IBM finally goes mid-market

IBM is finally beginning the long haul into the medium-sized business space, going after Microsoft on its home turf. For the past few years IBM has been in consolidation mode, establishing a strong server side Java story through its WebSphere Application Server, competing primarily with the likes of

BEA and Oracle, rather than Microsoft.

Eventually though, as IBM came down market, and Microsoft scaled up from the workgroup to the enterprise, the two would have to start competing in earnest. So far the battle has been a marketing air war, as the vendors attempted to win mindshare. From here on in the hand to hand combat starts.

Of course Lotus already has a presence in the SMB space, but that channel was always somewhat independent of IBM and didn’t drive sales of other IBM technology. What is different now is that IBM is applying itself to the mid market systematically, bringing technology to bear from all of its brands. IBM has also got its marketing mojo working nicely. It will seed the market with blanket advertising and marketing programs. That budget is very important in its battle with Microsoft. Let’s face it—at a time when few companies can afford to spend money on marketing and advertising, IBM shines like a beacon. For a VAR or mid-sized systems integrator, being able to tap into IBM or Microsoft’s budgets for joint marketing could be the difference between success in a down economy and living on the breadline.

Quite simply, IBM can’t afford to let Microsoft own the SMB space. The IT industry is increasingly based on commodity economics, and that requires volume. Why do many commentators think Sun is in trouble? Because its systems play is based on SPARC microprocessors rather than Intel. Why did HP buy Compaq? Partly to drive economies of scale in order to better compete with Dell. The thing is–volume drives scale. Whether we are talking about Linux, Java, or Windows, over time platforms grow and mature and become more applicable to a wider range of high end computing tasks.

Up until now, however, J2EE has been a top down phenomenon. BEA and IBM, for example, have been in a high end spitting match around application servers, a war fought primarily through direct sales, based on technical engineering as much as business benefits.

IBM must take Java into the mainstream however if it wants to compete successfully and seriously with Microsoft in the long run. Big Blue’s initial foray to expand its customer base was announced last month. Targeting implementations of less than 2,000 users, IBM said it would offer WebSphere Portal Express/Express Plus packages that provide information aggregation and application integration for the mid-market. The product is designed to be far easier to install, develop for, and maintain than classic J2EE-based enterprise portals, which, of course, it will have to be if IBM is serious about competing with Microsoft. That is the value proposition IBM is trying to drive—J2EE capability without J2EE cost or complexity.

Unlike the enterprise market, the SMB/mid-market opportunity is one with a dearth of legitimate contenders in terms of portal technology with built in integration capabilities. Microsoft SharePoint portal server, for example, is more akin to a document management system than true enterprise portal)

Building a mid-market channel will cost literally hundreds of millions of dollars–what with training, certification, technical support, politics, and the myriad other issues that have always made this portion of the market so difficult. IBM has the money though, and it has the will.

Big Blue has also finally managed to bring Lotus resellers to the WebSphere table. With the launch of Domino 6, Lotus supports the same Java-based runtime and development models as WebSphere, replacing Lotus proprietary equivalents. The decision to create common code bases delayed the product by nearly a year, but will still benefit IBM, its channel, and customers.

This was an unusual move by IBM; investment protection usually wins such decisions. IBM won’t decommission any platform without a hellish good reason. IMS, for example, IBM’s 35 year old transaction processing and database platform, grew 8% last year.

Simplification and consolidation around Lotus needed to be done. Lotus resellers initially objected to IBM’s plan, because it meant learning new development models and approaches, and supporting different runtimes. A chance to compete on an equal footing with Microsoft’s next-generation portal, messaging, and collaboration products should win them over however.

Hey Microsoft–here comes IBM. The phony war is over.

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