The enterprise software market has consolidated and changed dramatically over the past decade. Steve Mills, senior VP and group executive, IBM Software Group, says the company is sticking to its middleware-centric growth strategy. IBM's software revenue has doubled over the last decade to $22 billion, fueled by acquisitions of more than 65 companies. But is the company now ruing a 12-year-old decision to stay out of enterprise applications like ERP and CRM? Mills talked with Intelligent Enterprise about customer needs, the competition, and the opportunity to help companies take advantage of business analytics.
InformationWeek: Between the launch last year of the Business Analytics & Optimization practice and the acquisition of SPSS, IBM has made a huge bet on analytics. There's a compelling vision, but how far would you say we have to go before analytics can become a truly mainstream practice among your customers?
Steve Mills:If you apply a broad definition to analytics, which would span everything from basic report writing and what you might characterize as fairly simple manipulation of data all the way to the most sophisticated mathematical analyses, the market is measured in many billions of dollars. It's not a brand new market, but it's a market that has now reached an inflection point because the technologies have advanced far enough and price points have come down.
There's also a sense of imperative on the part of customers. They have obtained a lot of value from the investments they've made in the past, but they still don't feel as if they have enough visibility into changing conditions within their company and within the markets they serve. They believe that they can use computing to optimize the way their business operates, to optimize the way they interact with their customers and to find new opportunities that they couldn't see before.
Companies always talk about cross-sell and up-sell, and they wonder whether they really know what their customers are doing and what they want. With better insight, they could sell more products and services. This is propelling businesses around the world to not just continue to invest in analytic-based solutions but to increase their investment.
InformationWeek: IBM has made dozens of software company acquisitions over the past decade. Are there new areas where the company is planning to invest or where there are gaps you still need to fill?
Steve Mills: After each acquisition you still have to make significant organic investments. We continue to invest, and we've built an ever-larger development organization. Of course, every year we're on a path to do anywhere from eight to a dozen new software acquisitions. I don't see that pattern changing. I'm obviously not going to declare what it is we're going to buy, but the past is prologue to the future. Our acquisition patterns have been very consistent over the last 15 years.
The companies we have been acquiring have all fit within an overall architecture and strategy. Our business analytics investments are a logical extension of a many-decades-old information-management and data-management strategy that goes back to the founding of the company. There's a very logical progression of technologies, particularly around things we refer to as middleware, where we have built our software business and where we will continue to build.
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