IBM to Sell Cloud Software Directly to Top Executives, going beyond the traditional model of doing business with chief information officers

IBM to Sell Cloud Software Directly to Top Executives

International Business Machines Corp. (IBM), the largest computer-services provider, said it will sell software over the Internet direct to corporate executives, going beyond the traditional model of doing business with chief information officers.

IBM will market more than 100 cloud applications to heads of marketing, supply chain, human resources and others, changing the way it sells software as competition from Silicon Valley startups mounts.It’s the company’s second big move into cloud delivery this month, following the purchase of SoftLayer Technologies Inc., a cloud-computing storage provider that will help it compete with Amazon.com Inc. Many of IBM’s customers are just starting to become interested in software delivered via the Internet, known as software-as-a-service or SaaS, said Marc Dietz, the director of SmartCloud solutions for IBM.

“We’re serving a growing demand with a new way that we’re going to market,” Dietz said. “It’s really an expansion and a comprehensive cloud strategy for our clients.”

With SaaS, customers buy software as they use it and can access it through the Internet, as opposed to signing multiyear contracts for installation and support.

IBM, based in Armonk, New York, is also adding new software to the portfolio, including a social-media analytics product that will allow businesses to monitor customer sentiment on Facebook and Twitter.

To contact the reporter on this story: Sarah Frier in New York at sfrier1@bloomberg.net

JUNE 18, 2013, 5:44 PM

I.B.M. Inflates Its Cloud

By QUENTIN HARDY

For all the money it has spent, you don’t hear about I.B.M. as a powerhouse of cloud computing-based services. Cloud computing is still a tiny fraction of the company’s $106 billion in annual revenue. Still, I.B.M. has spent more than $4 billion acquiring cloud computing-based services in the last few years, and recently bought a big public cloud.

I.B.M. apparently feels that attention must be paid.

The company is certainly gearing up for a much bigger push in cloud-delivered software. The first step is packaging the products in new ways, to address a much bigger customer base that’s a little lower on the corporate pyramid.

On Tuesday, the company showed off a series of cloud products centered around such popular topics as Big Data and social analytics for marketing, as well as human resources, sales, customer care and procurement software delivered over the cloud. In all, I.B.M. says it has more than 100 cloud applications.

The announcement signifies that under Virginia M. Rometty, its chief executive, I.B.M., like other incumbent technology giants, is being forced to change its ways.

I.B.M. used to sell complex hardware, software and services packages to chief executives and their ilk. In the new world, it must also offer products for executives more directly involved with day-to-day operations that their departments can use without complex training or lengthy procurement, hassles like installing servers.

That approach is how many cloud upstarts, like Salesforce.com, even Yammer, made their way into companies, back when the cloud business was starting out.

Earlier this month, I.B.M. agreed to pay about $2 billion for SoftLayer, which has a global network of 13 data centers. Coupled with I.B.M.’s own data centers, SoftLayer should make it easier to deliver software over a so-called public cloud, as opposed to a company’s own machines.

Public clouds like Amazon Web Services, where many companies share computing space, have become an increasingly accepted part of enterprise technology.

Moving to a public model can’t have been easy for a company that made mainframe computers for corporations — its stock in trade for decades. But it points to I.B.M. for changing with the times.

June 19, 2013 5:46 pm

IBM looks beyond the IT department for fresh growth

By Richard Waters in San Francisco

After decades spent perfecting the art of selling to specialist IT buyers in the corporate and government worlds, IBM has decided to try something new.

High on its calling card these days: the marketing, sales and customer service executives who are coming to control a significant slice of technology spending. And that, in turn, threatens to stir up new and unlikely business rivalries.

“Typically, the IBMs of the world fight it out with companies like HP,” said Gard Little, an analyst at tech research firm IDC. By moving deeper into marketing and other customer-related fields, he added, “they will increasingly collaborate and compete with companies like WPP, Omnicom and Publicis. IBM needs growth, and this is an area to get it.”

The push into new fields comes as IBM struggles with little growth in its core IT markets. It has become one of the first rallying cries of Ginni Rometty, who took over as chief executive officer 18 months ago.

Rather than confining itself to the back office of automation and transaction processing, she wants Big Blue to push deeper into the “front office” of business operations: the place where marketing, sales and customer service managers work to identify, win and keep customers.

The market could turn out to be bigger than the wave of enterprise resource planning systems that transformed corporate back offices in the 1990s, she said at the company’s most recent investor day.

Besides betraying a critical need for IBM to reawaken growth, the drive also reflects a sea change in corporate purchasing, as digital technology comes to affect a wider range of operations inside companies. New platforms like the cloud are also making it easier for general business mangers to find and buy IT services, shifting the buying power inside companies, said Chris Andrews, an analyst at tech research firm Forrester.

Chief marketing officers “are becoming much more technical and analytical”, driving demand for more technology to collect and analyse data about customers, said Adam Klaber, managing partner of new markets at IBM.

Some of the biggest trends in technology have combined to turn the customer-facing parts of corporate operations into ripe prospects for IT sales forces. The mass of data being collected on individuals, along with the spread of social media, has transformed techniques for identifying and building customer relationships. At the same time, the rise of smartphones and tablets has created a new channel for reaching customers that, for many businesses, is already coming to rival the PC-based internet.

Some customers report big shifts in their tech buying as a result. Over the past five years, Nationwide Building Society in the UK directed around 70 per cent of its tech spending towards internal priorities such as rebuilding its technology infrastructure, from new data centres to its core corporate applications, said Tony Prestedge, chief operating officer.

But over the next five years, he added, a similar proportion of the budget would be devoted to more customer-facing areas, such as enabling digital commerce or learning how to deal with customers most efficiently over the multiple digital and real-world channels that will be available.

“One of the critical things will be working out what your digital distinctiveness is,” Mr Prestedge said.

Collecting and analysing the mass of customer data that is now available has also brought technology into the hands of general business managers. Another IBM customer, Mexican bank Banorte, is targeting an improvement of 1.5-2 percentage points in its return on equity over the next 12-18 months from projects under way to deal more effectively with its customers, said Alejandro Valenzuela, chief executive officer.

“You could argue that all the financial institutions have been pushing products rather than being client-centric,” he said. The new level of data available has made it possible to look beyond old techniques of customer segmentation to market to individuals directly, Mr Valenzuela added.

For IBM, meanwhile, reaching out directly to business managers had brought its challenges. “We didn’t know how to talk to chief marketing officers,” said Craig Heyman, general manager of industry solutions at Big Blue.

It has also had to grapple with a cultural divide inside its customers that has often led to weak co-operation between executives in charge of IT and marketing, although Ms Rometty, whose background was in business services, threw herself in this early in her tenure, arranging summit meetings to bring together chief information and marketing officers.

IBM at least has some advantages as it squares up to the front office opportunity, according to analysts. The business services division founded on its acquisition a decade ago of PwC Consulting has left it well placed to sell directly to business managers.

And, unlike rival services companies such as Deloitte and Accenture, which have also set their sights on new interactive marketing services, IBM can also bring some distinctive technology advantages to bear, said Mr Little at IDC. At a customer event earlier this week in Europe, for instance, it laid out a range of cloud-based services aimed at marketing executives and other managers, including one drawing on the internally developed Watson system that has been credited with breakthroughs in natural language processing.

IBM’s other big advantage, according to Mr Andrews at Forrester, stems from its presence in the back office of many of the world’s biggest companies: integrating a company’s back- and front-office operations could give it a leg-up over others like digital marketing agencies.

How far beyond the IT department IBM is set to stray is still unclear, and its executives play down possible rivalry with advertising agencies and others. But as digital disruption spreads through the business world, Ms Rometty has clearly decided that IBM will follow it all the way.