By Siobhan Kennedy
IBM Corp is piloting three ASP services for the small and medium business market and is expected to announce a fundamental new structure for what it deems to be a strategic line of business. Also, ComputerWire has learned, it will make the first of series of software hosting announcements at SAP AG’s upcoming Sapphire user show in Philadelphia.
The application service provider pilots are focused on enterprise resource planning software, with trials of Oracle’s applications in Denmark, SAP’s R/3 suite in Brazil and JD Edwards’ OneWorld in North America. But the company plans to expand its offerings to include supply chain and customer relationship management software, according to Kathy Dodsworth-Rugani, IBM’s director of hosted business applications. The pilots began at the beginning of the year and are being offered to a number of select companies at the small end of the small to medium business market, said Dodsworth-Rugani, where IBM sees the greatest need for hosted application services.
A source close to IBM also hinted that Big Blue plans to make a series of announcements at Sapphire later this month. These are likely to include the expansion of its hosted SAP offerings across North America, encompassing application management services on customers’ premises across all industries and to all sizes of organizations. Later, some time in October, it will also offer SAP’s software on a hosted basis.
Sources say there are no immediate plans to do the same with Oracle or JD Edwards products, but IBM will offer ASP services based on those vendors’ and others’ ERP products in future. JD Edwards-based pilots are already underway in Italy, the source said, with a view to expanding throughout Europe. And CRM offerings, both standalone and integrated with ERP applications, are expected to follow in due course.
Although IBM has offered traditional outsourcing services for years, the three pilot schemes mark the Armonk, New Jersey based company’s first attempt to consolidate ASP business in the manner of rivals such as Qwest Cyber Solutions, Usinternetworking and Corio. The detail of how IBM will tie its various ASP offerings together is still missing: a centralized ASP line of business would seem a logical option, but Big Blue could still opt to offer a range of ASP services to different sectors or organized around different software vendors’ product sets. Any reorganization must surely involve bundling of existing IBM core competencies, such as web hosting business, its applications services business and several other hosted businesses IBM is currently developing under one roof.
IBM refused to comment on the timing and detail of any such announcement, but did not deny that something is in the pipeline. It is readying itself to meet marketplace and customer demands sources said.
This isn’t the first move that IBM has made in the hosting space, but the company says it sees the upcoming announcements as its first attempt to centralize its piecemeal offerings in a more concrete manner. Back in July at the PC Expo show in New York, the company’s Global Services Division rolled out a number of SME hosting services in conjunction with partners including Saleslogics, for CRM software, Great Plains for financials, and Ultimate Software, for HR and payroll applications. It also offers hosting services for ASPs, internet service providers and service providers in what Big Blue calls megacentres. And Dodsworth-Rugani says over the years the company has racked up around 100 other customers, both medium and large sized organizations worldwide, for whom IBM either manages applications remotely or hosts the software in a datacenter.
But up to now, those contracts have been on an individual, customer by customer basis, she explained. The focus is now shifting to developing standardized offerings, based on templates and best of breed practices. IBM wants to shift more of its business to the 80:20 rule, said Dodsworth-Rugani, whereby 80% of the offering is a standard hardware/software/services bundle, leaving just 20% for individual company customization. Before, we operated in reactive mode, now we’re moving to proactively marketing the application delivery concept, Dodsworth-Rugani said.
IBM’s moves, if somewhat belated, make perfect sense for the hardware and services giant. Although the ASP market is still in its infancy, analyst firm IDC predicts the US market will be worth $2bn by 2003, while Gartner Group says the European market will grow from around $180m today, to $1bn by 2002. While there are lots of companies touting hosting services, IBM reckons very few are actually making any money yet. For that reason, it says it’s been waiting for the right moment to enter the market.
