Success Through Surrender

In exchange, IBM often will create a team of installers and support staff dedicated to the partner's application. IBM also assigns staff to joint implementation labs where the partner's software is ported to, optimized for, and tested on IBM middleware and hardware systems.

IBM still faces a fight in most every software category where it competes. While IBM's third-quarter sales of WebSphere and WebSphere Application Server grew more than 25% year over year, rival BEA Systems Inc. claims it won more than 90% of the 220 times it went head-to-head with IBM. And the WebSphere success hasn't been enough to buoy IBM's middleware group overall; the group, which includes WebSphere and its DB2 database, slipped 5% in the third quarter. Overall software sales dipped 3%--not horrible in this down market, but no match for Microsoft, which increased sales 26% in its most recent quarter.

IBM keeps expanding the partnership program. Next week, EXE Technologies, a maker of supply-chain software, plans to reveal that it's extending its partnership with IBM to optimize EXE's Exceed Fulfill 2000 and 4000 software and Exceed Collaborate software for IBM's MQ Series, WebSphere Application Server, and WebSphere Portal Server running on AIX 5.1 and DB2. EXE will continue to develop products on IBM servers and middleware while IBM will provide support services.

The partnership program has helped IBM play a major role in certain markets where it doesn't have its own application. "Take ERP," says senior VP Mills. "If you add up our services, hardware, and software sales driven through our ERP partnerships, it clearly would make us the largest ERP company in the world. Yet we don't produce an ERP package and we don't intend to."

Enterprise-application vendor J.D. Edwards & Co. and IBM last month struck a pact to establish an integration center to validate and certify several Java 2 Enterprise Edition-compliant hardware configurations of the company's collaborative business apps, known as J.D. Edwards 5, on IBM's middleware. J.D. Edwards 5 applications will be preintegrated with IBM's WebSphere Application Server and Portal with embedded security, Lotus collaboration tools, and the DB2 Universal Database. J.D. Edwards plans to begin delivering these ported apps early next year.

For some customers, IBM's partnerships with certain software developers are so tight they can't tell they're working with two separate companies. "It's seamless," says Ed Mugica, a VP with golf-club maker Solo Golf. The company uses product life-cycle management software Catia from Dassault Systemes to design the clubs. "It's really something as an end user when you don't know you're working with two companies," he says.

Business-technology managers say they can save time and money as a result of the integration and deployment work done by the partnerships. By using a preintegrated package of J.D. Edwards software on IBM middleware, Drug Trading Company Ltd., a Katz Group member company, says it was able to get applications deployed faster than if it had to do the integration and deployment work itself.

Drug Trading provides retail, professional, and technological services to more than 1,200 pharmacies. The company realized in the fall of 2000 that it was outgrowing its financial software system, which contained so much custom code that upgrading was out of the question. "We considered replacing it, but we had three different financial systems in three different companies," says Cary Rendek, a manager in the project-management office.

As it studied options for a new financial system, the company also began looking at ERP software. Rendek turned to IBM Global Services for help. "We had a lot of ups and downs," she says. The project took longer than anticipated, but the tight relationship between J.D. Edwards and IBM produced a relatively smooth transition as two of Drug Trading's units upgraded their financial systems, she says.

Rendek also expects smooth sailing when it implements J.D. Edwards' distribution, manufacturing, customer-relationship, and sales-force automation software at a third unit of the company. "These aren't point solutions. ... When something crops up, there's no finger-pointing," she says.

For customers, the lack of finger-pointing and the quick resolution of problems are among the benefits resulting from IBM's partnership program. "This is what we were looking for: a relationship between the two vendors to help their customers with any scale or availability concerns," says Tim Brown, executive director in CRM solutions of financial-services and insurance company USAA, which manages $65 billion in assets. USAA has started deploying Chordiant Software Inc.'s sales, marketing, and customer-service E-business software to its 11,000 service reps.

And that's exactly what many customers want. "When we buy from two vendors, it has to work seamlessly," says Colgate-Palmolive's Tobin. When it comes to ensuring that SAP's software can scale and be reliable, "we want that fully tested out on IBM equipment. The more the better. We've had that with joint IBM-SAP projects, and that's exactly what we expected and wanted."

IBM seems to have accomplished what it wanted, too. By partnering with leading enterprise app vendors, IBM has sold a lot of equipment and services and saved money by no longer developing competing products.