IBM to Overhaul Software Division

IBM will reorganize its software division in January, targeting 12 industries that need tailored software and middleware.

Driven by customer feedback, Big Blue will invest millions to improve its middleware as well as enhance it with applications from its independent software vendor (ISV) partners.

“Customers are now looking beyond buying products and brands to packaged infrastructure offerings to help them manage what is unique to their industry and respond to customers, employees and business partners faster,” IBM spokesman John Reilly told

Beginning next month, IBM will launch a marketing campaign to pitch its new industry accommodation plan. It has also signed 65,000 ISV partners to co-marketing deals and product launches. Finally, IBM will train 6,500 members of its sales force to be “subject-matter experts” with industry-specific IBM solutions.

The Armonk, N.Y., company, will divide its software division into 12 groups, each targeting a specific industry: insurance, banking, financial markets, automotive, retail, consumer package goods, utilities, telecom, electronics, health care, government and life sciences.

The move coincides with research that forecasts a an uptick in enterprise IT spending. IDC predicts
“the gradual recovery in software and services spending will gather
steam during 2004 as business confidence improves,” with spending to top
$912 billion next year, a 5 percent jump from 2003.

This is the second strategy shift for the company since 1999, when IBM announced its exit from the application development business to focus on middleware products that tied together software created by other companies.

Almost gone are the days where software vendors could afford to dish out pricey all-encompassing software suites and expect customers to fill in the gaps when incorporating them into the corporate network.

“As a young industry, they were able to throw technology at problems, but companies are weighing purchases more carefully now,” said Kathy Quirk, an infrastructure analyst at Nucleus Research. “They’ve gone through some experiences where they’ve paid a lot of money for technology that could still be sitting on the shelves or was too hard for them to implement and didn’t do what they needed it to do.”

The tech spending slump of the past two years combined with the maturation of the enterprise software industry, have created a class of customers who are going to thoroughly research their future IT purchases and pick the one software company that can best meet their specific needs.

That means software vendors better have highly focused offerings. While many companies do, in fact, have in-house experts that can devote time to industry-specific solutions, Quirk said many lack formal arrangements.

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