IBM Corp may have the largest software business, but it’s not the fastest growing. IBM’s 12% growth rate lags both Oracle Corp and Microsoft Corp and its size may prevent it from catching up, according to analyst Morgan Stanley & Co. IBM’s $12.7bn software revenues topped its rivals’ sales, but without the Lotus acquisition and favorable currency rates, Big Blue only saw a 3% increase last year. Oracle’s business grew by almost 40% and Microsoft’s almost 50%. The sluggish growth of host based system sales – which accounts for 75-80% of IBM’s business – is blamed and Morgan Stanley predicts the software division will see only 6% growth this year. IBM has a four-fold plan to increase its software sales. First, IBM plans to buy software companies that would complement its strategy, even if those firms don’t have strong sales. Second, it will offer middleware products where Microsoft and Netscape Communications Corp have failed to tread, including transaction processing, groupware and databases for non-IBM platform Solaris, HP-UX and Windows NT. Third, although it has 5,000 software salespeople, their presence is weak and the analyst advises lessons from its Lotus employees. Fourth, IBM leverage Lotus Notes’ Internet capabilities to entice banking and finance customers to buying its network products. The analyst suspects the Web will limit Notes’ attraction and that Notes will have to fight against Netscape and Open Market in the Internet application game, especially when Netscape launches its groupware plug-in, Collabra, in the second half of this year. IBM and Tivoli will offer their first product since IBM bought the systems management software house, in the first half of next year, but are still weak in the mainframe systems management area, where it will probably lose out to Computer Associates International Inc. Morgan Stanley projects second quarter sales will reach $18.1bn.
