Mark Smith's Analyst Perspectives

This month at its annual global analyst summit, IBM Connect 2010 (Twitter: #Connect10), IBM updated its direction and strategy for enterprise software. The company’s group executive in charge of software and systems, Steve Mills, discussed the business, its success in 2010 and organizational changes in naming Senior VP Mike Rhodin to manage the solutions group (which includes Analytics, Lotus and Industry Solutions) and Senior VP Robert LeBlanc to manage the middleware group (WebSphere, Information Management, Rational and Tivoli). This change occurred as Mills takes responsibility for the systems group and brings more focus to IBM’s growing portfolio from acquisitions in the software and middleware areas. In an open discussion Mills also talked about advances in analytics, cloud computing, collaboration and mobility technologies that use business intelligence in the IBM Cognos portfolio (See: “Cognos 10 Breaks Down Barriers To Business Intelligence and Analytics“) and in information management technologies grouped in IBM InfoSphere (See: “IBM Makes InfoSphere Information Server a Force in IT”). Steve outlined the importance of the technology investments in each area and the growth of the IBM portfolio which is quite substantive.

Compared to last year speakers focused more on business value and related technology than just the IT infrastructure from years past. Now that Mills also is managing systems, integration of software and hardware is increasing and the approach more resembles that of others like Oracle which has a similar technology portfolio. IBM, Oracle and SAP all have much to offer business users, but each must market and sell to the specific lines of business as purchasing authority shifts away from IT. IBM has been sharpening its competitive approach against Oracle and was willing to provide facts and figures to make the dialogue on its efforts more tangible. In speaking one-on-one with Steve Mills, I observed that disputes about Oracle’s integration prowess, from its database to the next-generation applications called Fusion, are good for the business of IBM’s integration technology in information management and could offer Cast Iron integration for Fusion appliance to make applications interoperate across cloud and on-premises locations. In addition as I mentioned to Steve advancing with mobility is challenging with dealing with Apple who focuses on the consumer market and is not prepared or competent in dealing with the enterprise and business markets. He agreed and we discussed the challenge with the information security of Apple mobile technologies that have been mostly not talked about or seen as a barrier to enterprise adoption.

Speaking for the solutions group, Mike Rhodin outlined its strategic investments into finance and marketing. For the first, IBM acquired Clarity Systems to provide a more sophisticated tool for the financial close, consolidation and reporting than IBM had previously. (By the way, my colleague Robert Kugel assessed competing applications in our recently released 2010 Value Index for Financial Performance Management; that evaluation rated Clarity a Hot Vendor.) Rhodin also outlined his group’s intensified focus on marketing since acquiring Coremetrics and Unica to combine those tools with analytics from Cognos and SPSS to bring more sophistication to marketing analytics which desperately needs improvement according to our early findings. Our benchmark research currently in progress finds a widespread lack of competency and maturity in this area of analytics. IBM’s solutions group holds a large portfolio of technology in various areas: analytics from Cognos and related tools from SPSS, OpenPages and Clarity Systems; collaboration with Lotus and WebSphere Portal; enterprise content management with FileNet, Datacap and PSS; and e-commerce with its recent acquisitions of Sterling Commerce, Unica and Coremetrics. IBM needed to invest in governance, risk and compliance (GRC) by acquiring OpenPages partly because Oracle and SAP already have products in the market; IBM also needs to step forward in providing analytics and performance management for sustainability.

IBM also continues to invest heavily in products for vertical industries, starting with specific activities and processes. These applications (which IBM calls integrated solutions) offer predefined value and functionality for a type of business. Beyond that, IBM should bring its services and software to support the rest of the organization’s business and IT needs. IBM is also advancing its social media and business collaboration efforts with a new analytics offering and enabling its own social media and collaboration capabilities to work across the enterprise. In fact the capabilities are quite robust and compete directly with Salesforce Chatter (See: “Think Outside the Box when Investing in Salesforce Chatter“) and Jive Software though replacing or layering on top of Microsoft Sharepoint that has fell behind in its collaborative capabilities. IBM is not ahead of the curve in supporting the range of mobility technologies from Apple to Android and even Microsoft latest mobile technology that is in desperate catch up mode (See: “Microsoft Hopes for a Miracle with Windows Phone 7“). In my one-on-one discussion Mike Rhodin described efforts to bring collaboration and mobility together for a new generation of products, which we agreed is essential to improving business efficiency and appealing to business more than just IT.

With these types of solutions IBM is challenged to show business buyers that they can gain value without long implementation and consulting cycles. IBM currently provides the majority of its products on a purchase-and-install basis that works against rapid deployment, although some areas such as Lotus make it easier to onboard solutions. IBM recognizes the business opportunity here, citing cloud computing as worth hundreds of billions of dollars, right behind the market for analytics. But the company has appeared to take an “IBM first” approach and did not present evidence of the cohesive partner ecosystem that this will require in specific business and industry areas.

Next up was the middleware group, and Robert LeBlanc outlined the evolution of its IT infrastructure and the processes for managing technology and the application infrastructure. This is nothing new for IBM which has been advancing its Rational and Tivoli technologies for years and competing particularly against CA and HP. But IBM is now augmenting its portfolio of tools on top of its middleware platform IBM WebSphere. This includes the recent acquisitions of ILOG, Lombardi and others that add depth in rules and workflows that support business processes. IBM likewise invested early in information-related advancements to middleware and continued to do so in 2010 done by acquiring Initiate Systems and Netezza to ensure flexibility in its offerings. IBM also realizes the importance of integration across public-cloud computing environments and the enterprise, and its acquisition of Cast Iron Systems will help it progress here.

IBM is expanding the core of InfoSphere from information integration and governance to supporting large volumes of data preparation and processing with its Hadoop offering IBM InfoSphere BigInsights. My colleague covered this recently (See: “IBM Makes InfoSphere Information Server a Force in IT”), noting that IBM is reinvigorating its work with advances in MDM and integration technologies including streaming data and event processing.
I am happy to see IBM advance new developments in its security framework including GRC across the business and in managing information and access security down to the base infrastructure. One of the largest IT challenges these days is to protect corporate intellectual property. Another key to managing applications and information is to easily manage the replication of images of systems for use across IT, which increases the demand for storage if it is not managed well. Security technology also will be critical as applied to mobility; the Apple iPhone and iPad, for example, have had numerous issues that deter most government agencies (and even IBM) from using them as secure devices for communications and sharing of information.

At the conference I was surprised not to see some vision on applying analytics and collaboration to help CIOs use IBM technology for running the business of IT. This need is not often addressed today and could use leadership from the likes of IBM. This is one area where HP is making progress, as is a small company called Splunk who provides an interesting portfolio of IT focused search and information applications.

All in all the IBM analyst summit provided good depth on the progress of IBM and involved its executive team and operating unit managers in discussing the technology coming in 2011. IBM has done well in outlining the big picture, which would be great to see also from Oracle and Microsoft. Another global technology company, HP, has brought a seasoned new CEO on board but seems to be removing itself from the analytics market (See: “HP Gives Up on Business Intelligence and Analytics Market”). There is no doubt that IBM will continue to expand its portfolio, having billions of dollars still to spend in acquisitions, and its ability to absorb executives and teams of people from its acquisitions should help drive further growth.

I believe the company needs to further refine how it dedicates experts to specific lines of business beyond marketing and finance and not just industries, but even with some growing pains in this area it can continue to raise its global presence. It still can expand into business areas such as sales, human resources and customer service where there is growth for a range of analytics and collaboration based business process solutions. IBM believes that with its substantive services efforts in business analytics and optimization (BAO) as I have written that it can be a one-stop-shop for software and services that meet specific needs. IBM’s biggest challenge though is to keep its proposals simple so it can engage with organizations in graduated steps and not try to sell too much at once or propose longer term projects and thus scare away potential buyers that could find value in smaller increments.

Regards,

Mark Smith – CEO & EVP Research