IBM Refocuses Its Application Reputation

September 19, 2011 Dan Burger

The question is often asked, “What is IBM doing for the small to midsize businesses that run on the IBM i platform?” From a numbers standpoint, this is the largest segment of customers Big Blue can claim under a single brand, with 95 percent of the IBM i installed base being SMBs. IBM built the System/3X and AS/400 business over three decades, and it did so with application software. It has been in maintenance mode for more than a decade, and now the company has seen that to keep and expand this business, it needs application software.

With this strategy, the bulk of the work is done by IBM partners, both the independent software vendors and the reseller channel that peddles the iron and the software. It’s the software drives hardware approach that was hugely successful when the IBM AS/400 broke from the gate. So IBM is in the process of applying that strategy to its entire product line. Basically it is admitting that if all its products were as successful as the AS/400–now the Power Systems server with IBM i–the company will be better off.

The job of applying AS/400 business success, achieved to a large degree on the backs of the ISVs, to IBM’s other hardware and software products sits on the desk of Ari Kugler, director of business development and business unit executive for IBM i. Kugler, in an interview with IT Jungle last week, provided his view of the ISV program that in his words is externally aimed at developing business relationships between IBM and ISVs and, on the internal side, improving the integration between IBM hardware and software groups.

This emphasis on ISVs differs from the past in that it is not platform specific. It does, however, have an IBM i flavor to it because it borrows heavily from the AS/400 success story noted earlier.

There are 85 people working worldwide on ISV relationships within IBM’s Systems and Technology Group. Kugler described it as a “brand new group and a big increase in the number of people devoted to building new relationships in the ISV community.”

This current ISV effort differs from those in the recent past, which have not been particularly successful, by switching the focus from technical issues to business issues.

“We are deciding to do more with less ISVs,” Kugler says. “The general program that exists will be sustained. But we will be picking a short list of who are best potential partners are and work with them more aggressively and in a more integrated manner–a go to market, joint sales, joint marketing, and joint value proposition type of thing.”

The ISV model that Kugler describes as two components: a “core” group and an “invest” group. The large ISVs fit into the core group. In the IBM i space, these are primarily the ERP vendors. His new program will seek ISVs with skills and capabilities and solutions in complementary areas such as CRM, social media, analytics, data mining, and Web portals. The ISVs in this category make up the invest group.

Vendors that have multi-platform offerings should be looking at IBM i as the foundation, and surround it with peripheral applications that can be integrated with those running on IBM i. One example he points to is the recent introduction of manufacturing and distribution products from Infor that use an integrated appliance to run a suite of Infor applications, which are not all running on one operating system. Infor is one of the largest IBM i ISVs, both in terms of revenues and installed base.

“The idea is to provide a complete set of solutions on i and focus on emerging opportunities where there will be growth,” Kugler says.

“We are getting to the point where platforms don’t matter so much because we can integrate things. This is what I call a hybrid option. Because the i is really good at certain things doesn’t mean you can’t incorporate one or two applications that run on other platforms. Becoming somewhat less platform dependent actually makes i a more attractive option because it is no longer a religious discussion any more. You just pick the application that works the best.”

The hybrid approach also looks good to Kugler because it plays well in the cloud. In that scenario a company could be running its core ERP on premise on IBM i and running CRM, social marketing, and Web-based ecommerce in a cloud. This type of interface between on-premise and the cloud is a “tremendous opportunity for ISVs to get in the game,” Kugler says.

The hybrid model that Kugler likes so much is also made to order for BladeCenter blade servers, which has little momentum overall and even less than that in the SMB sector. It also seems to me that Kugler too quickly discounts the religious fervor that still exists in the SMB space. Although there may be many good reasons to be platform agnostic, the reality is that IBM i shops still want to do things the OS/400 way. And the same is true for other platform loyalties, most importantly Windows, which is used at most IBM i sites these days for all kinds of work. Even though IBM has promoted Power Systems as one box that can run multiple platforms, very few SMB shops do that, either because they are i-centric or in cases where multiple platforms exist integration has not taken place because the silos are very strong.

There is also the issue of integrating IBM hardware and software with the efforts of the ISV community. Too many times in the past this unwillingness of IBM’s in-house development to sing harmony with the ISVs (territorial feuding) has undermined the big-picture strategy that has tried to be ISV friendly.

Kugler says the IBM i community is ready in many ways and will be accelerated by this ISV program, but that seems a bit optimistic to me. Perhaps the forces of change in the way businesses operate are accelerating and the necessary cultural changes will happen sooner than I think, but you can’t make people ready just by saying the word. Still, to Kugler’s point, if you wait until people are ready, you’ve waited too long. A competitor will be there to snatch that business.

My enlightening conversation with Kugler was precipitated by a conversation one day earlier with Ed Ahl, director of business development for Tributary Systems, a storage systems vendor that entered the IBM i market about two years ago.

Ahl attended an IBM Systems and Technology Group meeting for ISVs in Austin, Texas, the week before talking to me. His enthusiasm for the new ISV program was industrial strength.

“I was amazed,” Ahl told me while quickly following that up with the acknowledgement that he’s heard a lot of snake oil salesmen in the 30-some years he’s been in the IT business. “They opened the door and I was made welcome. I was introduced to all the right people, and they figured out Tributary had some real value and was serious about promoting IBM solutions.”

Up to this point, Ahl says he had been frustrated in his attempts to develop a business relationship with IBM. Prior to that he had had unsatisfying relationships with Hewlett-Packard and Oracle, but his company had succeeded there despite the obstacles put in its way.

Ahl believes the STG initiative for ISVs has the correct focus: to take advantage of technology that helps IBM products work better.

“IBM is looking at keeping its current market and expanding into more midmarket solutions, which it doesn’t do well but the ISVs do very well,” he told me. There are companies outside of IBM that have good solutions and by opening doors IBM is encouraging better solutions for the customer and doing what it needs to do to make and keep customers.”

In his view, Tributary’s contribution to IBM is that it helps customers leverage their investments, which has a positive effect on customer retention. It also cannot be overlooked that Tributary products help push IBM products such as servers and storage devices. That’s the kind of business partner that IBM likes. An ISV with a “value plan” like that will definitely be shown some love.

“I’ve gotten more positive out of this in the short time I’ve been exposed to this than anything I’ve been involved with before at IBM, Oracle, or HP,” Ahl claims.

Ahl met with three ISVs similar in size to Tributary while at the Austin meeting. All expressed past troubles with IBM and all were excited about opportunities that were available because of the new program.

“I think IBM has realized that in today’s business setting it has to make the channel more successful. It can do that by providing people as points of contact for the ISVs so they can get things done. The ISVs have needed someone to reach out to. Someone dedicated to ISV problem solving,” Ahl says.

Arrow, one of two master resellers in the IBM channel, was responsible for bringing Tributary the invitation-only ISV confab in Austin. According to Ahl, Tributary’s appliance-like product, Storage Manager, was brought to IBM’s attention by Arrow and Big Blue saw it as a good fit for its new ISV investment.

“We want to stimulate the ISVs to help them go to market more aggressively with their sales force and marketing to help drive i marketing,” Kugler says. “In the past few months, we are seeing growth in the i market. Growth in volumes and in sales, and it’s starting to generate momentum. We want to sustain the current growth with these go to market plans.”