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IBM to tempt mid-sized companies away from .NET

Big Blue is turning its middleware attention to smaller organizations with a raft of incentives and more 'Express' product offerings aimed at attracting ISVs to its Java middleware platform. If successful, the451 believes the moves could be at the expense of Microsoft's .NET.

IBM's software group has unveiled a series of programs designed to establish its middleware offerings as a viable alternative to Microsoft for medium-sized businesses running Internet-based applications and services. It's a broad and bold initiative, and IBM is spending big bucks and is expanding its partner base to reach the 400,000 organizations worldwide that have between 100 and 1,000 employees.

The company will roll out a series of initiatives designed to attract the smaller business partners that are key influencers in the buying process for midsized companies. As well as a slew of new sales and marketing programs, IBM will extend 'Express' versions of its core middleware portfolio to include the WebSphere application server and DB2 database. That's in addition to currently available Express versions of its Portal Server software, Business Connection integration technology and Tivoli Secure Web Portal.

Context: Medium-sized organizations can reap the same benefits as larger enterprises by integrating and exposing their applications, business processes and services, both internally and externally, using a common Internet-based infrastructure, but have been slow to adopt such a model because of their more limited resources, expertise and generally risk-averse nature.

With this in mind, IBM has highlighted third-party IT providers – systems integrators and VARs, but specifically ISVs – as the key influencers that it must attract if it is to gain any real traction with midmarket companies.

IBM says it's worth expending the effort on recruiting more of the right sort of partner, highlighting research that values the midmarket middleware market as a $150bn opportunity worldwide. Microsoft aside, IBM says no other major middleware vendors are focusing on this market.

Strategy: IBM has highlighted the legion of smaller, largely localized ISVs (rather than the large players such as SAP, Siebel and PeopleSoft, although these are also strategic partners) as a key battleground that it must win over to support its foray into the midmarket.

It plans to do this in two ways: first by establishing more attractive terms and conditions (such as improved financing, training and certification programs) for partners that commit to the WebSphere platform; and second, by optimizing its middleware offerings for the smaller deployments. These companies don't go out and buy an application server, IBM says: they use whatever their ISV recommends they use.

Partners: IBM has broad and bold aims for recruiting ISVs. It says it has a ready-made and significant base of partners that already offer services around Lotus, iSeries and Informix products.

It has also spent the last nine months conducting beta programs with about 50 ISVs worldwide as part of its Start Now program, and hopes to recruit at least 10 sector-leading ISVs in each country, with a target of at least 100 within the next six months in EMEA alone, with a similar target for North America. Current Start Now partners include e-commerce provider eOne Group, information systems developer Kumatroniks and security provider Protegrity.

Products: IBM has already been making moves to address this with Express versions of its portal and integration products, which have been available for some months.

It will extend this with the release of its Java-based WebSphere Application Server Express, which will be available in mid-December. Like the other Express products, it's a stripped-down version of the enterprise version, without some high-availability and advanced features. It doesn't come with EJB support, for example, and comes in only a single-server configuration, without clustering or load-balancing capabilities.

What it does offer is easy setup and maintenance, such as wizard-based installation, the inclusion of WebSphere Studio and technical support, which IBM says will appeal to novice or non-Java savvy developers. It will run on Windows and Linux servers initially, with iSeries (AS/400) support also on the roadmap.

Crucially, IBM is also aggressively pricing WebSphere Express. Starting at $25 per user, per year, or $2,000 per processor, the company claims this is half of the Microsoft equivalent.

IBM will also release an Express version of its DB2 database in early 2003 for Linux, Windows and Unix platforms. Again, the target is ISVs, which IBM hopes to convince to bundle DB2 Express with their own offerings as a pre-configured solution. Prices will start at $1,000 per processor.

Additionally, IBM will next year extend the Express version of its Business Connector integration offering to include internal organizational integration. It currently supports integration with third-party sites, such as public and private exchanges. "We're looking right now at the overall integration challenges for midmarket companies," said Henrik Hedegaard, VP of WebSphere sales in EMEA.

Competition: IBM says it is competing with Microsoft to win mind share in the ISV community, many of whom are deciding whether to use Microsoft's .NET framework or Java as the basis for developing future products. It acknowledges that Microsoft is a formidable competitor and has especially strong relations with smaller and midmarket companies, but says that few ISVs have made a commitment to .NET. This is in part because of the "huge" investment that is required, claims IBM, but also because some partners are unhappy with Microsoft's licensing terms as well as its move into the midmarket applications market following its acquisitions of Great Plains and Navision.

IBM says its Express products and aggressive pricing, coupled with the 'open' nature of Java (versus the proprietary .NET) and the enterprise potential of Java and Unix environments, will persuade ISVs to at least offer a Java version of their products as well as a .NET version. In reality, IBM thinks few small ISVs can afford to invest in both platforms. It is these players that it hopes will adopt the 'Powered by WebSphere' status.

BEA Systems has a midmarket version of its WebLogic application server, but IBM says the company is doing little to aggressively push its wares (although we expect BEA's strategy to change here over the coming months). It says competition from open source application and Web servers is valid, and is one reason why it has chosen to aggressively price its products, including features that open source offerings cannot match, such as technical support.

The451 assessment: Few other vendors have the resources to match IBM's ability to aggressively pursue new business partners, but IBM isn't perceived as a midmarket provider on the middleware front, where its tools are designed first and foremost for large enterprises. IBM's challenge in penetrating the midmarket is not in developing new technology. It already has plenty of that. The key factor is whether it has blended the right mix of products and sales incentives – and at the right price – to attract the interest of ISVs. On paper it seems to have all its bases covered.

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