Smart Market ISVs Find Few Leads in Early Going

December 7, 2009 Dan Burger

Most of us can agree that for IBM to be successful in the midrange it will have to get across the idea that it is a better application company than its competitors, the primary one being Microsoft. For a company that is entrenched in the enterprise market, like Big Blue currently is, working in the midrange presents a challenge. To take on that challenge, IBM has a program called Smart Business. ISVs, particularly the application software companies, will play a big role in this.

In the IBM i environment, approximately 80 percent of the customer base fits comfortably in the mid-market. It is what IBM knows about the midrange. And the application providers that serve these customers are the ones who know the market best. IBM will depend on them. They have the customer loyalty even though that loyalty is almost always attributed to the IBM i, which almost everyone who uses it refers to as the AS/400. However, even IBM realizes that companies buy applications. They buy solutions. Now, more than ever, the hardware rides along with whatever the software can offer in terms of business benefits and return on investment.

Organizations in the midrange are trying to sort this out and IBM is trying to help them do this through its Smart Business initiative. I give IBM credit for trying to simplify this process and for enlisting the support of some of its most loyal, and successful, ISVs from the AS/400 platform. They’re not the only ISVs in the Smart Business program, but they have a world of experience that IBM lacks. What IBM brings to the table is a powerful brand name and the resources to unleash a marketing blizzard. If it can overcome its tendency to dictate “IBM Knows Best” policies and concede that it isn’t all that smart about how small to mid-sized organizations operate, Smart Business will have a much greater chance of success.

One thing IBM does bring to Smart Business is the Smart Cube.

The Power Systems i Cube comes in three versions with an option of activating one, two, or four cores being the main distinction along with increasing memory options, and escalating number of permissible users. On the Linux side, there is a two-core and four-core X64 option with memory and user license distinctions as well. A base X64-Linux Smart Cube is priced at approximately $4,400, while a base Power-i Smart Cube runs around $12,000, which includes the DB2 for i database as well as integrated logical partitioning. IBM has also created the Application Integrator, a remote monitoring and tuning services piece that is perhaps the most important part of the Smart Business strategy. It offers a single point of contact with IBM for all support. This is expected to go over well with midrange companies impressed with the idea of reducing IT complexity.

The Smart Business program is beginning with an emphasis on ERP systems. That’s smart. IBM has recognized that an opportunity exists in this market with promising organizations that are running their businesses on spreadsheets and a prayer. They are the disorganized organizations. They need ERP applications. A potentially good fit for them is VAI, an ERP provider that itself is a midrange company. Its customer base is primarily the i/OS platform, and it has a pretty good track record of bringing in non-IBM business.

VAI applications, like each of the ISV applications available in the Smart Market, have been tweaked to run on the Smart Cube, an appliance-type server that can run Power Business Applications, as the Power Systems i flavor of the appliance is known, or the X64-Linux, which is referred to as the Smart Cube for Business Applications.

Dan Bivona, VAI sales director, says his company is Smart Business ready not only based on the products that have been developed specifically for running on the Smart Cube appliance server that is central to this program, but because of its familiarity with SMB companies where things are done differently than at the enterprise level.

“In the current phase and going forward with Smart Business, I see VAI going after customers with 25 users or less,” he says. “Those types of companies often have disparate systems and they need ERP. They need their information centralized so everyone can look at it in the same database. They don’t have the personnel on staff and they don’t want to invest in an IT staff to accomplish the implementation of an ERP solution. If I was a manufacturer or retailer or distributor, I’d want to grow my company with a system that allowed users to get on a browser and get to my system and see what orders did I get today, what is the status of my accounts receivable and accounts payable, what are my inventory levels, and I want to get that anywhere and anytime.”

EXTOL is another IBM i-based vendor that was eager to hook up with the IBM Smart Business program. EXTOL claims more than 800 customers, with approximately 90 percent of those considered IBM i shops that have come to the software tool maker because of its expertise in business to business communications that include EDI, XML, Web services, and spreadsheet formats sent via e-mail that are used among trading partners on both the customer and the supplier sides.

“If IBM is going to be successful in the midrange,” says Joe Debold, EXTOL’s vice president of sales and business development, “this is going to be a critical initiative for IBM. To compete with Microsoft, Oracle, Hewlett-Packard, as well as the alternative delivery mechanisms like Salesforce.com, IBM has to show it’s in the applications game.”

Debold describes the Smart Business program as being in the midst of figuring out the right mixture of marketing that will drive people to the Smart Market site. IBM, he says, needs to become the Web marketing engine that identifies Smart Business as an applications marketplace and a solution provider attuned to the midrange business.

Although the Smart Business roll out in the United States began in May, it is still a work in progress. Granted it’s been a tough year starting with the worldwide economy, but lead generation has been nothing more than a trickle. At VAI, Bivona says the company can attribute fewer than 50 leads to actions related to Smart Business. EXTOL’s Debold says he’s seen fewer than 10.

“We think the opportunity is huge,” Debold says. “There is a significant upside for both IBM and the ISVs. We think it’s in the early stages and are looking forward to IBM getting it [the level of awareness] right.

“These midrange companies are down-staffed. They are one-armed paper hangers. They don’t select technology all the time. Looking for a solution, reviewing them, and going through the buying process is a pain in the butt for these guys. They need to know there’s a simpler way.”

Bill Whalen, a sales executive at RJS Software, is also eager for some leads at new and different customers.

“The big reason it is attractive to us is the level of marketing exposure and publicity and getting our name out to places that wouldn’t have been reached by RJS otherwise,” he says. “The Smart Market gives us the opportunity to showcase some solutions and have some collaborative feel.”

Whalen confirms there’s been some general marketing support, and agrees the initial focus has been more on ERP. “We didn’t get any direct boost right out of the gate, but as they start placing boxes, we will see more opportunities,” he says.

If IBM can’t build some momentum with its marketing machine, it runs the risk of burning out the ISVs it needs to take Smart Business to the midrange. The ISVs, after all, are investing development time in making their products compliant with the Smart Business program and they are investing marketing money, too.

Both IBM and the ISVs are excited about the next phase of Smart Business, which is taking these applications to the cloud, which then gives customers the option of not buying Cubes and moving to hosted applications and even more freedom from IT complexity. But right now it’s one phase at a time.

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