IBM has never seen the need for anenterprise resource planning (ERP)software product.IBMsays its strategy is about integration, rather than top
level applications. So why is IBM buying up so many software
companies?
"No one ever got fired for buying IBM" ran the advertising
slogan. The implication being that stepping out of this comfort
zone could be a serious career set back. Meanwhile engineers would
refer to customers who dared to buy from rival suppliers as
"infected sites". These days, however, IBM is leading the charge to
legitimise open source software. It has single-handedly legitimised
Linux, bestowing a confidence
in open source software, and the modular approach to tailoring a
cohesive enterprise software strategy for each client.
What users really want from IBM, according to Ray Titcombe,
chairman of the
IBM CUA and Strategic Supplier Relationship Group, is clarity
about its intentions for future software platforms.
Titcombe believes long term customers of IBM want continued
relationships with Big Blue, on their terms. "But IBM lacks the
ability to meaningfully engage with the younger up and coming IT
management people, who perceive IBM as a high cost supplier with
little differentiation from any other software supplier. This lack
of perceived flexibility and value for money from IBM is a major
block to future continuation of business relations," says
Titcombe.
Titcombe feels that IBM - globally - is inflexible to customer
demands. Customers increasingly need to purchase products from
several suppliers to meet their business requirements. However,
customers deal with IBM via its channel partners and these channel
partners are very often restricted in what products and services
they can offer. As a consequence, "many existing and potential
customers find another Tier one supplier," he says. Which could be
Oracle or SAP's
gain, perhaps.
In fact, IBM, has very little interest in offering business
users an ERP system. Kevin Malone, IBM's software technical
strategist executive, says, "Some people see enterprise resource
planning as a package. We see ERP as a way of getting the right
information into the right business processes."
In other words, he says, the software strategy for IBM is to
stop making people work around software packages, and start making
packages adapt to the way people naturally work. It is anathema to
IBM to expect customers to install a major application (such as
ERP) and spend the next 18 months trying to fit around the
limitations of the package.
"We should be more service oriented, and the delivery of that
strategy depends on three factors. The people involved, the fine
tuning of business processes and the integration of information
into those business processes," says Malone.
Analyst Rob Bamforth argues that IBM never needed an ERP product
because it can take a more modular approach, and the company is
"amazingly skilful" at bringing partners together to form one
tightly integrated product. Who would have thought, ten years ago,
that IBM - Big Iron, the proprietary direct seller - would one day
be the champion of open systems and compatibility? "I always feel
IBM has lots of pieces to be deployed in different ways, which is
why they never went for ERP systems," says Rob Bamforth, principal
analyst with Quocirca.
IBM's vast amorphous form might consist of three broad
categories: hardware and servers, software, and consulting. But
primarily it is a hardware company, argues Bamforth, with a typical
hardware company strategy. It doesn't matter what software is
running, as long as its running on an IBM platform. Its software
and global services arms, meanwhile are more interested in
partnering. And they are amazingly good at it, he says (given how
isolationist the company used to be). "It's one of their hidden
assets," says Bamforth. "They partner with a huge number of
companies, ranging from the likes of SAP and Oracle to small
software outfits. I thought Sun were good when I worked there, but
IBM is something else."
Not everyone agrees with this approach. Mushtaq Shaheen, IT
director of JJ Food Service, a food industry distributor that grew
rapidly from an SME into an enterprise scale operation, says he
found the modular approach impractical. "It's too complex to try
and integrate all the best of breed products quickly. I don't agree
that modular necessarily means scaleable." If you get the right ERP
product - Microsoft Dynamix, in this case - you can get a workable
solution to your needs a lot quicker, he argues.
That's at best an old fashioned idea, argues Andes Loukianos,
sales director with IBM partner
Touchstone. "Enterprise resource software is too cumbersome in
most cases. It's so big and monolithic that frequently the company
has moved on by the time all the loose ends of the system have been
tied down," he says.
The IT industry used to be convinced that IT made the
difference. Now there's a general realisation that it's actually
the understanding of business, and the business processes that make
the most difference. "Our software strategy is about flexibility,"
says Malone, "we want to tailor software to the way people work.
For years it was the other way around." And still is, in some parts
of the industry.
"The real challenge is to change with the business without
incurring huge support costs," concedes John Crooks, MD of ERP
vendor and IBM partner
Agresso, "this sort of agility now is only achieved through a
modular approach."
One IT manager expressed his rejection of big package mentality
rather more strongly. "Enterprise resource planning software? I
wouldn't touch it for an organisation like ours," says Peter
Beckley, IT director for insurance company Kerry London. "I've
heard it has the same effect on a company as pouring quick drying
cement into a machine."
Analyst Rob Bamforth agrees. "The problem is that ERP is often
seen as a huge log rolling thunder type investment. But for many
organisations there are other priorities. People have learned that
the big grand plan project often doesn't work."
If it's industry knowledge that's most cherished, then IBM's
vertical market consultants (not to mention the pool of expertise
it acquired with Accenture) is invaluable, says Banforth.
Better still, IBM's sales model is the complete antithesis of
their original, aggressive strategy. These days IBM sales staff are
encouraged to work through business partners. The Influence Revenue
model even incentivises IBM's salesmen to push the sales out to IBM
partners, as they only get commission if a partner signs a
contract. The upshot is that IBM sales staff are a lot nicer to
deal with than many direct selling organisations, and they've even
been known to listen to the customer. Which is an astonishingly
rare quality among IT sales-animals.
The advantage for the CIO or IT director , apart from fewer
pushy sales calls from their supplier, is that they get a better
solution in place, according to Peder Daxberg, VP of Global
Alliances and Services at IFS, an ISV and IBM partner.
"IBM has fantastic vertical market specialists, who know their
clients business processes inside out. We, the suppliers, tend to
have generic software skills. So it makes senses that IBM's
consultants manage the projects we get involved in, and integrate
all the various elements," says Daxberg.
However, some partners wonder if IBM is having a rethink on ERP.
Though IBM has long positioned itself as the best integration
partner for ERP - its Global Services arm provides integration on
Oracle and SAP projects for example - its technology agnosticism
may be dissolving. It has spend billions on the acquisition trail
recently. Filent, Arsenal Digital Solutions, Solid Information
technology the shopping list runs into tens of billions. Why buy so
many software companies if company policy is to partner?
"One thing we have done is to speed up the market by making
acquisitions," explains IBM's Malone. "We lead the market in
middleware, and all these acquisitions help us to strengthen our
position as a provider of flexible, standards-based
middleware."
The rationale, argues Malone, is to accelerate the development
of the market, through its adherence to standards and its patronage
of key new niches, which IBM invests in. The short term self
interest, typified by sales target-driven IT companies, is shunned
in favour of a more holistic approach that, by happy coincidence,
happens to be good for the end user. "If the market gets bigger, we
get bigger, because we're the market leader," says Malone.
For IT directors it looks like they have more choice than ever,
because IBM doesn't show any signs of abandoning its policy to pick
and mix the right products for the right circumstances. Proof of
this, according to John Banfield, director of sales at Palo
Alto-based IBM software partner
SteelEye, is the continuing
commitment to Linux. "IBM's presence in the open source market has
legitimised Linux. It has established confidence in the suppliers
and the IBM brand puts a stamp of quality on the solutions
available. They would hardly abandon that legacy having worked so
hard to establish it," he says.
Ultimately, IBM might not have an ERP software product, but is
keeping its options wide open, and concentrating on its vertical
market expertise, project management and hardware manufacturing.
Applications won't be important in the future, argues Malone.
Attention to business processes will be more important than big
packages, which cannot be flexible enough to adapt to the needs of
the modern enterprise.
Below the application layer, IBM leads the middleware market and
has a successful range of computing platforms for applications to
run on. "We're happy to sit below the application layer and bring
the thousands of niche applications into play. And if they run on
our hardware, all well and good," says Malone.