Feeds

IBM in the software era: Big Blue man gives HP a seminar

From atop vast pile of cash

The Power of One Infographic

Euro recessionary scares aside, success for IBM is increasingly coming from software.

Software sales aren't just growing, up 16.9 per cent during the giants second quarter, so is profitability with software group margins up 88.4 per cent. Sales were down quarter on quarter in Q3, but still grew just over 12 per cent compared to 12 months ago.

The key brands are Websphere middleware, Rational tools, Information Management databases, Tivoli systems management and security, and Lotus groupware.

These all grew 21 per cent to nearly $4bn during the second quarter and, as The Reg calculates, profit margins for these five products at just over 80 per cent.

In other words: IBM's making almost pure profit on software.

This all comes after IBM pulled off the greatest sleight of hand in computing history: going from near total reliance on the mainframe and hardware - spectacularly unloading the PC business in 2005 for $1.75bn. No wonder the world's largest PC marker Hewlett-Packard, which likes to maintains it's also the sixth largest software company, is jealous and is dithering about its own future now the world's love of the PC is moving to smart phones.

IBM bought wholesale three of those brands behind its success - Rational, Tivoli and Lotus.

But acquisition isn't the whole story, and there's a big difference between ownership and turning these brands into a success.

Mike O'Rourke, Rational's vice president of strategy and product management, pointed out to us in a recent interview just how much both his particular division and IBM's culture has changed during the last 10 years. IBM paid $2.1bn for the Rational modeling and tools business in 2003 and was understood to have snatched it away from Microsoft, and Rational isn't just something IBM sells.

O'Rourke took over Rational in 2006 when, he says, IBM software delivered just 47 per cent of new and maintenance versions of products on time; today it's 95 per cent.

"In 2003 Rational was an individual tools team, a products team - that worked great, as open source wasn't really around and Agile was not a big movement," he told The Reg. "But there's been a lot of effort and energy to change - to become more team and organization based."

O'Rourke credits a mandate from IBM's uberhead of software Steve Mills in 2006 to adopted Agile software development practices internally as a turning point.

Human touch

IBM had used the waterfall development process with software betas sent out to collect feedback; in a Rational unit of 25,000 people and 80 products and meant just a small number of issues and bugs could be tackled.

Under Mills' Agile edict: "We made it so as if you change requirements everybody in the team knows it; we got metrics and measures that say when you change too late in the process it creates unstable code. Project managers can know when requirements are changed... we made it so that if I'm getting stake-holder back sooner I'm getting the precision sooner in the end it comes to prod management as a human disciple."

The change in IBM's operation and its culture is palpable for O'Rourke, who's on his second tour of duty with IBM.

O'Rourke was with Tivoli when IBM bought it in 1996 for $743m. He left around the time of the dot-com boom in 1999 and was sucked back in again when IBM bought his next company, BuildForge that was added to Rational, in 2006.

The Essential Guide to IT Transformation

More from The Register

next story
BBC goes offline in MASSIVE COCKUP: Stephen Fry partly muzzled
Auntie tight-lipped as major outage rolls on
iPad? More like iFAD: We reveal why Apple fell into IBM's arms
But never fear fanbois, you're still lapping up iPhones, Macs
Amazon Reveals One Weird Trick: A Loss On Almost $20bn In Sales
Investors really hate it: Share price plunge as growth SLOWS in key AWS division
Bose says today is F*** With Dre Day: Beats sued in patent battle
Music gear giant seeks some of that sweet, sweet Apple pie
There's NOTHING on TV in Europe – American video DOMINATES
Even France's mega subsidies don't stop US content onslaught
You! Pirate! Stop pirating, or we shall admonish you politely. Repeatedly, if necessary
And we shall go about telling people you smell. No, not really
Too many IT conferences to cover? MICROSOFT to the RESCUE!
Yet more word of cuts emerges from Redmond
Chips are down at Broadcom: Thousands of workers laid off
Cellphone baseband device biz shuttered
Twitch rich as Google flicks $1bn hitch switch, claims snitch
Gameplay streaming biz and search king refuse to deny fresh gobble rumors
prev story

Whitepapers

Designing a Defense for Mobile Applications
Learn about the various considerations for defending mobile applications - from the application architecture itself to the myriad testing technologies.
Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Top 8 considerations to enable and simplify mobility
In this whitepaper learn how to successfully add mobile capabilities simply and cost effectively.
Seven Steps to Software Security
Seven practical steps you can begin to take today to secure your applications and prevent the damages a successful cyber-attack can cause.
Boost IT visibility and business value
How building a great service catalog relieves pressure points and demonstrates the value of IT service management.