IBM sees growth for e-business hosting

Despite recent troubles in the hosting market, IBM Corp. says its hosting division is on a roll. Big Blue reported US$600 million worth of new customer business during the third quarter and says hosting revenue so far this year totals $1.7 billion, about double a year ago. Network World senior writer Jennifer Mears recently spoke with Jim Corgel, who took over as general manager of IBM’s e-business hosting services in April.

Network World: How important is the hosting business to IBM’s mission, and how does it fit into IBM’s overall strategy?

Corgel: E-business hosting services are clearly an important element of any e-business strategy. Customers have been working with us since the mid-’90s on ‘What is the Internet, and how do I put it to work for me?’

So the e-business hosting services is nothing but an extension of e-business … It was kind of a natural flow for customers to say, ‘Look I don’t have the skill. I don’t have the confidence that I can securely manage Web applications to my benefit. So why don’t you get involved, IBM, and do this for us, as well.’

Network World: What types of services are you seeing the most demand for today?

Corgel: It’s in three groups … The least complicated thing we do is to provide collocation services. But the vast majority of all our relationships are with firms that say, ‘Not only do I want you to get me connected with the services I already have, but I’m interested in the experience that you have, the know-how that you have in helping me get more for my buck from the Internet than ever before.’

So we tend to quickly move into another set of more managed hosting services where we deliver an infrastructure that is managed by IBM, not by the customer.

And then you get to a third level, which is almost where we run it all. It’s very close to traditional outsourcing, so the infrastructure is far more comprehensive.

Network World: How do you see the hosting industry these days?

As something that’s growing. Knock on wood. I like the hosting business, and we see a lot of opportunities.

Corgel: Has the downturn affected IBM’s hosting strategy?

Not yet. We still see growth in our opportunity.

Network World: Has demand slowed at all?

Corgel: There’s no question there’s been somewhat of a slow growth in the United States, but we’ve had up tick in Europe. So overall, I look at my business on a global basis. I see a breakthrough in a country [such as] Japan, where culturally in years past the word “outsourcing” wasn’t totally accepted … But the tragedy on Sept. 11 has caused every businessperson to pause, and surely we see some effect from that.

Network World: What type of flexibility do customers have as far as hardware they can use within an IBM Global Services data centre?

Corgel: The first thing we ask a customer is what their current investment is. First and foremost, we’re a services business. So we do run into an awful lot of IBM technology that’s been purchased in the past … But if you walk through the aisles of my data centres around the world, you’d see a wide variety of technology. That’s what makes us an attractive service provider because we have skills and capability in any brand you can name.

Network World: What sets IBM apart from managed hosting providers such as Digex and Digital Island?

Corgel: It’s mostly our experience. We’ve been moving data centres around for 30 years, so whether it’s building an infrastructure that’s secure and reliable, whether it’s taking an investment for a start-up and making sure that it’s well lit on the Internet, that doesn’t frighten us a bit. And it’s primarily because we’ve got so many years of experience in making the right kind of infrastructure investment so we can be affordable and competitive in the way we price our offerings.

Network World: What is IBM planning to invest in IBM Global Services? Will more data centres be built?

Corgel: If there’s a need. Today, we’re pretty comfortable with what we have … We have an outstanding relationship with people like Bell Canada, Qwest, Equinex and Shanghai Tel. We have a good strong partner strategy … We’re not interested in empty spaces any more than anybody else is.

Network World: What can companies expect from IBM Global Services in the future?

Corgel: You’ll see us spend a lot of time on what I would call an e-sourcing strategy. An e-sourcing strategy more often than not goes something like this: Customers will tell us that they have right-sized their IT infrastructure … Many customers, though, are stopping and realizing that the next big thing perhaps is how do you provision hardware, software and services as quickly as possible and as flexibly as possible right over the Web. And so we’re working with a number of clients today to begin to build a game plan that allows for provisioning of hardware, software and services over the Web.

Network World: As you move into e-sourcing, will there be services available that aren’t available today?

Corgel: Oh yeah. Customers today are asking for what I call seasonal provisioning. So if you’re a retailer, you don’t know, you can’t predict often what the capabilities are that you’re going to need from November to mid-January … Providers like IBM need to change and be as flexible as we can for those kind of customer situations and be the first to market with that kind of flexibility.