InformationWeek

Like virtually all companies entering into joint ventures, IBM's goal is to partner with companies that have the strongest chance to be successful in the space and have a strong management team. But unlike a venture-capital firm, IBM is less interested in an immediate return on its investment. "It's about the risk that we'll miss a great opportunity or build technology that doesn't hit the mark," Kovac says. "We see partnerships as a way to be an early entrant into important growth businesses by being out there working with companies that can lead our thinking."

Another IBM partnership is with Pfizer, the $29 billion New York drug company that's also teaming with Microsoft to create a system to automate the paperwork that clutters most physicians' offices. For years, Pfizer has identified the need for a unified IT system that would let doctors pull up a patient's medical history as he or she is being examined, enter a diagnosis, look up potential medications and a database of drug interactions to see possible side effects, send a prescription to the pharmacy, then forward the case record to the insurance company for payment. But developing such a system--and selling it to thousands of individual physicians--would take an investment much larger than what Pfizer felt comfortable with.

The company took the initiative in calling on technology companies to think in terms of sharing risk instead of just making a sale. "It was more happenstance that we called Microsoft and IBM than anything else, but it was hardly a cold call," says Peter Brandt, senior VP of finance, planning, and business development at Pfizer's pharmaceutical group. Clearly, in proposing a plan for a huge project, he started with well-funded top-tier companies that he knew were also interested in the sector. And he came prepared.

At the first meeting, Pfizer led with details of the market opportunity; an overview of the current state of affairs in the typical doctor's office, where a single doctor needs four people to handle paperwork; and Pfizer's vision of what might work and what it would take to build it. With all three companies defining the health-care space as a huge opportunity--more than 70% of physicians say improving operating efficiencies is their top concern, according to one survey--Pfizer suggested they combine their complementary expertise instead of competing.

As the alliance progressed, the partners laid out a prenuptial agreement of sorts: a clear explanation of what mattered to each party and what the objectives were for each and for the joint venture. All three companies contributed full-time employees to get started on the product and strategy and produce a beta version of the system by late summer, for commercial release by year's end.

"There's not one single door to partnering with Microsoft," says Richard Noffsinger, worldwide manager of Microsoft's health-care group, though clearly Pfizer's agreeing to use Microsoft's Windows 2000 platform and SQL server 2000 databases, messaging platform, and wireless technology were part of this deal. IBM, meanwhile, will contribute the call centers and system integration.

The alliance gives the two technology vendors a leg up into a new customer base and Pfizer's sales force to sell it. "IBM makes databases and servers and middleware; we don't do end-user applications," says Dr. Russell Ricci, a physician who's general manager of IBM's Global Health Care Industry practice. IBM considered tackling the job on its own, he acknowledges, but "we thought, 'Imagine the unit cost of calling on hundreds of thousands of physicians.'"

Cutting-edge businesses aren't the only ones that benefit from joint ventures with IT vendors. An alliance is in the works to bring an integrated, automated system to perhaps the oldest of old-line businesses, the grocery store. The Great Atlantic & Pacific Tea Co. of Montvale, N.J., which operates 750 stores in 16 states under the A&P, Food Emporium, Waldbaum's, Super Fresh, Farmer Jack, Kohl's, and Dominion brand names, is partnering with retail software company Retek to develop an ERP system for supermarkets that includes category management, merchandising, procurement, promotion, pricing, and forecasting. As part of the deal, A&P will get the system first; Retek then can sell it to other chains and pay the retailer a royalty on each sale.

The system will automate the process of purchasing everything from cereal to lighting fixtures, as well as forecast and track sales and help set prices. It's part of a four-year, $250 million IT overhaul for A&P that eventually will link Retek's demand-forecasting and data-warehousing applications with a warehouse-management system from OMI International Inc., a transportation system from Manugistics Group Inc., and in-store technology from Tomax Corp. and SofTechnics Inc.

The grocery retailer is determined to make its system work despite a spate of ERP failures in the retail industry. CIO Nicholas Ioli has set up teams not just to make sure the technology does what it should but also to focus on the internal business processes and change-management issues. The company's top brass meets weekly with representatives from Retek.

Such meetings are all-important, says Vantage Partners' Gordon, noting that 70% of alliances fail, most often because of a lack of trust and a breakdown of communication between the partners. Even a partnership that starts off well may erode over time, as each partner inevitably vies to push its own value to the customer, says Mike Beals, VP and leader of Meta Group's sourcing practice. To keep on track, it's imperative to sit down regularly and agree on such sticking points as how each side will act and how they'll share information, people, and intellectual property, Beals says.

That kind of interdependency is key to the success of these alliances. As IBM VP Kovac says, "It's about building something we can point to that both of us have bought into and will see ongoing benefits from."