IBM PartnerWorld: Gerstner Sketches Plans For Future - InformationWeek

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IBM PartnerWorld: Gerstner Sketches Plans For Future

IBM chairman and CEO Lou Gerstner talked about E-business, Linux, middleware, and outsourcing. He talked about resellers, systems integrators, and independent software vendors, and how IBM is handing them more authority. But in his keynote address at the vendor's PartnerWorld 2001 conference in Atlanta on Monday, Gerstner didn't talk about what may be the hottest topic in IT: the cooling economy and its impact on customers' spending.

On Friday, Salomon Smith Barney cut its 12-month price target for IBM shares to $135 from $140; they closed that day at $104. Salomon also cut its IBM revenue target for 2001 by $1 billion, citing tepid demand for IT. But Gerstner avoided those topics in his speech, instead painting the downturn in tech stocks as a shakeout of weak business plans.

"We've passed through the roller-coaster ride of E-business phase one," he said. "There were a lot of false starts." Gerstner was on hand to assure the audience of resellers and integrators that their channel isn't one of them. One-third of IBM's $88.4 billion in sales last year came though the channel, compared with less than 12% in 1993, when Gerstner took over as CEO. And the vendor is trying to hand partners more authority to lead product sales and service contracts, especially in the midmarket.

IBM plans no cap on the amount of channel sales it finances through its credit arm this year, Gerstner said. It's stepping back from more consulting and systems integration engagements to let resellers lead. The vendor will continue its exit from the application software development market, instead augmenting the 50 independent software vendor contracts it signed last year, which accounted for $700 million in sales. And IBM plans to invest $4 billion this year to build its data-hosting capacity, which the channel can resell.

Outsourcing is key to IBM's software strategy of developing middleware that sits on its servers and mediates between customers' apps and operating systems. With hosted software, more data processing, security, and systems management occur on the server and in the network layer of an application. "E-business workloads are not going to be processed on the desktop," Gerstner said. In a veiled dig at rivals Microsoft and Sun Microsystems, he said customers should be able to run software without worrying about compatibility with "any vendor's application suite or operating system."

There's one operating system IBM likes a lot, though, and that's Linux. The vendor is tailoring the system to run on all its servers, and Gerstner said IBM has 1,500 Linux developers on staff. "We think Linux matters," he said. Presumably, the economy does, too.

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