IBM's International Intrigue

Opinion: IBM's investment in its Overseas ISV farm system isn't a case of foreign aid. IBM is looking to the day when those companies' offerings could help surround and contain SAP, Oracle and Microsoft in the SMB market.

IBM likes to talk about the fact that it is not in the application software business and therefore is a better partner for ISVs because it doesn't compete with them directly. Of course, the problem that IBM faces is that behemoths like SAP and Oracle have taken up so much of the market that they could perhaps use their influence to push customers away from IBM middleware.

Given the strength of IBM's software group, this has yet to take place in a significant way, but the company does certainly believe in the old adage that an ounce of prevention is worth a pound of cure.

This is why you see IBM pouring so much time and money into developing an ISV farm system in countries like China, India and Israel. The thought is that these ISVs will leverage large pools of developer resources to create custom applications for a wide variety of markets that IBM will then take to market through its channel. To that end, IBM has been educating ISVs around the globe about the value of the channel.

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The first part of that effort, led by Buell Duncan, IBM's general manager for ISV and Developer Relations, has centered on the basic concept that as these ISVs develop their own channels, they will pull IBM gear along with them in their existing markets. In fact, they already account for over $500 million in annual sales for IBM products.

Beyond that, IBM seems to hope that as these ISVs expand into other markets, particularly the United States, they will look to IBM to introduce them to channel partners that will market their applications in vertical industries that most of them have no presence in today.

What IBM seems to be ultimately playing for is a variety of best-of-breed applications that it can leverage to surround and contain SAP and Oracle today and Microsoft later in the SMB (small and midsize business) market.

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Naturally, a big part of that strategy involves these ISVs finding lower-cost routes to market using SAAS (software-as-a-service) platforms that are hosted on IBM offerings. And over time, it doesn't take too much of an imagination to start thinking about the size and scale of the SAAS ecosystem that IBM might ultimately have in mind. In fact, Duncan says IBM is already working with venture capitalists around the globe to help identify SAAS prospects for IBM.

Clearly what IBM is thinking about today is the forerunner of the globalization of the channel as whole. And while we may be a few years away from its realization, we're already seeing a steady flow of transactions involving ISVs from around the globe selling their wares in the United States, and traditional solution provider companies in the United States expanding their practices both east and west.

The only thing that's unknown is exactly when is that trickle of transactions going to expand to become a flood of deals that encompasses every major manufacturer, ISV and channel partner to create a new truly global channel.

Michael Vizard is editorial director of Ziff Davis Media's Enterprise Technology group. He can be reached at michael_vizard@ziffdavis.com.