IBM Aims to Expand Network Of Software-as-Service Partners
By Chris Reiter 5/26/05International Business Machines Corp. is stepping up its efforts to help software makers make a transition into the business of "software as a service."
IBM yesterday launched a program offering tools and support to help software makers roll out the new business strategy, a move away from the industry's traditional licensing model. With software as a service, one company hosts the software application, such as for payroll management or accounting, and provides those capabilities remotely for client companies.
Big Blue is hoping to expand its network of 70 software-as-a-service applications partners in a bid to provide a more flexible alternative to offerings from competitors such as SAP AG, Oracle Corp. and Microsoft Corp.'s Great Plains unit.
"We firmly believe that this portfolio approach will be absolutely critical," said Scott Hebner, vice president of strategy and marketing in IBM's software group.
IBM, of Armonk, N.Y., recently has invested heavily in developing the software-services market, which offers an avenue for the company to sell bundles of programs, including its own middleware and database software, as well as hosting services.
IBM's move is part of a trend in the software industry as it diversifies away from the traditional model of selling software as a product. The service model allows customers to pay for usage and is seen as reducing the risk and costs of owning and maintaining software for information-technology buyers.
With its 40,000-strong sales force, IBM has the chance to gain leverage in the segment. But its hodgepodge of partners, which include small vendors such as Intacct Corp. and Digital Union, is still far from offering a legitimate threat to SAP and Oracle.
The software-services model is taking hold after originally falling short in the late 1990s. Research firm IDC estimates that the software-as-a-service market will grow to a $10 billion industry by 2009, from $4.2 billion last year. "It's a market that's finally coming into its prime," said Laurie McCabe, vice president with market-research firm AMI-Partners.
As part of its investment in developing the software-services market, IBM in January acquired Corio Inc., which provides services for hosting software applications, for $182 million.