IBM,” said Scott Hebner, vice-president in charge of strategy and marketing for IBM’s ISV and developer relations. “With 200 companies committing to our infrastructure (products), this is now a significant change in our ability to partner and thereby grow our and their business in the mid-market from just a year ago,” he said.

Over a year ago IBM, with the help of some of its corporate users, identified several hundred ISVs with whom users said they would like to see IBM strike up partnerships.

A “goodly” amount of the ISVs, according to Hebner, are moving away from Microsoft and towards IBM because they can be assured of not facing competition in a variety of different application areas from the same company also supplying them with the operating environments.

“One European-based company, AlphaNova, is moving away from Microsoft because of their (Microsoft’s) competitive nature. AlphaNova does CRM apps and are concerned about the competitive environment in that area because of Microsoft’s applications business in that space, as well as the overall cost of infrastructure,” Hebner said.

Officials from AlphaNova said they were moving away from Microsoft environments because of mounting deployment costs, which they believe is becoming cost prohibitive for some SMBs. The company has jumped to a Java and WebSphere based platform.

“CRM requires universal access by almost all employees and partners of an organization, and Microsoft’s closed and holistic attitude to use all their products makes the cost of ownership very high,” said Andros Papageorgiou, AlphaNova’a CEO.

There appears to be some anxiety SMBs about becoming too dependent on Microsoft’s operating environments and applications. In a survey last month among 600 companies with 500 employees or less released by The Yankee Group last month, some 43 per cent said they were “concerned” about becoming “overly reliant” on Windows based products and services. Seventy-two per cent of those respondents said they were now searching to lessen that reliance by evaluating other alternatives.

One of the factors working against Microsoft is its volume licensing plan. The Yankee Group analyst Michael Lauricella stated that “(Microsoft) can only hit these companies so many times with what is seen as exorbitant licensing fees before they start to look elsewhere.” He added that many SMBs are likely to gamble on making changes than their corporate counterparts.

But despite the results of the survey, Microsoft’s brand name in the lower end is of the market is extremely strong and should serve them well against IBM and a growing raft of other players starting to crowd into the SMB markets.

“It is not that this (over-reliance) necessarily puts them in a bad position and their competitor in a better one. These customers have relied on Microsoft for a lot of different things but now there is a lot more choice that didn’t exist a few years ago, particularly Linux,” said Helen Chan, a senior analyst at The Yankee Group.

At PartnerWorld next week, IBM is expected to announce a number of products and programs to further attract ISVs pursuing SMBs, with a stronger emphasis on midsize accounts.

“We are expecting many more ISVs to attend this year (PartnerWorld) than did last, and you will see that reflected in the number of announcements we will make at the show,” Hebner said.

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