Never Miss a Beat: Get a snapshot of the issues affecting the IT industry straight to your inbox.
IBM Takes On Microsoft: Smaller Businesses Win
Companies gain more choices to help them build adaptive, real-time infrastructures
June 27, 2003
5 Min Read
Tony Nuzio, president and owner of freight-management outsourcer ICC Logistics Services, was falling behind his customers. Companies such as La-Z-Boy Inc. were insisting that Nuzio develop a way to let them monitor the status of their invoices over the Web. The service provider and its 30 employees had to become an E-business if it wanted to continue working with the big companies it counts as clients.
Small and midsize businesses like ICC are often forced to accept new technology challenges, whether it's Wal-Mart Stores Inc.'s call last year for suppliers to move to Internet EDI or a business partner demanding they add security tools for collaborative efforts. They impose some of those challenges on themselves in their quest to remain competitive and grow. But compared with big companies, smaller businesses typically have more limited budgets for building adaptive, real-time infrastructures. With fewer IT resources, they need tools that can work out of the box, with minimal effort.
Microsoft has long been the main game in town for these buyers, but now IBM is making a bigger play. Last week, the vendor extended its Express line--less-costly and less-complicated versions of its infrastructure software--to include its WebSphere MQ messaging technology, for connecting applications without custom coding, and its WebSphere Commerce software, for quickly setting up E-commerce sites. WebSphere Commerce Express also comes with automatic-configuration and self-management capabilities. IBM's strategy includes undercutting Microsoft prices by as much as 25% for some middleware, as well as partnering with systems integrators that serve this market.
ICC was among the first customers to take advantage of IBM's Express software, which includes versions of the DB2 database and WebSphere Application Server. In conjunction with integrator Tri-Bry IT Solutions, ICC built a portal through which customers can log on and see live updates of their invoices. "I thought IBM was all about serving the GMs of the world," Nuzio says.
That was true, once. But with IT spending by small and midsize businesses expected to grow 17% this year versus 1.3% for large companies, according to Forrester Research, IBM is training its sights on businesses with fewer than 5,000 employees. Sales to small and midsize businesses now account for a fifth of IBM's annual revenue of $81 billion. "It's the last wave of E-business," says Elaine Lennox, director of SMB marketing at IBM.
Other vendors think so, too. SeeBeyond Technology Corp., for instance, plans to offer in two months a simplified, low-cost version of its integration software.
But it's IBM that can wield the biggest stick against Microsoft. Competition sounds good to John Giantelli, senior director of IT at the not-for-profit American Society for the Prevention of Cruelty to Animals. Giantelli arrived at the ASPCA from an IBM shop but has often adopted Microsoft technology, including its SQL Server database, at the ASPCA because it was cheaper. "Now that they're more competitive, I'm jumping back to IBM again," Giantelli says. He plans to consider DB2 Express for upcoming projects.
Analysts caution that it will take more than the right technology at the right price to seriously challenge Microsoft. IBM is looking to value-added resellers and systems integrators to help it identify and serve smaller businesses, but Forrester analyst (and former IBM employee) Rob Enderle says many service providers are hesitant to get too close to a Goliath like IBM. "There's the fear that they will create the relationship but that IBM will ultimately take over the relationship and squeeze them out," Enderle says. It will be difficult for IBM to shift gears and focus for any length of time on smaller customers, he says.
IBM has to work on its image. "I'm not sure how focused they are on companies of our size," says Daniel Feldstein, VP of operations at Crestron Electronics Inc., a $150 million-a-year maker of audiovisual control systems. Pricing played a big part in the company's adoption of a Microsoft infrastructure for its SAP deployment. Other options "were a little high for our application," he says, and Microsoft's functionality is "more than adequate."
Similar sentiments prevail at the Wolf Organization, a privately held, $300 million-a-year company composed of the Wolf Distributing Co., a kitchen and bath distributor, and the Lumber Yard, a building-materials subsidiary. Windows NT and an Oracle database support its companywide enterprise resource planning implementation. It uses Microsoft's development tools to publish information on its intranet and will use them as it further develops its E-commerce capabilities. "Microsoft is just very easy to do business with," CIO Vince Johnson says.
Wolf runs its ERP software on an Oracle database because SQL Server wasn't up to snuff when it undertook the deployment in 1998. Though Oracle has proven robust, at the time Johnson had concerns about complexity, and the company hired a database administrator. If others have similar concerns, that could open the door for offerings like DB2 Express.
But SQL Server has come a long way since the late '90s, and Microsoft deftly leverages its predominance as an applications platform provider to strengthen its relationship with smaller businesses. This summer, it's set to launch a service that will let companies transmit data, in the correct format, directly between Microsoft desktop apps and business partners' apps. It also has introduced a package to provide customers with one financing contract that covers all their Microsoft software, independent software vendor implementations, and other third-party software. Says Lynne Stockstead, general manager for product management at Microsoft, "We also understand that smaller companies have limited budgets."
Photo by Alan Wycheck/Getty Images
About the Author(s)
You May Also Like