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IBM is doubling down on its independent software vendors (ISVs) channel in the hopes of capitalizing on pent-up demand for Software as a Service (SaaS), virtualization and other technology that helps customers optimize their infrastructure and save money.

Mark Hanny, vice president of strategic partnerships, IBM says even in today’s weak economy, IBM ISV partners are still seeing strong demand for their services. Currently, he says software drives about 40 percent of Big Blue’s profits, and with the channel’s help, that percentage will only increase.

“By 2010 we think software will drive 50 percent of our profits, and we are counting on partners to make that happen,” Hanny says.

A focus on solution selling and on technologies that help end customers save money and streamline business processes will help drive ISVs’ success, he says, rather than pushing partners to simply make one-time software package sales.

“Customers don’t buy middleware on its own, they buy it as part of a solution,” Hanny says. “Now more than ever, our strategy remains the same – to drive ongoing revenues through value-added services like consulting, integration and implementation services,” he says.

Worldwide initiatives like IBM’s Dynamic Enterprise and Smart Planet are examples of how this strategy can be applied, he says, and of ways in which an emphasis on open standards and Services-Oriented Architecture (SOA) can allow customers to be more efficient.

IBM’s Smart Planet initiative, for example, announced in November 2008, is IBMs vision of how software applications can be used to develop ‘smart infrastructure’ that can streamline the delivery of energy, water, information and even people via a more efficient transportation infrastructure.

“For many of our customers, as much as 80 percent of their budget is spent managing and maintaining their existing infrastructure. We are showing clients how SOA and Open Standards can make legacy systems work better together so they can be more efficient,” Hanny says.

Virtualization, too will be a major technology focus in the coming year, says Hanny, especially in the area of storage virtualization, which dovetails with customers’ needs to better manage data growth and constrain IT budgets.

And while SaaS may seem like old news in the North American market, Hanny says ISVs are seeing SaaS take off worldwide, especially in Brazil and Western Europe, where there’s a lot of pent-up demand. These global markets are extremely important for IBM, which currently sees about 65 percent of revenue driven through overseas sales and services, says Hanny.

“We’ve more than doubled the number of partners who participate in our SaaS program. Partners haven’t stopped selling on-premise solutions, but have added SaaS-based CRM, business intelligence and supply chain management applications as another way to help meet clients’ needs,” he says.