IBM looks to medium business as the next frontier

Somers, N.Y. – With a promise to invest $1 billion in partnering initiatives, the development of a new software executive team and the release of an “Express” family of WebSphere products, IBM Corp. announced its strategy to move aggressively into the mid-sized market.

Defining this market as companies that employ between 100 and 999 employees, IBM Software Group’s vice-president of worldwide small and medium business software sales, Mark Oullette, said that this category represents between four and five hundred thousand companies in the world.

“Medium business represents the highest proportion of IT spending and compound growth rate going forward,” he said, noting that this is a $40 billion-plus marketplace for middleware software.

Steven Mills, senior vice-president and group executive at IBM Software Group agreed that the medium business realm is an obvious place to focus attention.

“The majority of money spent in the IT world is spent in medium and large businesses appropriate to the technology we produce,” Mills said.

According to Oullette, medium business faces similar challenges to the enterprise, but are unable to afford or manage the tools available to the larger organizations. IBM’s commitment to this marketplace involves creating tools that directly apply to the mid-sized market.

“We’re going to offer components designed for the needs of medium business customer, and not just take enterprise offerings and attempt to dummy them down for this customer space,” he said.

Announced in mid-November, these components include the WebSphere-Express suite of offerings including WebSphere Application Server-Express, WebSphere Portal-Express and WebSphere Business Connection.

Morgan Smyth, president of Toronto-based IBM partner company Braegen Group Inc., said that WebSphere-Express allows smaller companies like his to “get in the game” without paying enterprise prices. The WebSphere Application Server, available in December, will be priced at US$25 per intranet user or US$2,000 per processor for unlimited users on intranet, Internet or extranet Web sites and US$400 for developer use.

Mark Mendelson, director of eBusiness development at Corning Data Services Inc. in Johnson City, N.Y., agreed that the Express family is ideal for IBM partners that are targeting customers such as the local ladder manufacturer or hubcap dealer rather than a national bank or governmental department.

“You don’t need to reinvent the wheel – we can’t do what IBM does, but now we can afford it,” Mendelson said.

IBM’s move into the mid-range market reinforces its commitment to its partners and independent software vendors (ISVs), according to Donn Atkins, vice-president of worldwide sales and marketing for the IBM Software Group.

“Unlike some of our competitors, we don’t compete with our partners – we know our partners have very important businesses,” Atkins said.

By working closely with its partners, IBM hopes to be able to infiltrate the mid-sized market – a feat it might be unsuccessful with on its own.

“Smaller companies like to do business with other smaller companies,” Smyth said, and by using its partners on the front line while staying in the background, IBM can make inroads into these companies while eliminating the intimidation factor.

Bob Timpson, general manager of IBM solution developer marketing for IBM’s Software Group, agreed.

“Our image is high-end, robust, industrial-strength, NASA-level complexity. We’re simply not a player in the SMB space, but this allows us to ramp up,” he said.