Palmisano: SMB Will Be IBM's Largest Market in Five Years

In a wide ranging keynote speech at the company's PartnerWorld conference, IBM Chairman and CEO Sam Palmisano predicted that the small to medium business market will become IBM's largest customer segment within five years.

IBM defines the SMB market as customers with 250 to 1,000 employees, which is an area that is expanding its IT spending at a rate of about 6.4 percent a year. That's considerably higher than traditional enterprise customers, which Palmisano explained at a compound rate would allow the SMB segment to surpass the financial services sector as IBM's largest customer.

In terms of specific new initiatives to help drive that growth, Palmisano promised solution providers a new preconfigured blade center tailored for SMB customers and the ability to resell IB services that will be organized around specific IBM assets such as security and systems management.

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In general, Palmisano said that systems and finance accounted for 23 percent of IBM's profitability while software and services contributed 40 percent and 37 percent, respectively. But in order for IBM channel partners to be successful, Palmisano said that going forward, solution providers will need to focus on innovative solutions that drive business value around collaboration and globalization.

"It's not about hardware, software and services," said Palmisano. "Everything we do is about innovation and collaboration. We don't want you to think that IBM is trying to become the next GE holding company in technology."

Palmisano said "the PC era is over" and as such IBM is making bold bets on blade servers, managed services, service oriented architecture, virtualization and the convergence of software and services. As part of that shift, Palmisano said customers today are looking for IT solutions that are open, flexible, collaborative and autonomic.

The IBM chairman encouraged solution providers to adopt their internal business models and solution to work better in a global economy where more IT-driven business processes are being located all across the globe.

"IBM is a globally integrated enterprise," said Palmisano. "As a company, we're trying to lower the center of gravity."

That strategy means moving business processes, such as locating IBM's supply chain operating in China, to the places in the world where it makes the most economic sense," said Palmisano.

As other companies follow the same business model, solution providers are increasingly going to find themselves supporting business processes strewn around the globe that need to be open and flexible.

"In today's world, every customer's products and services are technology dependent," said Palmisano, "But what they want are short cycle of innovation enabled by their IT architecture."

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