December 01, 2003, 2:11 PM — IBM Corp. is reorganizing its US$13.1 billion software business, focusing its sales and development efforts around a dozen vertical industries in a shift the company calls the most significant strategic change for its software group since IBM's 1999 decision to exit the applications market.
IBM, based in Armonk, New York, plans to retrain its staff so that more than half of its 13,000 worldwide sales employees focus on industry-specific product sets. It will also shift its marketing and development efforts away from a focus on IBM's five software brands and toward cross-brand application packages tailored for specialized industries, according to company spokesman John Reilly.
The changes will come throughout the next year, and will affect all aspects of IBM's software group's operations, including IBM's partnership programs, Reilly said. In January the company plans to announce a slate of middleware packages for industries including insurance, banking, financial services, automotive, retail, consumer packaged goods, utilities, telecommunications, electronics, health care, government and life sciences.
IBM cited its forthcoming insurance industry offering as an example of its new approach. The bundle will be an integrated package of applications including WebSphere for managing claims processing and workflow, DB2 Information Integrator for aggregating claims information from disparate databases, and Lotus Notes as a front-end for insurance agents.
Also in the works are packages to help retail companies manage store operations, marketing and inventory, and an automotive industry bundle with support for dealer collaboration and build-to-order manufacturing.
IBM began targeting vertical industries in mid-2003 with packages built around its WebSphere Business Integration software. It has also built industry bundles as part of an ongoing push to increase its sales to small and midsize businesses, an initiative that relies heavily on IBM's channel resellers and relationships with ISVs (independent software vendors).
Several years after its rocky acquisition of Lotus Development Corp., IBM decided to stop selling applications and focus instead on providing middleware, hardware and services to support applications developed by its partners, which include top business applications vendors such as Siebel Systems Inc. and SAP AG along with a host of smaller ISVs. In April IBM created ISV Advantage, a support program for ISVs that specialize in serving midmarket customers and are willing to commit to using IBM technology in a significant portion of their customer projects.
As part of its vertically focused shift, IBM will adjust that program to encourage participating ISVs to couple their applications with IBM's industry-specific middleware products. IBM will co-market third-party applications optimized for use with its hardware and software, particularly software in its midmarket-aimed Express portfolio of scaled-down applications.
IBM's software group posted revenue of $13.1 billion last year, and brought in $10.1 billion in the first nine months of 2003. Headed by Steve Mills, the division includes five software portfolios, IBM's WebSphere application server and integration software, DB2 database, Rational development tools, Tivoli management software, and Lotus collaboration and information management applications.
